Joint loans: The answer to home ownership

When an estranged couple opts to air their dirty linen on the scales of justice, the fate of their matrimonial home forms a major part of their anticipated separation. The judge, in their Solomonic wisdom, has to decide who walks away with the keys – or if the unit can be divided.

While such cases are a possibility for a couple, excerpts of a joint report from the Sacco Societies Regulatory Authority (Sasra), Financial Sector Deepening (FSD) Kenya and the Kenya Mortgage Refinance Company (KMRC) show that joint loan accounts offer a better pathway in home ownership.

A report from these three institutions as compiled by advisory firm AIS Capital, shows that due to the nature of a majority of Kenyans’ incomes – which is largely below Sh100,000 – its easier if loans are issued to joint accounts which would make many afford mortgages.

The premise of this argument is that the performance of loans issued by Saccos is at par between male and female borrowers, which could be a good data set for financial institutions.

However, the reason why joint or group loans are not as common in the space of home ownership, the report says, is because of lack of data since Saccos have not experimented in with this customer base.

The blanket reasoning is that two borrowers – in this case a couple – who have jointly Sh1 million in savings may be attractive to the Sacco compared to one half whose monthly income is less than Sh100,000 and has Sh500,000 in savings.

Therefore, if Saccos come up with products that favour such a customer base, then it is believed home ownership could be attained with ease.

From the Saccos that were analysed for the report, the performance of loans between male and female customers is more or less alike. For example, on sum of loan principal, 88 per cent are categorised as performing for female and 88.4 per cent for male. Loss in this category is 0.5 per cent for female borrowers and 1.1 per cent for male.

Performance by gender on number of loans stands at 88.7 per cent for female (categorised as performing) and 87.9 per cent for male. Loss in this category is 0.7 per cent for female borrowers and 0.8 per cent for male.

The report titled Leveraging Sacco Data and Research to Strengthen the Financing of the Affordable Housing Value Chain by the Sacco Sector notes that majority of borrowers earn Sh100,000 or below.

As such, they may not qualify for large loan amounts borrowed at once. Aware of this, many borrow incrementally for housing construction or land purchases.

“From the dataset analysed, over 70 per cent of land and housing borrowers fall within this income bracket while only about 5.2 per cent earn above Sh300,000 monthly,” the report says.

The report states that most mortgage borrowers earn between Sh100,000 and Sh200,00 monthly which highlights the need for housing products that accommodate these financial realities.

According to the report, with loan performance among female borrowers at par with their male counterparts, intentional efforts should be placed on supporting more women to join Saccos to increase their stake in property ownership.

“Launching or enhancing uptake of joint mortgage products may further improve loan affordability and home ownership or households with two incomes,” the report says. “This point is further reinforced considering the largest share of borrowers earn less than Sh100,000 monthly.”

The report states that less than half of total loans disbursed goes to female borrowers across most of the participating Saccos. Of the 17 Saccos that provided data on borrower gender for analysis, 13 show they extend credit mostly to male borrowers averaging 65 per cent of the loans disbursed.

“Only 38 per cent of loans across all 17 Saccos were lent to female members with just three Saccos having majority borrowers as female (average of 62 per cent of loans),” the report says. “This suggests a gender gap in access to land and housing finance or broader Sacco membership.”

The report says while other factors explain this trend, it also mirrors the higher level of male membership within the overall Sacco sector. For example, in 2019, men made up 58 per cent of membership.

“Other factors that could explain this gap include cultural norms and traditional gender roles that may still position men as the primary borrowers for land and housing purposes such as men are seen as providers, which includes providing a home for their families,” the report says.

But some Saccos also attributed this imbalance to men having a relatively higher risk appetite compared to women, increasing their likelihood of borrowing larger loans over longer periods to finance construction projects.

Further, group or joint account loans represent a very negligible share of land and housing loans in most participating Saccos based on data shared.

“Some Saccos prefer not to lend to joint account borrowers while others may not have shared joint or group loan data for analysis,” the report says.