This presentation explores the strategic scope, market relevance, and opportunities for HDI Guarantees in Kenya’s housing and financial ecosystem.
As a global leader in insurance with over 120 years of experience, HDI Global is poised to introduce innovative guarantee products that could transform Kenya’s housing finance landscape and contribute to solving the country’s significant housing deficit.
Our analysis examines the current state of Kenya’s housing and mortgage markets, financial institution practices, insurance sector dynamics, regulatory framework, and development opportunities to provide a comprehensive picture of this high- potential market entry.
Guarantees, in the context of finance and insurance, are commitments by a guarantor (e.g. HDI Guarantees) to assume responsibility for a borrower9s debt or obligations in case of default. These are not traditional insurance policies but credit enhancement tools designed to de-risk lending.
Common types include:
HDI Guarantees will likely focus on credit and mortgage guarantees to increase access to housing finance in Kenya.
Guarantees play a critical role in enabling broader credit access by:
Banks can lend to clients they might otherwise reject due to insufficient collateral or informal income.
With a guarantee, even low-income or first-time borrowers become viable customers.
Access to credit drives housing development, construction jobs, and social stability.
Borrowers may benefit from smaller down payments or lower interest rates.
In Kenya, where mortgage penetration is low and housing demand is high, guarantees offer a powerful solution to bridge the credit gap.
Kenya's 42 licensed banks hold 67% of mortgage market share. Leading providers include KCB (28%), Stanbic (14%), and Co- operative Bank (11%). Average mortgage size: KES 8.5 million ($68,000), requiring significant collateral and formal employment verification.
Over 175 deposit-taking SACCOs serve 5.5M members, offering more flexible housing loans at 12-14% interest. Asset base: KES 630 billion ($5B). SACCOs finance approximately 90% of housing developments for low and middle- income earners but face liquidity constraints.
The Kenya Mortgage Refinance Company provides long-term funding to primary mortgage lenders at 5% (banks) and 3.5% (SACCOs), enabling them to offer fixed-rate mortgages below 10% for affordable housing units. KMRC has deployed KES 2.8 billion ($22.4M) to date.
Credit guarantees in Kenya have primarily focused on the MSME sector, with the government establishing a KES 10 billion ($80M) Credit Guarantee Scheme in 2020. While this has demonstrated the concept’s viability, housing-specific guarantees remain largely unexplored territory despite clear market need.
Lending institutions cite high default risk (current NPL ratios averaging 12.3% across the sector) as a primary barrier to mortgage expansion. HDI Guarantees can directly address this pain point by providing first-loss coverage or partial credit guarantees, enabling lenders to serve new market segments while maintaining sound risk profiles.
Strategic partnerships with institutions already serving the affordable housing segment (like Housing Finance Group, Family Bank, and larger SACCOs) would provide immediate market entry opportunities while building credibility for broader expansion.
Kenya faces a severe housing deficit exceeding 2 million units, primarily driven by rapid urbanization (4.2% annual urban growth) and population expansion.
This deficit grows by approximately 200,000 units annually, creating significant pressure on existing housing stock and driving up property values in urban centers.
The government’s “Affordable Housing Program” aims to build 500,000 affordable homes by 2022, but financial constraints have limited progress to less than 50,000 units completed.
With mortgage penetration at less than 3% of GDP (compared to 31% in South Africa), innovative financial solutions are urgently needed.
Over 2 million housing units needed, growing by 200,000 annually due to urbanization (4.2% growth) and population increase
Approximately 27,000 active mortgages for a population of 54 million; average interest rates of 12-15% with loan terms rarely exceeding 15 years Strategic Implications for HDI Guarantees
83% informal employment, limited credit history documentation, and median monthly income of KES 50,000 ($400) against rising property costs
The significant gap between housing demand and mortgage accessibility presents a clear opportunity for HDI Guarantees. By providing risk mitigation tools, HDI can help financial institutions extend credit to previously excluded segments, particularly the “missing middle” 3 households earning KES 50,000-150,000 monthly who can afford payments but lack traditional security requirements.
Guarantee products could specifically address collateral shortfalls, informal income verification challenges, and first-time homebuyer risks, potentially unlocking billions in dormant mortgage demand from creditworthy but underserved Kenyans.
The government’s “Affordable Housing Program” aims to build 500,000 affordable homes by 2022, but financial constraints have limited progress to less than 50,000 units completed. With mortgage penetration at less than 3% of GDP (compared to 31% in South Africa), innovative financial solutions are urgently needed.
Kenya’s insurance market, while still developing with penetration at 2.43% of GDP (below the global average of 7.2%), represents one of Africa’s most sophisticated insurance sectors. The industry consists of 56 licensed insurers generating KES 240 billion ($1.9B) in annual premiums, dominated by life, health, motor, and property coverage.
Within this landscape, financial guarantee products represent a significantly underdeveloped segment, accounting for less than 0.5% of total premiums. This creates a unique market positioning opportunity for HDI Guarantees to establish leadership in a niche category with high growth potential.
Current providers in the adjacent space of credit and guarantee insurance include:
The Insurance Regulatory Authority (IRA) provides robust oversight of Kenya’s insurance sector, with guarantee products requiring specific licensing. HDI’s global expertise and strong capitalization position it favorably for regulatory approval, with projected approval timelines of 6-9 months from application.
