By Beth Nyaga
Buying property is perhaps the most expensive purchase one will ever make-a critical shortage of new homes in the country compounds the difficulties for thousands of prospective home owners to gain a foothold into the housing sector ladder.
Significant jump in cost of home-loans has seen most middle income earners and the poor priced out of the market.
It is against this background that HF Group has decided to turn tables.
In a strategic re-organization of its operations, the firm has come up with enticing products targeted at low-income earners and non-salaried customers to help them staircase their way to property ownership.
The mortgage financier said it has turned its sight to unbanked but prospective property owners and those with some access to financing models but are not fully satisfied with services in the local market.
“After restructuring our operations, focus is now on this person who does not have a monthly income, or pay slip to confirm the same…what can we package for them, is the question that guides us now,” said HFC Managing Director, Sam Waweru. HFC is the banking subsidiary of HF Group.
Kenya’s urban housing is faced with acute shortage of houses producing only 30,000 houses annually against a demand of 250,000 units.
The Household Survey report by FinAccess revealed that 90 percent of Kenyans earn less than Ksh 30,000 in monthly income with only three million people said to be on a pay slip.
A 2014 study by salary explorer found that an average salary in Kenya was Ksh 147,182, making it difficult for such individuals to set aside 30 percent of their earnings to comfortably service an average mortgage of Ksh 7.5 million.
An average mortgage price has risen steadily over the last three years to grow by more than Ksh 1 million, having risen to Ksh 7.5 million last year from Ksh 6.4 in 2012 according to a Central Bank of Kenya (CBK) mortgage survey.
With these figures that predictively show a huge likelihood of high risks of default and low uptake of home loans, HFC has decided to go against the grain, moving into the uncharted territory without trepidation. “We want to look at the challenges in the current market conditions, with an aim of turning them to opportunities for both our clients and the organization”, Waweru added.
People without a salary survive and have money but they are the most avoided, argues Waweru.
“Our experience has taught us that default rates for a common Kenyan out there, is actually lower than bigger corporate clients. We are not fearing the risks for this category of customers, because we believe it’s about having the right strategies to mitigate such,” he says.
HFC has confirmed it is not chasing after the 3 million Kenyans with salary accounts-targeted by over 40 players in the commercial banking space, with a strong sentiment there is a maximum to which the country’s banks can reach before they get choked.
A huge percent of its new clientele are considered risky because they lack collateral to ease their access to credit.
“You can fear the risks so much that you sit back and do nothing, but we want to help the remaining population access financial services with ease,” he adds.
This plan is anchored under the Group’s strategy that has made its banking and development arms independent and geared to diversify its offering by creating a one-stop shop to boost convenience and ease cost of credit to customers.
The Group restructuring created a holding company but that has however not affected its core business, property finance.
Instead it has pulled out an extra lens on its telescope to look at the segment in a broader sense hinged on relatively new areas like property finance for the SME sector.
‘’Ultimately, if a customer has a business premise in Nairobi’s Kariobangi estate, he will be helped to put it up and refurbishing while a farmer in Kitale will get assistance in developing a warehousing structure,’’ said Waweru.
“We want to use Property financing us our hook even when we get into other businesses with customers. We don’t want to lose our competitive advantage,” he added.
The company is establishing its mark into corporate banking that is dominated by most commercial lenders ‘but in a different way.’
Financing stocks, assets, provision of insurance and a host of other banking services will be filled up on its SME plate to avoid direct competition with other banks.
The company is using these services to lure corporate firms with an annual turnover of Kes50 million to Kes1 billion, largely considered as engines of economic growth for the country.
We have seen a lot of demand for clients wanting to buy vehicles for transport, machinery for roads and combined harvesters for farming.
In full service banking, HFC is striving to lock in clients to a wide range of customer conveniences like current accounts as well forex exchange services with intention to limit their movement to different rival lenders.
On Agency banking model, the company will leverage on its ecosystem using hardware outlets to capitalize on their long working hours to serve more clients conveniently.
“Our strategy is a mixture of learning what the consumers want and how the market has evolved, our customers want solutions that work but they were going to too many players. We saw a niche in that,” said Waweru.
HFC is mulling a plan to start property exchange that will allow property owners to either consider disposing off their land or exchange the property locations for high value returns.
Research studies have already begun to find the best model it will use to help investors escape hurdles associated with exchange in properties.
“We have begun pitching to clients how they can begin investing in property with cash at hand or small assets they own and how to progressively increase their investments,” said Waweru.
HFC currently has 25 branches across the country and is moving big into the digital space to improve customer experience.