Big banks are shaping up for a fresh market war following Family Bank’s announcement that it has set aside Sh8 billion for mortgage lending — marking its entry into the lucrative homes loan market.
The bank on Tuesday said it will focus more on borrowers who already own land and will lend between Sh700,000 and Sh1.5 million for this segment of the market — a pointer that it is going for the low-income segment that other lenders have shied away from.
This promises to raise mortgage accounts that the World Bank says stood at a measly 15,000 in 2009, meaning that the home lending market was an elitist venture.
Family Bank, however, will offer other mortgage products including big ticket commercial homes projects putting it in a head-to-head battle with KCB, Housing Finance and CFC Bank at a base rate of 15 per cent.
“The low-income segment has a huge potential for us because it involves small loans which will enable us reach the masses,” said Peter Munyiri, the CEO of Family Bank. “We have always been a mass-market lender.
The bank is targeting people who have already bought land and need financing to enable them to develop it,” Mr Munyiri said.
Rapid urbanisation, population growth and expansion of the middle class have emerged as key drivers of Kenya’s red-hot property market that is riding on nearly three decades of under investment in mid-segment of housing.
This has sparked a rally in rent and home prices that is attracting investors to the property market that is emerging as a favoured investment home compared to equities, bonds and bank deposits.
As a result, real-estate lending has emerged as a profit driver for Kenya’s commercial banks who are racing to get a price of the market on increased demand for financing.
In the 12 months to November, real-estate has posted the third largest uptake of loans after households and traders.
New lending to real-estate stood at Sh38 billion compared households (Sh57 billion), trade (Sh47 billion) and manufacturing (Sh33 billion).
This increased activity in the homes lending market has seen HF lose its market leadership position to KCB, which now has 29.7 per cent stake in the loans market. HF stake has reduced to 27.9 per cent from about 40 per cent in 2006 as other banks lend faster that it’s growing its loan book.
CFC Stanbic had 10.7 per cent stake, Standard Chartered Bank (8.2 per cent) and Barclays Bank (5.1 per cent).
For Family Bank, which has modelled its business around micro-finance, it is eyeing new business lines that include home loans and corporate banking which offer big ticket lending at relatively lower cost.
Mr Munyiri said the bank wants to capture the entire breadth of the banking market to include lending to blue chip firms, forex trading and treasury functions. “Our customers have been seeking other banking services from our rivals, this will stop and we will exploit our strengths such as our vast branch network to get a footing in the new business lines,” said Mr Munyiri.
The bank is aggressively searching for new business lines following the purchase of a 22.4 per cent stake for Sh916 million last October by a consortium of investors including PE fund AfricInvest, FMO of the Netherlands, and Norway’s Norfund .
This has also culminated in the shake-up of its executive suite that has seen its tap managers from big banks such as KCB and Barclays including Mr Munyiri who joined the lender in July.
It plans to list at the Nairobi Stock Exchange by the end of October and announced a 15.4 per cent growth in half year net profit to Sh187 million.