Saccos could help ease Kenya's housing shortage: World Bank

The World Bank on Wednesday said Savings and Credit Cooperatives (Saccos) could help ease Kenya's housing deficit that currently stands at 200,000 housing units.

World Bank Lead Financial Sector Specialist Mehnaz Safavian told journalists in Nairobi that the share of Saccos financed housing in Kenya is estimated at 90 percent as banks do not consider housing finance to be attractive.

"Saccos provide a credit for housing finance that is much more accessible and is provided at a cheaper rate as compared to what many banks can offer," Safavian said during the launch of the 15th Edition of the Kenya Economic Update.

According to the Central Bank of Kenya, there are 25,000 bank mortgages in the country.

Government data also indicates that the East African nation currently produces less than 50,000 housing units annual against an annual demand of 244,000 units forcing 61 percent of urban residents to live in slums.

Safavian said that commercial banks have to assess credit risk of borrowers before they advance mortgage loans. "This is difficult in Kenya where majority of people are in the informal sector," she said.

In Kenya, Saccos typically offer unsecured loans to members, while formal mortgages remain affordable to most households.

Safavian noted that Saccos are able to offer smaller formal mortgage loans that can be used for self construction of houses.

The World Bank official said that the majority of Kenyans are in the informal sector and few can afford homes built by formal developers resulting in mortgage lending being only accessible to a small segment of the population. Endit