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KMRC: Demystifying Homeownership · The Mwango Capital Podcast

0:00
SPEAKER_00: Welcome to this edition of Wango Spaces this Thursday, Yune.
0:03
SPEAKER_00: Really grateful to have the CEO of KMRC here.
0:06
SPEAKER_00: And for the next hour, I'll also be demissifying home ownership.
0:08
SPEAKER_00: My name is Eric Mokai.
0:09
SPEAKER_00: I'm the founder of Wango Capital.
0:12
SPEAKER_00: I'm hosting the spaces today.
0:13
Join us in this journey to understanding a bit more about home
0:16
ownership and how
0:17
SPEAKER_00: KMRC facilitates that.
0:19
SPEAKER_00: But just move to the CEO right now so that he can introduce himself.
0:22
Maybe you can tell us about you and your journey to becoming
0:24
the CEO of KMRC.
0:26
SPEAKER_01: My name is Omutetia, CEO of KMRC.
0:30
SPEAKER_01: I really don't like talking about myself,
0:33
but this journey started a couple of years back when I was
0:36
working at the National
0:37
Treasury advising on financial sector matters and the
0:40
affordable housing issue,
0:42
SPEAKER_01: which was part of the Big Four agenda to development at that time.
0:46
One of the responsibilities I was given when I was at the
0:49
National Treasury was to
0:50
SPEAKER_01: lead on the housing part of the Big Four agenda.
0:54
And we had to do a couple of things,
0:56
shaping policies for purposes of developing housing.
1:00
And one of the key impediments at the time on the development
1:04
of housing was long-term finance.
1:07
For sure,
1:08
banks obviously have money,
1:09
but usually the funds that are held by banks are shorter.
1:13
SPEAKER_01: The deposits you give to banks are considered short-term funds.
1:16
SPEAKER_01: And therefore, banks not have privilege to extend loans longer.
1:21
SPEAKER_01: Then they run into a mismatch.
1:23
SPEAKER_01: And that's how we essentially developed KMRC from a concept.
1:27
SPEAKER_01: And one of the key things that came up was affordability.
1:30
And a study which was actually funded by Nash Bank together
1:34
with us at the National
1:35
SPEAKER_01: Treasury came at all that says unavailable and unaffordable.
1:39
SPEAKER_01: And that essentially created and put into place KMRC.
1:43
SPEAKER_01: So here we are and KMRC currently is running.
1:46
SPEAKER_01: And I think we are going to talk a little more about that.
1:48
But the main objective of KMRC is to enable a lot more people
1:52
to be able to own homes.
1:54
SPEAKER_01: When we started,
1:55
SPEAKER_01: we noted that,
1:57
SPEAKER_01: and I think we still do,
1:58
SPEAKER_01: have a significant deficit of housing in the country.
2:02
Over 2 billion units,
2:03
we have almost about 50,000 homes coming to market.
2:08
SPEAKER_01: We don't have the current data to see how many are now coming to market,
2:11
SPEAKER_01: but that was the estimate.
2:13
SPEAKER_01: But the shortage is still significant.
2:15
SPEAKER_01: It's about 150,000 units every year.
2:18
SPEAKER_01: Now, that is the gap.
2:20
SPEAKER_01: that we are trying to address.
2:22
SPEAKER_01: The solution that KMRC provides is essentially around affordability.
2:28
SPEAKER_01: We are trying to resolve the affordability problem that we have.
2:31
We actually have what we call an affordability crisis on home
2:36
ownership in Ken.
2:37
And one of the ways to look at affordability is even when you
2:40
just look at the rent,
2:41
SPEAKER_01: for example,
2:42
SPEAKER_01: taking rent as a share of household costs.
2:47
SPEAKER_01: And on average, we know that it's about 37 to 40%.
2:52
So that in itself is an affordability crisis because you will
2:55
not be able to afford
2:55
because that essentially crowds out the other obligations that
3:00
anyone has if
3:01
SPEAKER_01: housing alone takes more than a third of the costs of a household.
3:06
SPEAKER_01: Now,
3:06
SPEAKER_01: for purposes of addressing that affordability issue,
3:09
SPEAKER_01: that's why we came up with a number of considerations.
3:12
SPEAKER_01: Number one, we obviously are providing financing that is lower cost.
3:17
And the main cost of a loan is usually the rate or the interest
3:21
that you're going to pay.
3:22
We significantly reduced that to the extent that CAMRC is
3:26
offering single-digit
3:27
SPEAKER_01: rates or below 10% rates.
3:30
SPEAKER_01: The other one,
3:32
SPEAKER_01: which is also more critical,
3:33
SPEAKER_01: in fact,
3:34
SPEAKER_01: is the fact that we ensure that financing is actually fixed.
3:38
SPEAKER_01: Now, variable costs tend to be problematic when markets change.
3:42
SPEAKER_01: Like last year and earlier this year,
3:44
the market had completely changed to the extent that interest
3:47
rates were going up
3:48
SPEAKER_01: all the time.
3:49
SPEAKER_01: Usually what happens,
3:50
you find that the banks would send you a text or a financial
3:54
institution would send
3:55
SPEAKER_01: you a text advising you that the rates have increased.
3:57
SPEAKER_01: And therefore, your monthly repayment has increased to a certain amount.
4:01
You can imagine what that implies to a person whose income has
4:05
not increased in tandem.
4:06
SPEAKER_01: In most cases, it doesn't.
4:08
So we have fixed the rates to the extent that you borrow a loan
4:12
or someone borrows
4:12
SPEAKER_01: a loan for whatever number of years,
4:15
SPEAKER_01: then 15,
4:16
SPEAKER_01: 20 or 25 years,
4:17
and they have a constant repayment for the duration of the
4:20
repayment of the loan.
4:21
SPEAKER_01: That is significantly important.
4:23
SPEAKER_01: We are also providing loans at high LTVs.
4:26
SPEAKER_01: LTV is essentially the loan to value ratio.
4:29
SPEAKER_01: That means you will not have to make a down payment.
4:33
SPEAKER_01: The bank essentially or the financial institution or SACO in this case,
4:36
SPEAKER_01: because KMRC works with banks and SACOs,
4:39
will extend the loan to you without necessarily have to make a
4:42
down payment or what
4:43
SPEAKER_01: is called a deposit.
4:44
SPEAKER_01: And that's why it's high LTVs.
4:46
SPEAKER_01: In fact, it's up to 105%.
4:49
SPEAKER_01: The 5% above that is meant for incidental cost.
4:55
The incidental cost essentially is what you pay as extra for
4:59
processing of the loan.
5:00
Like,
5:00
for example,
5:01
you'll have to pay stamp duty,
5:02
which is a tax to government.
5:04
SPEAKER_01: You'll have to pay legal fees.
5:06
SPEAKER_01: You'll have to pay valuation fees.
5:08
SPEAKER_01: And such like fees, those are incidental costs.
5:11
SPEAKER_01: And therefore,
5:12
SPEAKER_01: the deposit or the down payment,
5:14
SPEAKER_01: which essentially acts as a barrier to entry in certain cases,
5:18
SPEAKER_01: is removed.
5:19
SPEAKER_01: So that if you need a home loan today, you get it with outside barriers.
5:22
The only thing that you have to fulfill is essentially having
5:26
ability to repay the loan.
5:28
SPEAKER_01: And that is usually checked by a financial institution.
5:32
SPEAKER_01: We try as much as possible to push financing down market.
5:34
SPEAKER_01: And that means we are going to the middle to low income earners.
5:38
And that is because that is the category of people who are
5:41
disproportionately affected.
5:43
SPEAKER_01: Majority of the people who are middle to high income can afford a loan.
5:48
So we want to serve Kenyans who essentially will otherwise
5:52
never have gotten an
5:53
SPEAKER_01: opportunity to take that home loan because they are a lot more expensive.
5:57
SPEAKER_01: And so that's why we essentially put a cap on the loan size.
6:02
SPEAKER_01: And the cap is about $10.5 million.
