CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
KICC, Nairobi
March 20, 2012

Mr. Steve Mainda, HFCK Chairman;
Mr. Frank Ireri, Managing Director, HFCK;
Board Management of Housing Finance here present;
Distinguished Guests;
Ladies and Gentlemen
1. I am very delighted to join you this evening for the official launch of the Housing
Finance Current Account. The provision of current account is one of the
institution’s key planks towards its long term vision of offering a broad range of
services to its customers.
2. Ladies and Gentlemen, allow me first to commend the Board, Management
and Staff of Housing Finance for the introduction of this new product that will go
a long way in enabling the institution access affordable funds. It is noteworthy
that since its incorporation in 1965, the institution has progressively grown in
this very specialized market to 11 branches. I also note that as at January 2012,
the institution had an impressive mortgage portfolio of Ksh.26 billion and
customer deposits of Ksh.19 billion, supported by a strong capital base of Ksh.3.7
billion. In addition, the number of mortgage accounts stood at 5,143, accounting
for about 31% of the total banking sector mortgage accounts. This indeed shows
great effort put in by the Board and staff of Housing Finance. This is the
direction we need to strengthen our mortgage market.
3. Ladies and Gentlemen, the product being launched today is as a result of the
policy proposals made by the Central Bank in Year 2010 that resulted in the
Banking Act being amended to allow mortgage finance companies to operate
current accounts. This initiative was meant to facilitate attraction of large
amounts of low cost customer deposits that would in turn allow such institutions
to increase their lending capacity and expand operations to meet the growing
demand for housing.

4. The Central Bank, jointly with the World Bank in June 2010, conducted a
baseline survey on mortgage finance in Kenya with the aim of assessing the size
and obstacles to the development of the mortgage finance market. The results of
the survey showed that the country’s mortgage finance market has more than
tripled over the last five years, from Ksh.19 billion in 2006 to Ksh.61 billion in
2010, while the number mortgages in the banking sector grew from 7,580 to
13,803 over the same period, demonstrating great potential in this sector.
However, Kenya’s mortgage debt to GDP ratio at about 2.5% is still low
compared to the international standards such as US Market where the ratio is
over 70%.
5. The survey also identified key constraints to the mortgage market in Kenya such
as low levels of income, access to long term funds, credit risk due to absence of
historical information, relatively high interest rates, difficulties with property
registration and high incidental costs of borrowing. However, various initiatives
are under way to tackle these obstacles. These initiatives include issuance of
corporate/housing bonds by institutions with the aim of mobilizing long term
resources to match the long-term nature of mortgages and the roll-out of the
credit information sharing mechanism to enable financial institutions enhance
their credit risk management processes.
6. Ladies and Gentlemen, Kenya has seen rapid urbanization over the last
decade with the proportion of the Kenyan population living in urban areas
forecast to reach 60% by the year 2030 from about 20% in 2005. Expanding
cities are good for productivity and growth. However, the Kenyan housing sector
is currently characterized by inadequacy of affordable and decent housing and
low-level of urban home ownership.
7. Despite the challenges, the Housing Sector plays a critical role in the
achievement of key goals envisaged by Vision 2030. Housing construction, being
labour intensive and having strong linkages with other sectors of the economy
remains one of the principal levers for creating jobs and driving economic
activity. Mortgage market development will be required to support the expanding
cities with the accompanying productivity gains; but also has to be accompanied
by infrastructure to decongest the cities and create more space for housing.

8. Ladies and Gentlemen, the Central Bank of Kenya in partnership with the
banking sector is currently focusing on initiatives aimed at reducing costs of
doing business for financial institutions with the main aim of bringing down
costs of financial services. In addition to developing innovative products, the
other major initiative towards cost reduction and financial inclusion has been the
introduction of Agent Banking. The CBK has so far licensed eleven banks to carry
out agent banking business and approved 10,335 specific agents since the roll out
in May 2010. The rollout of the agent banking model is mainly aimed at
addressing the challenges of high transaction costs arising from the lack of
proximity to financial services and putting up brick and mortar branches where
they may not be economical in all the corners where customers are to be found. I
am delighted to note that Housing Finance has also obtained approval for agent
network from CBK and will in due course be rolling out the model.
9. Finally, let me reiterate that the Central Bank will continue to facilitate an
environment that allows for a diverse range of financial service providers to
thrive and compete in the Kenyan market. Specifically, the Central Bank remains
committed to working with the relevant stakeholders to create an enabling
environment for the mortgage sector to play its rightful role in achieving the
aspirations of the country’s blueprint, the Vision 2030, which includes providing
the country’s population with adequate and decent housing in a sustainable
environment. Further, it will pursue better regulation as opposed to more
regulation so as to create room for more innovations by financial institutions and
also be ready with effective tools to deal with any system vulnerabilities and
emerging risks. We are happy and proud to be associated closely with the
developments Housing Finance has introduced and the growth success they have
achieved so far.
10. With these few remarks ladies and gentlemen, it is now my honour and privilege
to declare the Housing Finance Current Account officially launched and we look
forward to seeing better results and innovations from them in the market place
with increased capacity and financial strength due to this launch.
Thank You