Recent regulatory developments in the “Sandbox” framework for InsurTech innovations provide additional pathways for introducing guarantee products through technology-enabled distribution channels.
Credit guarantee providers in Kenya must obtain specific authorization under the Insurance Act (Cap 487) with minimum capital requirements of KES 600 million ($4.8M). Foreign providers like HDI can enter through three routes: direct licensing (12-18 month process), acquisition of an existing licensed entity, or strategic partnership with a local insurer (fastest entry at 3-6 months).
Kenya has three licensed Credit Reference Bureaus (CRBs) - Metropol, TransUnion, and Creditinfo - providing credit scoring for approximately 39% of adults. The 2021 Credit Information Sharing (CIS) regulations have expanded data sources beyond traditional banking records to include utility payments, mobile loans, and rental history, creating richer risk assessment capabilities.
Kenya's legal system for contract enforcement has improved significantly, ranking 89th globally in the World Bank's contract enforcement index. While commercial courts exist for expedited resolution, typical contract dispute timelines average 465 days. This necessitates robust documentation and clear trigger conditions in guaranteed instruments.
The Competition Authority of Kenya (CAK) and the recently established Financial Markets Conduct Authority (FMCA) oversee market conduct, requiring transparent disclosure of guarantee terms, pricing, and claim processes. HDI would need to develop Kenya- specific disclosure documentation meeting local standards while maintaining global risk management practices.
The legal feasibility assessment indicates a favorable environment for HDI Guarantees’ entry, particularly through partnership models with established financial institutions already holding appropriate licenses. This approach would accelerate market entry while building local compliance expertise and relationships with regulatory stakeholders.
HDI Guarantees presents a unique opportunity to contribute significantly to Kenya’s development agenda, particularly the “Big Four” priorities established by the government. The housing guarantee product directly supports both the Affordable Housing pillar and the Financial Inclusion objectives outlined in Vision 2030, Kenya’s long-term development blueprint.
By enabling mortgage lenders to extend credit to previously excluded segments, HDI Guarantees could help reduce the housing deficit by an estimated 15,000- 20,000 units annually. This represents approximately 10% of the new housing needed each year to address urbanization pressures.
Currently, only 41% of Kenyans have access to formal financial services, with mortgage access limited to less than 1% of the population. Guarantees could expand mortgage access to an additional 5-7% of the population within five years, primarily targeting the 'missing middle' income segment.
Research shows homeownership is correlated with improved community stability, reduced crime rates, and better educational outcomes. Each housing unit created supports approximately 3.2 jobs in construction and related industries, generating economic multiplier effects.
Several development finance institutions active in Kenya could provide operational support, risk sharing, or funding for HDI Guarantees’ entry, including:
These partnerships could enhance HDI’s value proposition while mitigating entry risks and accelerating market penetration through established networks and complementary programs.
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HDI Guarantees presents a unique opportunity to contribute significantly to Kenya’s development agenda, particularly the “Big Four” priorities established by the government. The housing guarantee product directly supports both the Affordable Housing pillar and the Financial Inclusion objectives outlined in Vision 2030, Kenya’s long-term development blueprint.
Comprehensive review of data from Central Bank of Kenya, Insurance Regulatory Authority, Kenya National Bureau of Statistics, World Bank, and UN-Habitat to establish market sizing and benchmarking.
Structured interviews with 25+ key players including commercial banks, SACCOs, housing developers, regulators, and potential customers to identify specific needs and product requirements.
Analysis of similar guarantee schemes in comparable markets (Ghana Home Loans, Nigeria Mortgage Refinance Company, India Mortgage Guarantee Company) to identify best practices and potential pitfalls.
Proactive consultations with IRA, Central Bank, Ministry of Housing, and Treasury to ensure regulatory alignment and potentially shape the emerging guarantee framework.
This research program will require an estimated budget of ¬120,000- 150,000 and should be completed within 4-6 months to maintain market relevance.
The investment will significantly de-risk HDI’s market entry by providing granular insights into customer needs, regulatory requirements, and partnership opportunities.
HDI Guarantees has identified a compelling market opportunity in Kenya’s housing and financial sector.
By offering innovative risk- sharing mechanisms that enable broader access to credit, HDI can address critical market gaps while establishing a profitable business with significant growth potential.
Kenya's 2M+ housing deficit and limited mortgage penetration (3% of GDP) create strong demand for financial innovations that can unlock credit access for underserved segments.
HDI's global expertise, strong balance sheet, and specialized guarantee products position it uniquely in a market where existing players lack specialized guarantee capabilities.
Beyond commercial returns, HDI Guarantees can deliver meaningful social impact by enabling homeownership, creating jobs, and supporting Kenya's development agenda.
Establish a dedicated Kenya market entry team with representatives from product development, risk, legal, and business development
2. Commission the comprehensive market research program outlined in this presentation
3. Initiate preliminary discussions with potential distribution partners (top 5 mortgage lenders and 3 largest SACCOs)
4. Begin regulatory relationship building through introduction meetings with IRA and Central Bank of Kenya
5. Develop financial models and capital allocation proposals for Board approval by Q4 2023
With proper execution, HDI Guarantees could achieve market entry within 12-18 months, establishing a first-mover advantage in a high- growth segment while delivering on HDI Global’s commitment to sustainable development and financial inclusion.
HDI Guarantees
It´s a brand of UNITY PAYMENT SERVICES LIMITED as joint-venture with HDI Global.
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