6:05
SPEAKER_01: And that amount has evolved over time.
6:07
SPEAKER_01: We started with a low amount of about $4 million.
6:10
SPEAKER_01: We moved to $6 million.
6:11
SPEAKER_01: And then now we are at $10.5 million.
6:16
SPEAKER_01: The idea is to serve the low to middle income.
6:18
But again,
6:19
we also don't want to essentially skew the markets to one
6:23
particular direction.
6:24
So we have a blend where we say that 80% of the loans
6:29
essentially go into the low
6:30
SPEAKER_01: to middle income and 20% will essentially serve the middle income market.
6:36
SPEAKER_01: So that of course we try to balance the market.
6:38
SPEAKER_01: So that is the solution that KMRC is providing.
6:42
SPEAKER_01: We obviously are strengthening our research.
6:45
SPEAKER_01: We already have numbers.
6:47
SPEAKER_01: that we get from time to time from the Central Bank of Kenya,
6:50
SPEAKER_01: from the Kenya National Bureau of Statistics.
6:52
And those numbers,
6:55
that research information help us to make informed decisions.
6:59
SPEAKER_01: So from time to time,
7:00
we check on those and that's when we shape policy according so
7:03
that we can support
7:05
SPEAKER_01: a greater home ownership in the country.
7:07
SPEAKER_00: When you survey the landscape in terms of homeownership in Kenya,
7:10
SPEAKER_00: what are your key observations in the market?
7:13
SPEAKER_00: Where are the bottlenecks that maybe KMS is also trying to address?
7:16
SPEAKER_00: Just give us a brief overview of the homeownership market in Kenya.
7:19
SPEAKER_01: So when you look at the homeownership in the country,
7:21
SPEAKER_01: there obviously have been a number of bottlenecks,
7:23
SPEAKER_01: some of which are being addressed.
7:25
SPEAKER_01: Some of us, we still have a bit of rigidity.
7:28
SPEAKER_01: But one of the main factors
7:30
SPEAKER_01: rigidities was essentially financing.
7:33
SPEAKER_01: Financing is a key component of any form of ownership.
7:38
SPEAKER_01: The kind of financing that we need is actually long-term finance.
7:42
That is currently being addressed by KMRC,
7:45
but that was one of the key concerns.
7:48
SPEAKER_01: However,
7:48
SPEAKER_01: we still have a bit of challenge with what we call developer finance or
7:53
SPEAKER_01: construction finance.
7:55
SPEAKER_01: KMRC does end-user finance, but we still need developer finance.
7:59
The reason why we need developer finance is because we need
8:02
affordable units or
8:03
SPEAKER_01: affordable homes so that when you get affordable finance,
8:07
SPEAKER_01: then certainly that increases the affordability that we're talking about.
8:10
But there's also some work going on around that because that's
8:14
essentially why we
8:15
SPEAKER_01: are contributing a certain levy that we all know about,
8:18
SPEAKER_01: which is called the affordable housing levy.
8:20
That levy is a government tax and it is an institution which
8:24
was established to
8:26
SPEAKER_01: manage that,
8:26
SPEAKER_01: which is called the affordable housing board.
8:29
And what they do essentially is to support greater developments,
8:33
that is construction.
8:35
And we are told there are a couple units that are coming up
8:38
from time to time,
8:39
SPEAKER_01: partly under government land and some are in private land.
8:43
SPEAKER_01: But that's a key concern.
8:45
SPEAKER_01: Of course,
8:45
we're waiting to see how that turns out because of course we
8:49
have not seen the
8:49
SPEAKER_01: units yet,
8:50
but we are told there are a number of units that are coming up
8:52
in the market.
8:54
SPEAKER_01: The other key challenges,
8:56
SPEAKER_01: essentially around policy matters,
8:58
SPEAKER_01: which includes the rigidity sometimes we have in the Ministry of Land.
9:02
SPEAKER_01: Of course, when you need a home, you need a title.
9:05
SPEAKER_01: And in any case,
9:06
you can't get financing for a home without a title because
9:09
that's what is held as security.
9:10
SPEAKER_01: We've had a bit of challenges with that.
9:12
SPEAKER_01: And of course,
9:14
we understand there's some work that is going on digitalization
9:16
and things like that.
9:17
We actually understand there's a bit of improvement,
9:19
but it's not nearly enough.
9:21
SPEAKER_01: because we want greater efficiencies on the production of titles,
9:25
SPEAKER_01: that's number one,
9:27
SPEAKER_01: and as well as on the registration of the security documents,
9:31
which sometimes takes a little longer than expected for someone
9:35
to be able to get
9:36
SPEAKER_01: into their home.
9:36
SPEAKER_01: When you get a loan and you have the title,
9:39
you want a little bit of speed and certainty as to when you'll
9:43
actually be able to
9:43
SPEAKER_01: get the process to be concluded for you to be able to get into your home.
9:48
One of the other key challenges that certainly affects housing
9:52
is the cost of land.
9:53
SPEAKER_01: There has been a lot of significant speculation on land in the country,
9:58
SPEAKER_01: particularly within the city centers,
9:59
SPEAKER_01: in Nairobi particularly,
10:01
SPEAKER_01: which has affected the cost of land.
10:03
SPEAKER_01: Land is unbelievably pricey.
10:05
SPEAKER_01: And in fact, land contributes almost 40% of the cost of a unit or a home.
10:12
SPEAKER_01: And that is terribly expensive.
10:13
SPEAKER_01: We need a correction on that.
10:15
SPEAKER_01: But then the issue is the speculation that people believe you buy land,
10:19
SPEAKER_01: you hold it for speculative purposes.
10:22
SPEAKER_01: And that just keeps subtracting the cost of housing units.
10:25
SPEAKER_01: Construction costs tend to be high.
10:27
SPEAKER_01: Of course, the input costs come in there.
10:30
SPEAKER_01: There is government taxation in there.
10:33
Those input costs like cement,
10:35
the roofing tiles,
10:36
and things like that tend to be pricey.
10:38
SPEAKER_01: And that exactly contributes to the high cost of housing units.
10:43
SPEAKER_01: There is a number of things that are happening around that.
10:45
SPEAKER_01: The government,
10:46
SPEAKER_01: obviously,
10:47
SPEAKER_01: because housing is considered a key development priority,
10:52
SPEAKER_01: of course,
10:52
SPEAKER_01: there is a bit of relaxation on a number of those factors,
10:57
particularly on the inputs for construction of housing that
11:01
we're beginning to see.
11:02
SPEAKER_01: And government is also actually providing some incentives around that.
11:06
For example,
11:06
there is an incentive on zero taxation for a first home buyer.
11:10
SPEAKER_01: That is on stamp duty.
11:12
SPEAKER_01: A lot of people actually are not aware about that.
11:14
But then there is certainly an incentive that government has
11:18
provided for a subsidy
11:20
SPEAKER_01: that government has provided in relation to that.
11:23
SPEAKER_01: And there are a few others.
11:24
SPEAKER_01: So those are some of the challenges we face.
11:26
SPEAKER_01: A majority of these challenges are actually being addressed.
11:29
SPEAKER_01: It tends to grind slow, but we begin to see some improvements.
11:33
SPEAKER_00: I was a bit surprised about land taking 40% of cost over home.
11:37
I think that speaks to the very high prices that you tend to
11:40
have in the market.
11:41
SPEAKER_00: And I think for most Gen Zs and the younger people,
11:43
they are hoping that these land prices would go a bit lower
11:46
than they can be able
11:47
SPEAKER_00: to afford.
11:47
SPEAKER_00: But if you're talking to someone maybe new to us today,
11:51
could you explain what a mortgage is and then what KMRC's role
11:54
in facilitating that
11:55
SPEAKER_00: mortgage would be?
11:56
SPEAKER_00: Like if I am a young person who wants a mortgage with a KMRC,
12:01
SPEAKER_00: where should I go to start that journey?
12:03
A mortgage is a home loan or a loan that you take for you to be
12:07
able to buy a home
12:08
SPEAKER_01: immediately or actually to construct one.
