Determinants Of Mortgage Uptake Among Financial Institutions In Kenya

Abstract

There is a need to seriously consider the accessibility and eligibility of mortgages if home ownership is to be increased to a wider band of Kenyans. This is due to the fact that size of the mortgage portfolio in Kenya is low with only a few lenders holding more than 70% in their portfolio, with a total mortgage value of Kshs 61.4 billion and 13803 mortgage accounts WHICH is far below expectation of bridging the housing gap of 156,000 units per annum. Even after the government increased the number of lenders from 25% to 40% with an intention of enhancing the growth of mortgage market, the mortgage market has remained low in Kenya. The purpose of this study was to establish the determinants of mortgage uptake among financial institutions in Kenya. The objectives of the study were to determine the influence of capital adequacy on the volume of mortgage loans, establish the influence of asset quality on the volume of the mortgage loans, assess the influence of liquidity on the volume of the mortgage loans and to find out how earnings ability influence the volume of the mortgage loans in Kenya. The study adopted a descriptive research design in which the target population was the 28 commercial banks licensed to carryout mortgage lending business in Kenya. Data was collected from secondary sources from individual banks while the data on the volume of mortgage was obtained from the Central Bank of Kenya for the period of study (2010-2017). The study applied descriptive statistics and panel data analysis model. The findings were presented in tables. The study established that the variables asset quality, liquidity and capital adequacy affect the mortgage uptake. The study established that only on predictor variable was positive. The results further revealed that liquidity had a positive effect in the mortgage uptake by the financial institutions in Kenya even though this was not significant. The study also established that the capital adequacy had a negative and significant effect on the mortgage uptake among the financial institutions in Kenya. The study therefore concludes that among all the variables, it was the capital adequacy that had a significant effect on the mortgage uptake among the financial institutions in Kenya. The study also concludes that there seem to be other variables that affect the mortgage uptake among the financial institutions in Kenya which were not under study. Based on the findings of the study the study recommends that the management of the financial institutions should focus on the capital adequacy of their institutions with the aim of enhancing the mortgage uptake. The findings further recommends that the government though the Ministry of Finance should formulate policies on the capital adequacy of the financial institutions so as to enhance the mortgage uptake among the financial institutions so as the achieve one of the governments’ agenda four of housing for majority of Kenyans.