KE-Affordable Housing Finance Project 2

pipeline

The earlier Kenya Affordable Housing Finance Project (P165034) made significant strides in expanding access to affordable housing finance in Kenya, primarily through the support and operationalization of the Kenya Mortgage Refinance Company (KMRC). As of September 2025, KMRC had refinanced approximately KES 23 billion in mortgages, representing 4,915 loans. Repayment tenor lengthened from 8.3 (2021) to 14.4 years (2024) signaling enhanced affordability. Notably, nearly 48 percent of KMRC-refinanced mortgages were issued to women, highlighting significant progress in gender inclusion. KMRC’s portfolio now accounts for about 5.0 percent of the banking sector’s mortgage book by value and 12.8 percent by number of loans. Additionally, the share of refinancing through SACCOs within KMRC’s portfolio grew from 7 percent in 2022 to 13 percent by August 2025, indicating a strengthened role for non-bank lenders in the affordable housing finance sector, and growing financial inclusion. These achievements demonstrate that KMRC is actively driving the market forward in a positive direction; however, affordability remains a binding constraint for the majority. A phase 2 of the Kenya Affordable Housing Finance Project is aimed at strengthening the Kenyan housing market by addressing some of the lingering demand and supply gaps in the sector. To ensure continuity, it proposes to support KMRC with a line of credit for mortgage refinancing, blended with KMRC’s own funding raised through bond issuances on the capital markets, to ensure leverage of the IDA resources and the overall sustainability of the mortgage market. The project will aim to deliver additionality by moving beyond conventional mortgage financing and exploring more innovative products that can reach underserved segments of the market. It will also support the State Department of Lands and Physical Planning (SDLPP) in its reforms to make property registration faster, cheaper and more reliable, which is a precondition to develop the mortgage market. Additionally, the project proposes to support the GoK, via the National Treasury, in launching a sovereign sustainability-linked loan (SLL). The innovative instrument ties the cost of borrowing to national sustainability targets, aligning Kenya’s financing needs with measurable environmental and development outcomes that would also have co-benefits for housing. It will also support a sub-sovereign bond issuance by KMRC.