12:10
Usually you take a mortgage because you don't have ability or
12:15
sufficient funding to
12:16
SPEAKER_01: be able to pay for the home upfront.
12:19
SPEAKER_01: And that's why you take a mortgage for that kind of loan.
12:23
SPEAKER_01: It's actually a lot more efficient because you need a home now,
12:27
SPEAKER_01: you take a loan now,
12:29
SPEAKER_01: and you pay overtime.
12:30
SPEAKER_01: The other side is that you have to wait because,
12:33
SPEAKER_01: of course,
12:34
SPEAKER_01: you'll have to build a saving for you to be able to buy a home cash.
12:38
SPEAKER_01: And that tends to be inefficient.
12:39
You can imagine if you want to buy a home or you want to get
12:42
into a home now,
12:43
SPEAKER_01: the option is for you to continue paying rent and rent is usually,
12:46
SPEAKER_01: of course,
12:47
SPEAKER_01: a sinking.
12:48
SPEAKER_01: fund arrangement because you'll never be able to recover that money.
12:51
But your rent can actually pay or buy you a home because that
12:54
would actually be
12:55
SPEAKER_01: your repayment,
12:56
SPEAKER_01: especially because of the current affordability that we have.
12:59
SPEAKER_01: So instead of you paying rent,
13:02
SPEAKER_01: you use that as a repayment for your home,
13:05
SPEAKER_01: which you leave in immediately.
13:06
The other advantage of that is that as you continue repaying,
13:10
usually you build on equity.
13:12
SPEAKER_01: Equity is essentially having
13:14
a contribution because the value of your home potentially
13:17
increases over time.
13:18
And in certain cases,
13:19
it increases faster than the rate at which you are paying.
13:22
SPEAKER_01: And so as you build that,
13:24
which essentially is an advantage you'll never be able to have
13:26
when you're paying rent,
13:27
it obviously makes sense for you to be able to pay or to buy a
13:31
home using a mortgage.
13:32
And certainly there is never a requirement for you to hold on
13:35
to that mortgage for
13:37
SPEAKER_01: the duration that you have taken the mortgage.
13:39
So assuming you take a mortgage for 10,
13:42
15 years,
13:42
it's usually an entry issue.
13:44
SPEAKER_01: So you want to enter into a home now,
13:47
SPEAKER_01: you take a mortgage now,
13:49
SPEAKER_01: but you don't have to stick on to that mortgage for those 15 years.
13:53
SPEAKER_01: When you enter into your home,
13:54
SPEAKER_01: your circumstances improve,
13:56
SPEAKER_01: your income may have increased at that time.
13:58
You repay it quickly within the shortest time duration that you
14:01
can afford to,
14:02
SPEAKER_01: and you get out of that mortgage situation,
14:05
SPEAKER_01: and suddenly you own your home.
14:07
SPEAKER_01: You can imagine if you have to wait,
14:09
SPEAKER_01: pay rent,
14:10
and then you try to make a saving overtime for you to be able
14:13
to get sufficient
14:14
SPEAKER_01: money to be able to build your home using cash.
14:17
SPEAKER_01: It will take so long,
14:18
SPEAKER_01: and if you do your calculations properly,
14:20
SPEAKER_01: you'll actually find that it's a lot more expensive.
14:23
SPEAKER_01: compared to the repayment that you make.
14:25
SPEAKER_01: For purposes of getting a loan from KMRC, KMRC is a wholesale lender.
14:30
SPEAKER_01: So it's a lender to other lenders.
14:33
We lend to banks,
14:34
we lend to circles,
14:36
we lend to microfinance institutions.
14:39
And the reason that we decided to do that at the start is that
14:43
we knew for sure it
14:44
will take so long to build an institution to have enough
14:47
branches all over the
14:48
SPEAKER_01: country for its impact to be felt.
14:51
And so there was no need to create another institution that
14:54
will compete the
14:55
SPEAKER_01: current retail financial institutions that we have.
14:58
And the idea was essentially to stimulate liquidity within the
15:01
financial system.
15:02
SPEAKER_01: And that is why it's a lender to other lenders,
15:06
SPEAKER_01: with a distribution network being the financial institution,
15:08
SPEAKER_01: the banks and the circles.
15:10
SPEAKER_01: And the impact will be felt immediately because...
15:13
SPEAKER_01: The financial institutions are current primary lenders.
15:16
They already do mortgage lending and therefore they only get
15:19
financing and they move.
15:20
SPEAKER_01: So the financing will be,
15:22
SPEAKER_01: of course,
15:23
accessed from all financial institutions that lend or provide
15:28
home loans in the country.
15:30
SPEAKER_01: At the start,
15:30
we only were lending to 20 financial institutions because
15:34
that's a model we built initially.
15:35
The shareholders of KMRC who are primary lenders were the ones
15:39
that would receive
15:40
SPEAKER_01: funding from KMRC.
15:41
SPEAKER_01: Last year, we changed that and we opened it up to all primary lenders.
15:46
So when we opened immediately,
15:48
we increased the number of institutions by 100%.
15:52
So we actually got another 20 institutions that are accessing
15:55
KMRC or are in the
15:57
SPEAKER_01: process of accessing KMRC funding this year.
16:00
SPEAKER_01: So anyone should be able to get funding from wherever they are,
16:04
SPEAKER_01: either from ASACO or from a bank.
16:08
SPEAKER_01: And that essentially has enabled us to
16:11
SPEAKER_01: increase the number of homeowners in the country.
16:13
SPEAKER_01: So far,
16:14
we have almost 3,900 additional homeowners who have accessed
16:19
homeownership at
16:20
SPEAKER_01: affordable rates.
16:23
SPEAKER_01: And 47% of those are women.
16:25
In addition to obviously the impact that creates to the
16:28
homeowners who are now
16:29
SPEAKER_01: repaying loans lower than anything they will have ever gotten,
16:33
the financial institution will have increased availability of
16:35
liquidity within the
16:37
SPEAKER_01: financial sector.
16:38
SPEAKER_01: by about 14 billion Kenya shillings of December 31st, 2024.
16:43
SPEAKER_01: So we also,
16:45
SPEAKER_01: of course,
16:46
SPEAKER_01: brought in CERCOS,
16:47
SPEAKER_01: who were never part of the primary mobile lenders,
16:50
SPEAKER_01: will help them to build the underwriting frameworks.
16:53
SPEAKER_01: And they have been now part of the lending institutions.
16:57
SPEAKER_01: We also standardized the underwriting processes.
17:00
SPEAKER_01: And certainly now,
17:01
that means we have essentially democratized our home ownership
17:05
because it's
17:05
SPEAKER_01: available from a number of financial institutions,
17:08
SPEAKER_01: not only the traditional financial institutions,
17:11
SPEAKER_01: that is banks that have been there.
17:13
SPEAKER_01: For you to get a mortgage from KMRC,
17:15
SPEAKER_01: all that you need is to just go to any lender,
17:19
SPEAKER_01: your bank,
17:20
SPEAKER_01: your circle,
17:21
SPEAKER_01: and ask for a home loan.
17:23
SPEAKER_01: And...
17:24
If you have a discussion with a primary lender,
17:26
they should be able to give you two options.
17:28
SPEAKER_01: Option number one will be a KMRC mortgage.
17:31
SPEAKER_01: And I think when you enter in there,
17:33
you'll find some of them actually have clear indications that
17:36
they have KMRC mortgages.
17:38
SPEAKER_01: Option number two,
17:39
SPEAKER_01: they can give you a regular mortgage of their own,
17:42
SPEAKER_01: but which tends to be pricey.
17:44
SPEAKER_01: And therefore,
17:45
SPEAKER_01: of course,
17:45
you don't want to go into a commercial or a regular mortgage
17:49
when there's one that
17:50
SPEAKER_01: is a lot more pricey.
17:52
SPEAKER_01: All that you need to have is an income and the income essentially will be
17:55
SPEAKER_01: determined by the financial institutions.
