Financing the low income housing sector in Kenya: a viability study
In developed countries, it has been observed that the low cost housing segment offers higher opportunity for profitability and growth for financial institutions. This has seen the realignment of individual financial firm portfolios in developed countries inclined more heavily towards mortgage supply. The Kenyan financial institutions however have expanded their credit lines and financial products in non housing mortgage financing areas over the years thereby constraining the low cost mortgage segment of the necessary funds. The Kenyan cities continuously exhibit a paradox of housing UN agencies and various multilateral agency offices alongside high class office and residential premises and factories in the neighbourhood of ever enlarging slum dwellings. In realization of this and the social and capital responsibility of the government to provide low cost housing for its citizen especially in the slums so as to meet the vision 2030 and the (MDG) millennium development Goal 7, Target 11: ““Achieve a significant improvement in the lives of at least 100 million slum dwellers, by 2020.”, The Kenyan government has placed incentives such as tax preferential treatment and services for the development of low cost housing but has yet to receive substantial support on these efforts that require substantial financial resources. The dissertation is aimed at establishing the reasons behind the non provision of finance to the low income housing sector by the formal financial institutions in Kenya and the existing financing mechanisms for the low income housing segment. The research study covered all the registered financial institutions in Nairobi. Also considered were the informal financing agencies that fill the void unattended to by the formal financial institutions. The study is expected to inform the stakeholders in the sector to ways in which they can provide their services in a more cost effective and efficient manner.