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The Significance of World Bank’s Nod for Housing Loan

The World Bank is a venerable institution, devoted to providing loans to countries for capital projects. It does not go into any deal lightly and pours over the detailed issues of risk and economic health for any countries it loans money to.

When it approves a Sh25 billion International Bank for Reconstruction and Development (IBRD) loan to enhance access to affordable housing finance for Kenyans who are unable to access long-term housing finance, it has done its homework.

The Kenya Affordable Housing Finance Project (KAHFP) will support the establishment and operationalization of the Kenya Mortgage Refinance Corporation (KMRC) a largely private sector-owned and non-deposit taking financial institution under the supervision of the Central Bank of Kenya.

Cheap houses

KMRC’s goal is to drive affordability of mortgages by providing more long-term funding to financial institutions, an incentive to enable them to offer long tenure loans to homebuyers.

The project will also assist the Ministry of Lands and Physical Planning to improve property registration and address structural constraints in the land management system in Kenya.This is a major statement of intent to bolster efforts to find durable solutions for the challenges facing the Kenyan people.

The Big 4 Agenda is a laudable attempt to drill down and deal effectively with four of perhaps the greatest issues facing Kenyans; further food security, affordable housing, manufacturing, and universal healthcare.

Basic need

The World Bank invariably agrees.“We believe that Kenya’s vibrant private sector offers an excellent opportunity to crowd in privately held skills and resources towards achieving the country’s Big 4 affordable housing goals and in alignment with the World Bank Group’s Maximizing Finance for Development agenda,” said Felipe Jaramillo, World Bank Kenya Country Director.

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Arguably, the greatest need is affordable housing.High prices have rendered more than 90 per cent of Kenyans incapable of buying the cheapest houses, leaving only a tiny segment of the population in the home’s market.In recent years, the housing market has failed to meet the rising demand in the lower-income segments of the economy pushing more than 60 per cent of those living in Nairobi and other towns into informal settlements and overcrowded slums.

Increased home ownership is considered a gateway to becoming an upper middle-income nation.It creates a stable environment for your family, ensures greater security and stability and studies have shown that owning one’s home has positive psychological effects on the household like employment opportunities and children who fare better in school.Those most affected by the inability to afford housing are those that fall within the mortgage gap and low-cost categories representing 95 per cent of the formally employed population.

Real opportunity

Those that work should be given a realistic opportunity to start on the property ladder because these people are going to be the backbone of a future Kenyan middle class.

Meaning, that conceivably, tackling the issue of affordable housing as a foundational pillar of the Big Four Agenda can have enormous effects for Kenyans on the family, social, communal and national level.However, an eye on helping Kenya secure a better future would not be enough for the World Bank to hand over one of its biggest single loans in recent years, especially to a nation with the population size of Kenya.

It also needs to see that the right ingredients are there to ensure that the desired future is met, and the loan will not plug and ever-growing hole making little long-term difference to the economic landscape of the nation.


“The World Bank has supported many mortgage refinance companies in emerging markets, and Kenya has the right pre-conditions for KMRC to be successful, such as supportive macroeconomic conditions, well-developed capital markets and financial institutions active in housing finance,” said Caroline Cerruti, World Bank’s Senior Finance Specialist and Task Team Leader for the Project.Apart from the World Bank’s faith in the Kenyan economy, especially its private sector, the lender also understands the importance of affordable housing for the Kenyan people.

This is also why about 20 banks and savings and credit cooperative societies (saccos) have joined the World Bank in contributing capital to the KMRC so far.This is not charity or beneficence by an international institution, but a major buy-in from the World Bank to our development agenda.

By Maoka Maore 


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