17:58
SPEAKER_01: You realize that when you go in,
17:59
SPEAKER_01: whenever you want any loan,
18:00
SPEAKER_01: not just a home loan,
18:02
a financial institution will ask you for a pay slip or they
18:04
will actually ask you
18:05
SPEAKER_01: for your income.
18:06
SPEAKER_01: And usually it's evidenced by your pay slip or your bank statements.
18:11
And so that is a very easy way of assessing,
18:15
but of course you'll have to make a decision.
18:17
SPEAKER_01: You will have to sit down and say, you know what, I need a home.
18:20
SPEAKER_01: And since a home is very personal,
18:23
SPEAKER_01: and of course we recognize that,
18:24
of course you'll have to look for the home yourself because
18:27
you'll have to look for
18:27
SPEAKER_01: a place that suits your circumstances.
18:30
SPEAKER_01: And that's now when you come back to the primary lender,
18:34
SPEAKER_01: the bank or the circle,
18:35
once you have clarity as to where you want to live and you
18:38
actually potentially
18:39
SPEAKER_01: could have done some determination of the pricing of that home.
18:44
SPEAKER_01: And when you come to a primary lender,
18:45
SPEAKER_01: you now talk about financing and anything else,
18:49
SPEAKER_01: of course,
18:50
SPEAKER_01: with that.
18:51
SPEAKER_01: So that's a journey, but you take it relatively easy.
18:54
SPEAKER_01: It's faster.
18:55
I understand from the lawyers who work with us that these days
19:00
and the conveyancing
19:01
SPEAKER_01: process after the registration doesn't take too long.
19:04
There's a bit of inefficiency that has been built in the
19:07
Ministry of Lands,
19:08
SPEAKER_01: particularly on the registration.
19:10
SPEAKER_01: And that I understand in certain cases, it takes about a month.
19:13
SPEAKER_01: In certain cases, it takes a couple of weeks.
19:15
And so it no longer takes too long for you to be able to get
19:18
access to that home
19:19
SPEAKER_01: loan and obviously get into your home.
19:23
SPEAKER_00: Well,
19:23
SPEAKER_00: a key takeaway is,
19:24
SPEAKER_00: of course,
19:24
SPEAKER_00: that KMRC works with primary lenders,
19:26
SPEAKER_00: and those are the ones you should go to and ask them for a KMRC loan.
19:31
SPEAKER_00: And then they will ask with KMRC to be able to take the loan.
19:34
SPEAKER_00: And at least for some of the primary lenders, they are on their website.
19:37
SPEAKER_00: So if you go to KMRC.co.uk,
19:41
SPEAKER_00: You'll be able to get a list of them.
19:43
SPEAKER_00: I can mention a few of them.
19:44
SPEAKER_00: There's ABSA,
19:45
SPEAKER_00: Bingo Circle,
19:46
SPEAKER_00: Karambe Circle,
19:47
SPEAKER_00: Credit Bank,
19:48
SPEAKER_00: DTB,
19:49
SPEAKER_00: HF Group,
19:50
SPEAKER_00: Imarika Circle,
19:51
SPEAKER_00: KCB,
19:51
SPEAKER_00: Mwalimu National,
19:53
SPEAKER_00: Stanby,
19:54
SPEAKER_00: Abstar,
19:54
SPEAKER_00: Steema Circle,
19:56
SPEAKER_00: Unitas,
19:56
SPEAKER_00: Tawa Circle,
19:58
SPEAKER_00: NCBA,
19:59
SPEAKER_00: Police Circle,
20:00
SPEAKER_00: Kenya Women's Finance Trust,
20:02
SPEAKER_00: AWFT,
20:03
SPEAKER_00: Imarisha Sako, Imarika Sako.
20:06
SPEAKER_00: There are 20 of them listed there.
20:07
So if you walk into any of them,
20:09
they should be able to connect you directly to KMRC loans.
20:12
SPEAKER_00: A question that I often get is the single digit rates.
20:14
SPEAKER_00: I think people don't tend to believe that's possible.
20:17
So perhaps you can explain how you come about to single digit
20:20
lending rates,
20:21
SPEAKER_00: which are fixed,
20:21
SPEAKER_00: and then to be able to lend at low rates.
20:23
I think Kenyans have been scammed a bit too often and they want
20:27
to know,
20:27
is it real?
20:29
SPEAKER_01: Absolutely.
20:29
SPEAKER_01: It's very real.
20:30
SPEAKER_01: But let me just take a step back.
20:32
There are actually a number of other institutions and we'll
20:35
publicize those very soon.
20:37
SPEAKER_01: The 20 you've mentioned are those that started with us,
20:40
SPEAKER_01: but we actually have another 20 that we are currently considering.
20:44
And that may just be the additional institutions that you may
20:47
want to go into.
20:48
But once we extend financing to them,
20:51
we list them in our website as part of the landers.
20:55
SPEAKER_01: When we go into matters to do with single digit, it's real.
20:59
We actually have testimonials of people who currently enjoy
21:02
that facility.
21:03
And I mentioned earlier that at the moment we have at least
21:06
3,900 homeowners who got...
21:09
SPEAKER_01: financing through KMRC at those single digits.
21:13
SPEAKER_01: So there is no further truth than that.
21:16
SPEAKER_01: But the way you get single digits,
21:18
SPEAKER_01: actually for purposes of any loan,
21:20
SPEAKER_01: the key determinant of the rate is the cost of funds.
21:24
SPEAKER_01: And that's why I think you keep hearing from time to time.
21:27
SPEAKER_01: And if you read in the papers,
21:29
the kind of discussion that they're currently going on the
21:32
market rates that the
21:33
banks are charging against what the regulator talks about or
21:37
the CPR or the central
21:38
SPEAKER_01: bank rate,
21:39
SPEAKER_01: Usually,
21:40
SPEAKER_01: where you get the financing,
21:41
SPEAKER_01: at what cost is what determines at what rates then you extend.
21:46
SPEAKER_01: KMRC accesses financing from development finance institutions.
21:51
So our financing,
21:51
in fact,
21:52
comes from the World Bank and the African Development Bank.
21:56
SPEAKER_01: They are relatively cheaper.
21:58
And so when we extend financing,
22:00
we do about 5% to financial institutions.
22:04
And we have agreed with them that their margin must not be
22:07
higher to the extent
22:08
SPEAKER_01: that the loan,
22:10
SPEAKER_01: the cost will increase to more than 10%.
22:12
SPEAKER_01: So at the moment,
22:13
we extend financing at around 5.6% and the banks charge a
22:18
minimal 3 to 4% maximum.
22:22
And that's how you arrive at 9.5,
22:24
sometimes 9.6% from the financial institutions.
22:30
SPEAKER_01: So that's how you essentially determine at what rate.
22:34
SPEAKER_01: In the recent past,
22:35
SPEAKER_01: in fact,
22:35
SPEAKER_01: we started around 5%,
22:37
SPEAKER_01: but then when we raised further funds from the capital markets,
22:41
SPEAKER_01: capital markets financing tend to be costly because we issued a bond,
22:46
SPEAKER_01: I think in 2022 and listed it in the stock exchange in 2023.
22:50
SPEAKER_01: And that's slightly more pricey.
22:52
But what we did was because we essentially want to ensure that
22:56
it's affordability,
22:58
SPEAKER_01: We did blending.
22:59
So we blended the capital markets funds with the more
23:03
concessional financing that
23:04
SPEAKER_01: we currently have.
23:04
And the weighted average cost of funds came down and we still
23:08
extended the
23:09
SPEAKER_01: financing at an additional 60 basis points to the primary mobile lenders.
23:13
So we keep monitoring that because we have an understanding
23:17
with the banks and the
23:18
SPEAKER_01: circles that we maintain single digit rates.
23:21
SPEAKER_01: Now for purposes of the fixed rates,
23:23
when we negotiated financing from the African Development Bank
23:27
and the World Bank,
23:28
SPEAKER_01: we actually fixed the rates at the time we were borrowing.
