31634 - Housing Finance Co. of Kenya

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Summary of Investment Information

Project Number

31634

Company Name

HOUSING FINANCE COMPANY OF KENYA LTD

Date SPI Disclosed

Jul 23, 2012

Country

Kenya

Region

Africa

Projected Board Date

Aug 31, 2012

Environmental Category

FI-1 - Significant

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Nov 19, 2012
Signed : Feb 5, 2013
Invested : Jul 2, 2013

Sector

Primary Mortgage Institutions

Additional Project Attributes

Blended Finance

Project Description

The proposed project is a senior loan of up to $16 million for IFC’s own account and a senior loan of up to $4 million by IFC in its capacity as the implementing entity of the Canada Climate Change Program (“CCCP”) to Housing Finance Company of Kenya Limited (“HFCK” or the “Company”) to support the Company’s funding base and help it grow its mortgage and property development finance business, with an added incentive to develop a green housing portfolio (the “Project”).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	16.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Housing Finance
Straight Senior Loan	Housing Finance

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

The Project is expected to generate a range of social and economic benefits related to mortgage lending. With CCCP funds complimenting IFC''s own funds, it is expected that the Project will also generate environmental benefits through the development of energy efficient green housing projects. The Project may also have a strong demonstration effect in Kenya and beyond - to financial institutions seeking to build their green housing business and to property developers seeking to green their portfolio.

Specifically, the Project will: (i) increase access to affordable housing in Kenya through growth in mortgage lending; (ii) help to grow housing supply in Kenya through on-lending to property developers; (iii) facilitate energy efficient housing developments and therefore introduce and promote a new sustainable housing product into the Kenyan market; (iv) enhance environmental and social (E&S) management capacity of HFCK and therefore help the Company to improve E&S and sustainability standards for property developers; and (v) help abate green house gas emissions as a result of construction of green buildings.

Financial Risk Mitigation: IFC will provide long-term funding of up to 7 years that is not readily available in the market.
Standard Setting: IFC will introduce E&S standards to help HFCK to better manage E&S risks of lending to property developers.
Knowledge and Innovation: IFC will apply and share its global expertise in sustainable housing to help HFCK introduce an innovative housing product in the Kenyan market.
Mobilization: IFC will help arrange donor funding which, subject to HFCK satisfying certain performance criteria, will qualify for certain concessional terms.

E&S Category Rationale / Risks and Mitigation

This transaction involves providing senior loans of up to $20 million to HFCK to help it grow its mortgage lending business and facilitate energy efficient housing developments in Kenya. HFCK is Kenya’s only dedicated housing finance institution. HFCK’s portfolio currently comprises 84.5% residential and other housing loans and 14.8% project finance. As HFCK plans to significantly grow the property development business and to expand the project finance portfolio significantly, the transaction will be classified as FI type 1 in accordance with IFC’s Environmental and Social Review Procedure.

The lending provided entails potentially significant adverse E&S risks and impacts that are generally site-specific, largely reversible and readily addressed through mitigation measures. For this Project the Company will be required to screen its project/ corporate finance loans and property development activities against the IFC Exclusion List, the Kenyan E&S laws and regulations, and the IFC Performance Standards.

The key risk is the ability of HFCK to identify and manage the environmental and social risks associated with its lending activities particularly lending to project developers, and to ensure consistency in E&S performance between its own property developments, and those to which it provides finance. Additional E&S risks and impacts of the Project derive from the capacity and systems in place to manage these risks, and the Company’s practices with regard to labor and working conditions. At present HFCK does not have an Environmental and Social Management System (ESMS) outlining the procedures, responsibilities and tools for undertaking E&S risk management of its lending activities and, apart from assessing compliance with national environmental permitting requirements, E&S related due diligence is not yet part of the Company’s loan review process. No staff/department has been assigned responsibility for E&S due diligence and monitoring, and training needs to be provided to all staff involved in ESMS implementation.

Contacts

For Inquiries About the Project, Contact

Frank Ireri
Managing Director
Housing Finance Company of Kenya Limited
Rehani House
Cnr. Kenyatta Avenue and Koinange Street
P.O. Box 30088
00100 Nairobi
Kenya
Tel: +254 20 326 2000
Fax: +254 20 221 6490
Email: mailto:frank.ireri@housing.co.ke
http://www.housing.co.ke

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Title & Description	Anticipated Completion Date	Status	Comments	Completion Date
Nominate officers		Completed	Completed
Establish SEMS		Completed	Completed
Formalize procedures		Completed	Completed
Develop guidelines		Completed	Completed
Staff Training		Completed	Completed

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