23:31
And it was essentially intentional from the beginning that we
23:34
wanted to introduce
23:36
SPEAKER_01: fixed rate mortgages in our country at the time.
23:39
SPEAKER_01: there was almost 90% of loans were on variable rates.
23:43
And that obviously tend to be problematic because whenever the
23:46
rates change,
23:47
SPEAKER_01: they increase,
23:48
SPEAKER_01: people tend to default.
23:51
SPEAKER_01: The rate of default,
23:52
SPEAKER_01: which you call non-performing loans,
23:54
SPEAKER_01: essentially continues to escalate whenever there are those changes.
23:57
But we wanted a market that people get constant repayments so
24:02
that in fact we
24:03
SPEAKER_01: reduce the problem of non-performing loans,
24:06
SPEAKER_01: particularly for homeownership.
24:08
So we fixed the rate at the access of funds and essentially we
24:12
extended the same
24:13
benefit all the way to the financial institutions and to the
24:17
end user who is the
24:18
SPEAKER_01: home loan borrower.
24:20
SPEAKER_01: It's very intentional.
24:21
SPEAKER_01: It's very purposeful.
24:23
SPEAKER_01: that we are doing that,
24:25
SPEAKER_01: and that's because we need stability,
24:27
SPEAKER_01: particularly when people are borrowing and taking in home loans.
24:31
SPEAKER_01: We want people to have stability in their homes.
24:34
Their circumstances can change,
24:36
but they will nonetheless continue to repay the loans.
24:40
SPEAKER_01: at the same rate that they have started.
24:42
SPEAKER_01: We believe with that kind of arrangement,
24:44
SPEAKER_01: usually people's circumstances tend to improve in most cases.
24:47
SPEAKER_01: Rarely, of course, you will get circumstances where that doesn't happen.
24:51
SPEAKER_01: But when that improves,
24:53
it increases a lot more stability at the home because you will
24:56
then apply the
24:56
SPEAKER_01: additional funds that you have to meet other obligations.
25:00
SPEAKER_00: You said 20 more situations coming up.
25:02
SPEAKER_00: We've gotten a list of 10, which have already been onboarded.
25:04
SPEAKER_00: So if you're a member of Thai SACO,
25:06
SPEAKER_00: Nation SACO,
25:08
SPEAKER_00: SBM Bank,
25:08
SPEAKER_00: Kingdom Bank,
25:09
SPEAKER_00: Eco Bank,
25:11
SPEAKER_00: I&M Bank,
25:12
SPEAKER_00: Kingdom SACO,
25:14
SPEAKER_00: Wanandege SACO,
25:15
SPEAKER_00: Amar SACO,
25:16
SPEAKER_00: and Cyndian Bank,
25:16
SPEAKER_00: you should be able to access KMRC loans.
25:19
SPEAKER_00: I have one more question for you.
25:21
SPEAKER_00: You've been in this space for a while.
25:22
SPEAKER_00: You should be able to tell us a bit more about it.
25:24
Some of the common misunderstandings and misconceptions about
25:28
mortgages generally in Kenya.
25:30
One of the things I've learned from you today is that you don't
25:32
need to stick with
25:32
SPEAKER_00: the mortgage.
25:33
SPEAKER_00: If you took at first, you can actually pay it back very quickly.
25:36
You don't have to stick with it until the 15 years that you've
25:39
taken it up for.
25:40
SPEAKER_00: That's something I didn't know.
25:41
So perhaps some of the other things in your course of dealing
25:44
with clients that
25:45
SPEAKER_00: you've seen as misconceptions,
25:46
SPEAKER_01: you can share them.
25:47
SPEAKER_01: There are quite a number of misconceptions about formed mortgages.
25:51
SPEAKER_01: One of the key ones is essentially that a mortgage is for the rich.
25:56
People tend to associate mortgages to people who are elite or
26:00
elitists for that matter.
26:02
SPEAKER_01: It's far from the truth.
26:03
SPEAKER_01: A home loan is available to anyone and everyone who has capacity,
26:09
SPEAKER_01: who has an income sufficient enough to be able to repay a loan.
26:13
SPEAKER_01: So that essentially remains a myth.
26:16
It's a terrible misconception because people who otherwise will
26:20
have been able to
26:21
SPEAKER_01: take a mortgage,
26:22
SPEAKER_01: but because of that misconception,
26:23
they tend to want to build a saving enough to be able to build
26:27
their own home in future.
26:29
SPEAKER_01: And that takes long.
26:31
The other one is that people tend to associate mortgage with
26:36
significant costs,
26:37
SPEAKER_01: that it's very expensive and therefore it's something not to consider.
26:42
Now,
26:43
a mortgage or a home loan or accessing a home loan is super efficient.
26:48
SPEAKER_01: Of course,
26:48
there are costs that are associated with it and the fact that
26:52
the costs are
26:52
SPEAKER_01: calculatable
26:53
SPEAKER_01: Of course,
26:54
you'll be able to get the cost immediately because a financial
26:57
institution will
26:57
SPEAKER_01: share with you.
26:59
SPEAKER_01: The other option of self-build or something like that,
27:03
you do not see that cost or you do not do the calculations in
27:06
now for you to be
27:07
SPEAKER_01: able to see that that's a lot more expensive.
27:10
SPEAKER_01: Because of the time it takes to do the construction and,
27:13
SPEAKER_01: of course,
27:14
SPEAKER_01: the complexities of constructions and that kind of thing,
27:18
you will realize that it's actually a lot more pricey to do
27:21
that than taking a mortgage.
27:23
The protection you have for taking a mortgage is usually there
27:26
are a number of
27:27
SPEAKER_01: actors that tend to review the mortgage.
27:31
And,
27:31
of course,
27:31
there's a lot of due diligence that is done on your behalf.
27:34
by the financial institutions and of course the agents that are
27:38
appointed in
27:39
SPEAKER_01: between to be able to do that.
27:41
And that essentially just protects or provide protection to the
27:44
mortgage person.
27:46
SPEAKER_01: So while there are costs,
27:47
SPEAKER_01: and I think I mentioned earlier,
27:48
there are those incidental costs that range from stamp duty to
27:52
legal fees and matters,
27:54
SPEAKER_01: which I think on aggregate tend to take about an additional 7%,
27:59
SPEAKER_01: it is recognizable.
28:01
SPEAKER_01: You'll be able to see that cost is actually there.
28:04
And of course,
28:05
that's a cost you just need to meet for you to be able to get
28:08
in there.
28:09
The other costs,
28:09
they usually know data to be able to determine the cost or how
28:14
much it takes.
28:15
SPEAKER_01: But we understand it's actually a lot more costly.
28:19
One of the other myths is the fact that mortgages have gotten a
28:22
bad name in the past.
28:24
SPEAKER_01: And because we have legacy issues in relation to mortgages,
28:28
SPEAKER_01: and this was mainly driven by the variability of rates.
28:31
SPEAKER_01: The fact that all loans were on variables, they tended to change.
28:37
And when that happens,
28:38
and you do not have an income you cannot afford to pay anymore.
28:43
SPEAKER_01: you enter into a default.
28:44
And that drove people to believe that financial institutions
28:48
were driving them to
28:49
SPEAKER_01: take mortgages so that they can come in and take your home,
28:52
SPEAKER_01: either by foreclosures or things like that,
28:55
SPEAKER_01: and you lose.
28:56
So we have had those legacy issues,
28:58
which was driven mainly by the variable rates.
29:01
SPEAKER_01: And that's why we decided to do fixed,
29:03
SPEAKER_01: so that the chances of default,
29:06
SPEAKER_01: and as a result,
29:07
SPEAKER_01: a foreclosure of your home is reduced,
29:10
SPEAKER_01: if not totally eliminated.
29:12
SPEAKER_01: Foreclosures are bad,
29:14
and the fact that people believe that financial institutions
29:16
are ruthless and they
29:17
tended to target people because of their unfortunate defaults
29:21
should not be an
29:22
SPEAKER_01: issue that should stop anyone from borrowing,
29:25
SPEAKER_01: particularly right now,
29:26
because you will not be able to go into a foreclosure situation
29:29
if you can make
29:30
SPEAKER_01: your accounts and repayment over time.
29:32
SPEAKER_01: In any case these days,
29:33
SPEAKER_01: even if you default or because of maybe some unfortunate circumstances,
29:38
SPEAKER_01: you'll have to have an agreement with the financial institution.
29:41
SPEAKER_01: You'll have to enter into an agreement of,
29:42
SPEAKER_01: say,
29:43
I want to dispose the house myself and then I repay the loan
29:46
and then I keep the difference.
29:47
Or the financial institution can do that on your behalf with a
29:50
clear understanding
29:51
SPEAKER_01: that the amount that is above or more than the loan,
29:54
SPEAKER_01: of course,
29:55
SPEAKER_01: will be paid back to you.
29:57
We have lost a bit of trust on the financial institutions
30:00
because of that.
30:01
SPEAKER_01: And that's also,
30:02
SPEAKER_01: I think,
30:03
one of the common misunderstanding that continues to affect
30:07
people to take mortgages.
30:08
SPEAKER_01: Trust is a key issue.
30:11
If people don't trust the situation,
30:13
of course,
30:13
they will not enter into any form of agreement.
30:16
SPEAKER_01: And of course,
30:17
we recognize that we had challenges in the past that actually
30:20
destroyed the kind of
30:21
SPEAKER_01: trust that we have.
30:23
SPEAKER_01: But we are slowly rebuilding that.
30:24
SPEAKER_01: Okay, Mars is helping essentially to rebuild that trust.
30:27
Because the kind of loans or the kind of protection we're
30:31
providing right now is
30:32
SPEAKER_01: essentially useful.
30:33
SPEAKER_01: And we believe it's for the long time.
30:36
I appreciate that bit of you explaining a bit on the context
30:39
around mortgages and all,
30:40
because there's a lot of people who remember their parents
30:42
being kicked out of homes,
30:43
SPEAKER_00: perhaps because of the poor way in which those situations were handled.
30:46
SPEAKER_00: I think it's better now.
30:48
SPEAKER_00: As you say, there's a lot of options when there's foreclosure for you.
30:51
So you don't need to fear,
30:52
starting more in fear of foreclosure at some point.
30:55
SPEAKER_00: Perhaps to double click on that,
30:57
SPEAKER_00: what are some of the options when it comes to,
30:58
SPEAKER_00: okay,
30:58
SPEAKER_00: I've taken up the mortgage,
31:00
SPEAKER_00: I'm not able to pay.
31:01
What can someone do in that instance to be able to protect
31:04
themselves and to be
31:04
SPEAKER_00: able to get out of the situation in a better way?
31:07
SPEAKER_01: So if you enter into a mortgage situation or under home loan,
31:11
SPEAKER_01: and you are no longer able to make the repayments,
31:16
the first thing usually is to approach your lender and have a
31:20
conversation to the
31:21
SPEAKER_01: extent that at the moment they're unable to make the repayments.
31:25
Usually they have special circumstances under which they will
31:29
review based on your circumstances.
31:32
SPEAKER_01: If you are in between jobs, for example, they may give you a time
31:36
They may restructure your loan to provide you a slightly longer
31:40
time or maybe
31:42
extend the repayment duration even longer so that you can be
31:46
able to pay smaller
31:47
SPEAKER_01: installments that way to enable you to recover at some point.
31:52
SPEAKER_01: So they give you a recovery period.
31:54
SPEAKER_01: If it is totally impractical that you are unable to,
31:59
SPEAKER_01: even with extended time,
32:01
SPEAKER_01: for example,
32:01
SPEAKER_01: if they provide unstopped or stop the repayment for a certain duration,
32:07
SPEAKER_01: of course,
32:07
as you work on your circumstances and it inevitably have to be
32:11
a foreclosure,
32:12
SPEAKER_01: or a sale of the house,
32:14
if you cannot be able to raise financing from any other
32:16
property or any other way,
32:17
then a foreclosure arrangement can be discussed with a
32:20
financial institution.
32:22
SPEAKER_01: And with the option that I think that I discussed earlier,
32:24
whether you can do the sale yourself and make a repayment on
32:28
the understanding that
32:29
you have with a financial institution or the financial
32:32
institution can do it with
32:33
understanding that they pay you sure the properties turns out
32:37
to be higher or
32:39
SPEAKER_01: higher value than the loan that you have.
32:41
SPEAKER_01: So that is a clear and I think very transparent way of doing things.
32:46
SPEAKER_01: It's a lot more transparent these days to the extent that you,
32:49
SPEAKER_01: that understanding is actually very clear.
32:52
SPEAKER_01: So those are rare circumstances.
32:53
SPEAKER_01: In fact, they are completely not common.
32:56
SPEAKER_01: There are very few situations when you enter into that,
32:59
SPEAKER_01: but certainly when you enter into an arrangement,
33:02
SPEAKER_01: for some,
33:03
those are some of the things you should also be having in mind
33:05
when you're in there.
33:06
That's a very important thing to reiterate for other people who
33:10
are afraid to take
33:10
SPEAKER_00: up mortgages.
33:11
SPEAKER_00: So come discuss.
33:12
SPEAKER_00: There is room for discussions.
33:14
SPEAKER_00: And I think the earlier you do that in terms of discussing, the better.
33:17
Unless you have something to add,
33:18
I wanted to ask you a bit about the 2024 results of KMRC.
33:22
SPEAKER_00: They are pretty impressive.
33:24
It would be good for you to maybe give us a little bit of
33:26
flavor on how they were generally.
33:28
SPEAKER_01: Before I do that, can I just add, we are already facilitating KMRC.
33:33
SPEAKER_01: affordable home loans.
33:35
And I think some of the numbers which we have published
33:38
demonstrates what we have
33:39
SPEAKER_01: done so far around that because they are all public information.
33:44
SPEAKER_01: But we actually even trying to make it a lot better.
33:46
The way we are looking at it is we want to provide or we want
33:51
to have a situation
33:52
SPEAKER_01: where we have a backup or a guarantee.
33:55
And that is why we are just about to launch what we call a risk
33:58
sharing facility or
34:00
SPEAKER_01: a partial mortgage guarantee arrangement.
34:02
Partial mortgage guarantee is usually where you find a third
34:05
party providing a
34:07
SPEAKER_01: guarantee cover for what any potential defaults that can arise.
34:12
SPEAKER_01: And the cover is usually given to a financial institution.
34:16
So the intention is actually to take care of the credit risk or
34:20
the risk of
34:21
SPEAKER_01: defaults by a borrower.
34:23
SPEAKER_01: We have developed that institution.
34:25
It's called Kenya Mortgage Guarantee Trust,
34:28
which is currently a subsidiary of KMRC.
34:30
It's a trust because it will run on its own because it has a
34:34
whole set of different
34:35
risks and therefore it will have its own balance sheet for
34:38
purposes of covering the
34:40
SPEAKER_01: guarantees that we have.
34:41
The way it works is that the Kenya Mortgage Guarantee Trust
34:45
will provide cover of
34:46
SPEAKER_01: up to 40% should there be a default by a borrower.
34:50
SPEAKER_01: The intention is essentially to de-risk the end user or the end borrower.
34:55
And this is because we are trying to shift financing even
34:58
further down the market,
34:59
SPEAKER_01: particularly for first-time homeowners.
35:03
People who are owning a home for the first time are the kind of
35:06
eligible candidates for that.
35:08
The other category of people we are looking at is those who do
35:11
not have a reggae line.
35:13
You have a couple of people who have income or post SMEs and
35:17
things like that,
35:18
SPEAKER_01: or they work,
35:18
SPEAKER_01: say,
35:19
SPEAKER_01: for example,
35:20
SPEAKER_01: a taxi driver or something like that,
35:22
SPEAKER_01: or even someone who runs a small business,
35:24
SPEAKER_01: a shop or something.
35:26
SPEAKER_01: They actually have an income,
35:27
but the income is not as regular as a person who has a regular
35:31
job where they have
35:32
SPEAKER_01: a payslip.
35:34
SPEAKER_01: Those people can actually be able to repay a loan.
35:37
And so what we are saying is that we are providing the
35:40
guarantee to the financial
35:41
institution to the extent that they originate mortgages or
35:45
underwrite mortgages
35:46
SPEAKER_01: from that category of people.
35:48
SPEAKER_01: And should they default, they get a 40% cover.
35:53
SPEAKER_01: This means if you take a loan of $1 million and there is a default,
35:57
Kenya Monk Guarantee Trust will repay $400,000 out of that $1
36:02
million loan.
36:03
SPEAKER_01: And so that cover is significant.
36:06
SPEAKER_01: The assumption is that the difference is,
36:09
SPEAKER_01: of course,
36:09
SPEAKER_01: part of the credit risk that is borne by the financial institution.
36:13
SPEAKER_01: And that's why it's a shared investment, that's risk sharing investment.
36:18
SPEAKER_01: Having said that,
36:18
SPEAKER_01: if we talk about the KMRC financial performance,
36:22
SPEAKER_01: I think we have built our institution over time,
36:25
SPEAKER_01: our gradually.
36:26
SPEAKER_01: When you look at KMRC performance since 2020,
36:30
SPEAKER_01: 2021,
36:30
SPEAKER_01: you can actually see the gradual increase on a number of areas.
36:34
Starting,
36:35
for example,
36:35
when you look at our balance sheet,
36:37
it expanded by almost 25%.
36:39
SPEAKER_01: reaching about 32 billion by the end of last year.
36:44
SPEAKER_01: And that's, at least in our view, not a mean achievement.
36:47
Building over 30 billion balance sheet within five years is
36:51
another mean task.
36:52
We also have increased the number of institutions who have
36:57
received funds from KMRC
36:59
SPEAKER_01: to the extent that the kind of liquidity that has gone to the market.
37:02
increased by another 46% last year from $9.6 billion in 2023 to
37:08
about $14 billion
37:09
SPEAKER_01: by December 2024.
37:09
I mentioned earlier about the number of people who have
37:15
directly benefited,
37:16
SPEAKER_01: who have essentially taken loans that are affordable.
37:19
SPEAKER_01: The loans at the single digit,
37:22
SPEAKER_01: at the fixed rates,
37:23
SPEAKER_01: were almost 3,900 additional mortgage borrowers.
37:28
SPEAKER_01: Of course,
37:28
SPEAKER_01: when you look at the profitability,
37:30
SPEAKER_01: that also increased by about 56%,
37:34
SPEAKER_01: closing at about $1.3 billion in 2024.
37:37
SPEAKER_01: And of course,
37:38
SPEAKER_01: that is mainly driven by the interest income,
37:41
which also rose by about 34% to about $3.2 billion from $3.4
37:44
billion in 2020.
37:48
SPEAKER_01: So our broad momentum continues.
37:51
SPEAKER_01: Of course,
37:52
SPEAKER_01: we anticipate that it's going to continue,
37:55
but we are also going to broaden a lot more on the people who
38:00
are going to take up mortgages,
38:02
SPEAKER_01: the financial institutions who are going to borrow.
38:04
SPEAKER_01: We are taking small margins in the business,
38:07
but we are as much as possible optimizing our costs to ensure
38:10
that the benefit is
38:11
SPEAKER_01: actually passed to the people who are borrowing funds that are provided.
38:17
SPEAKER_01: by KMRC.
38:18
SPEAKER_01: The most important thing is what we're encouraging people to do,
38:22
SPEAKER_01: that they take advantage because people will always need a home.
38:27
SPEAKER_01: There is absolutely no time that someone will ever not need a home.
38:32
Home can be owned,
38:34
which is the ideal or the best,
38:36
and home can also be for rental.
38:39
SPEAKER_01: But then,
38:39
SPEAKER_01: of course,
38:39
you understand that it's actually you're sinking your funds
38:43
when you're doing that.
38:44
SPEAKER_01: And now that affordability is equivalent to your rent,
38:49
SPEAKER_01: so there's absolutely no reason why you continue to pay rent,
38:53
SPEAKER_01: which would be your repayment of your mortgage,
38:56
SPEAKER_01: and you own your home.
38:58
SPEAKER_01: And essentially, there's certainly no need to wait.
39:03
SPEAKER_01: When you want a home,
39:04
you actually need to take a home loan or have your home only in
39:07
your life so that
39:08
SPEAKER_01: you have sufficient time to make those payments.
39:11
SPEAKER_01: In a number of jurisdictions that we know of,
39:14
SPEAKER_01: people take what they call multi-generational mortgages.
39:17
SPEAKER_01: And in most countries, actually, credit drives markets.
39:21
SPEAKER_01: Credit, a mortgage is a credit.
39:23
And so people don't wait for cash and people generally don't
39:26
even have cash.
39:28
SPEAKER_01: So the idea is you take a mortgage for 30,
39:31
SPEAKER_01: 40 years,
39:32
SPEAKER_01: and that's what they call a monthly generational,
39:35
SPEAKER_01: and the mortgage can actually be passed to you.
39:38
SPEAKER_01: your children to continually pay because in their view,
39:41
there is no hurry to pay now if someone else can take over the
39:45
payments over time.
39:46
SPEAKER_01: But of course, we understand that people are different.
39:49
SPEAKER_01: The study we did last year,
39:51
we noted that people actually love short-term funds as opposed
39:54
to long-term.
39:55
SPEAKER_01: But sometimes in our view, it's a misunderstanding.
39:57
SPEAKER_01: It's maybe lack of information.
40:00
Why would you want to repay if you know that you can make a
40:03
repayment for a number of years?
40:06
SPEAKER_01: But of course,
40:06
SPEAKER_01: in our situation,
40:08
the loan you take in most cases is back to your retirement from
40:11
the current income
40:12
SPEAKER_01: that you continue to earn.
40:14
SPEAKER_01: But if you are young,
40:15
your repayment can actually start now and you'll pay it for
40:19
whatever duration that
40:20
SPEAKER_01: you want.
40:21
But again,
40:21
it doesn't have to be long or long-term if people prefer to do short.
40:26
SPEAKER_01: So you take a long-term loan,
40:28
SPEAKER_01: enter into that now,
40:30
SPEAKER_01: and then you exit out of it within a short time,
40:33
SPEAKER_01: as fast as you can manage to repay.
40:36
SPEAKER_00: You've comprehensively covered the issue of mortgages and all.
40:40
SPEAKER_00: Only one or two questions remain.
40:42
SPEAKER_00: One is from the audience.
40:43
SPEAKER_00: Someone is asking,
40:44
SPEAKER_00: apart from the 40 institutions that you'll be working with,
40:47
SPEAKER_00: someone who's outside the 40 institutions,
40:49
SPEAKER_00: what can they do to get in?
40:50
SPEAKER_00: And I know you're working with more to bring on board.
40:53
SPEAKER_01: We have actually broadened this up to any lender that does mortgages.
40:59
SPEAKER_01: So if your institution is not coming to work with us,
41:03
SPEAKER_01: you have an option to shift into another one.
41:05
SPEAKER_01: In any case, that's why we are creating competition.
41:07
SPEAKER_01: You can shift to a circle or you can actually shift to
41:11
another financial institution that is more keen on getting
41:14
funding from KMRC.
41:15
SPEAKER_01: And we have seen a lot of that.
41:17
SPEAKER_01: We have seen actually a number of people who have shifted.
41:20
And we have also seen a number of financial institutions coming
41:23
to KMRC driven by that pressure.
41:26
They come and tell us our customers are shifting because we are
41:29
unable to provide
41:30
SPEAKER_01: lower cost mortgages and therefore we want to work with KMRC to get
41:33
SPEAKER_01: this so that we can also retain our customers.
41:36
SPEAKER_01: So one of the key things that I think we have helped to do is to increase
41:40
SPEAKER_01: competition in the market,
41:41
SPEAKER_01: which tends to serve customers.
41:43
And that's one thing that I think that's what makes financial
41:48
institutions to take
41:49
SPEAKER_01: action that tend to serve their customers.
41:52
SPEAKER_00: The second question, what would be your vision for KMRC going forward?
41:55
What would be your ideal vision for KMRC and for Kenya as a
41:59
whole in terms of home
42:00
SPEAKER_00: ownership generally?
42:02
So we are keen on providing or supporting or promoting or
42:07
enabling people to be
42:09
SPEAKER_01: able to own homes.
42:11
SPEAKER_01: It is increasing decent access to housing in Kenya.
42:16
SPEAKER_01: That's actually our vision.
42:19
SPEAKER_01: We have a lot of migration,
42:20
SPEAKER_01: urban migration,
42:21
and that is going to actually significantly increase over the
42:25
years because most of
42:26
the majority of the people now will tend to live in the cities
42:29
or peri-urban areas.
42:31
And so as they shift into those,
42:34
we believe they should be indecent homes.
42:37
SPEAKER_01: The pressure that I supplied on cities,
42:39
SPEAKER_01: and that's why they say cities grow the way they are financed,
42:43
SPEAKER_01: is people come in and then there's a significant shortage of houses.
42:47
SPEAKER_01: And what happens?
42:48
People then tend to shift into informal settlements and that
42:52
just creates other problems.
42:54
So KMRC is playing his role or we want to play our role to
42:58
support ownership of decent homes.
43:01
We have targets for increasing home ownership and that's we
43:07
believe will be done over time.
43:10
When KMRC came in 2020,
43:12
there were about what,
43:15
26,000 mortgages in the country.
43:17
SPEAKER_01: And that number has been sticky.
43:19
SPEAKER_01: It has been there forever actually.
43:20
Now we are beginning to see a shift and a gradual upward shift
43:25
of that to the
43:26
SPEAKER_01: extent that now the numbers we got last year is now 30,000 mortgages.
43:31
SPEAKER_01: So we believe that is going to increase.
43:33
SPEAKER_01: We lack data on how the other homes are financed.
43:37
SPEAKER_01: In most cases,
43:38
SPEAKER_01: they're still financed by loans,
43:40
SPEAKER_01: but then that data is not appropriately aggregated,
43:43
SPEAKER_01: but we'll be able to see that and we'll get those numbers over time.
43:48
SPEAKER_01: This is an institution that we believe is a partner for Kenyans,
43:53
for home ownership or for Kenyans who want to own homes or who
43:57
want to own decent homes.
43:59
SPEAKER_01: There is never going to be only one way of doing that.
44:02
SPEAKER_01: We'll of course keep changing or growing or developing more products.
44:06
SPEAKER_01: At the moment, it's just a plain vanilla mortgage.
44:09
And we have a number of other options which we introduced recently,
44:13
like the buy to build.
44:15
SPEAKER_01: You can buy land and then you build that home.
44:18
SPEAKER_01: And we also have what we call tenant purchases,
44:21
SPEAKER_01: which is also another great way of owning a home,
44:23
SPEAKER_01: which you can do over time.
44:25
And so we are going to experience some shifts in home ownership
44:30
over time.
44:30
SPEAKER_01: But of course, KMRC is going to be a greater partner.
44:34
We want to be associated with a significant growth of people in
44:39
Kenya who own their
44:40
own homes and who are essentially then stable or have stability
44:45
in their homes
44:46
SPEAKER_01: arising from the support that they have gotten from their mercy.
44:49
SPEAKER_01: So that's essentially our vision.
44:51
SPEAKER_00: Thank you so much.
44:52
SPEAKER_00: That's been a very good conversation.
44:54
SPEAKER_00: I hope to have you again soon to discuss more about homeownership.
44:58
You've been in depth in the spaces in terms of dealing with
45:01
homeownership here and there,
45:02
SPEAKER_00: and you have a passion for it.
45:04
So we really appreciate that you're able to take that hour to
45:07
come and share with
45:08
SPEAKER_00: us a little bit of perspective on that.
45:10
So I want to give you maybe one more chance now as we close up
45:13
the spaces,
45:14
perhaps you can tell us a bit about maybe something or some
45:17
tidbit that you've
45:18
gleaned from your career in this space that you can share with
45:21
the young person
45:22
SPEAKER_00: who's starting out in their journey,
45:24
SPEAKER_00: maybe in home ownership generally or just specifically career-wise.
45:27
SPEAKER_01: Sure.
45:28
SPEAKER_01: Thank you very much.
45:29
SPEAKER_01: It is about spending your time and spending your work life.
45:34
The decisions that you make when you're young will impact how
45:39
your life will turn
45:40
SPEAKER_01: out when you're older.
45:41
SPEAKER_01: And so that's important.
45:43
If you have the advantage of having someone wise who can advise
45:46
you and you take
45:47
SPEAKER_01: the advice earlier,
45:49
SPEAKER_01: for example,
45:49
SPEAKER_01: the advice you are giving on home ownership,
45:52
SPEAKER_01: that you don't need to wait,
45:54
SPEAKER_01: you just need to buy that home now and then you wait,
45:58
your circumstances will be very different in the future
46:01
compared to somebody,
46:02
SPEAKER_01: for example,
46:03
who decided to wait and try to enter into a home ownership
46:06
discussion in the future.
46:08
SPEAKER_01: So that's one lesson that at least I have learned over my career life.
46:14
SPEAKER_01: And I believe it's very important.
46:17
And that is,
46:18
I think,
46:18
my parting shot that please don't wait to buy a home,
46:22
buy a home and wait.
46:24
SPEAKER_01: We'll have further discussions,
46:25
SPEAKER_01: of course,
46:26
because we'll want from time to provide greater detail as to
46:30
what we observe going
46:31
SPEAKER_01: on the homeownership.
46:33
We are strengthening capacity of the public in relation to the
46:38
journey to going home.
46:40
We are equally strengthening capacity of the financial
46:42
institutions that work with us.
46:44
SPEAKER_01: In fact, we are going around all the counties.
46:48
I think we've been in about 10 or 11 already that we are
46:53
inviting the financial
46:55
SPEAKER_01: institutions that are working with us so that they can understand
46:58
essentially how to do greater underwriting or origination of
47:02
those mortgages.
47:03
SPEAKER_01: The idea is to increase efficiency in the process,
47:06
SPEAKER_01: especially when the customer onboarding or the customer journey.
47:10
And the idea is also to just get people to come in and see the
47:15
value that is currently there.
47:17
SPEAKER_01: We have a significant customer proposition that we are providing,
47:22
SPEAKER_01: and we want people to take advantage of that,
47:24
to certainly go into their journey of home ownership using the
47:27
various methods that
47:29
SPEAKER_01: we have described.
47:30
SPEAKER_01: So I want to thank you very much.
47:32
SPEAKER_01: I thank all the listeners who were in this.
47:34
We greatly appreciate this kind of discussion and this kind of partnership.
47:39
We are very excited to see a number of people who have joined
47:43
in this conversation.
47:44
SPEAKER_01: It's very exciting.
47:46
It means that we are serious about at least this form of
47:52
education that we are providing.
47:53
SPEAKER_01: And we are very glad to have you listen.
47:56
Please pass the message to anyone and everyone about this and
48:00
look out for more
48:01
SPEAKER_01: information that we are providing from time to time.
48:04
SPEAKER_01: Thank you.
48:05
SPEAKER_00: Thank you all for joining us on this spaces today.
48:07
SPEAKER_00: Thank you so much, the KMRC CEO, for joining us for the past hour.
48:10
SPEAKER_00: So we are grateful for your time.
48:11
SPEAKER_00: Thank you for facilitation from the KMRC team led by Irene.
48:15
SPEAKER_00: Thank you for bringing the CEO to our spaces.
48:19
SPEAKER_00: Do check out their website, kMRC.co.uk for more information.
48:22
SPEAKER_00: Thank you so much and have a lovely evening.