Role of Pension Backed Mortgages in Affordable Housing in Kenya

A Case Study of Public Sector Pension Schemes in Nairobi

  • Violet A. Misiko University of Nairobi
Keywords: Affordable housing, Kenya, Nairobi, Pension Backed Mortgages, Retirements Benefits Authority


Access to affordable housing is a challenge to many public sector employees who retire without a home despite having worked and saved towards pension. One of the initiatives by the Government of Kenya (GOK) to increase access to housing is by amending the Retirement Benefits Act (RBA) to allow pension funds to be used as collateral for purchase of a home. The uptake of Pension Backed Mortgages (PBMs) by public sector employees in Kenya has, however, been low. This study sought to evaluate the role of Pension Backed Mortgages (PBMs) in provision of affordable housing among public sector workers in Nairobi City in Kenya. The population comprised of pension scheme administrators, financial institutions, RBA officials and Civil Servants who are pension contributors. Purposive sampling was employed targeting scheme administrators, pensioners, managers of financial institutions and Retirement Benefits Authority. Data were obtained from primary and secondary sources and analyzed and presented in tables and diagrams. Findings indicate that uptake of PBMs by public sector workers in Kenya has remained low, even after amending the Retirement Benefits Mortgage Regulations to allow pensioners to use about 60% of pension savings as collateral. This is attributed to factors such as: high mortgage interest rates, lack of awareness on use of pension funds as collateral, lengthy mortgage processes, lack of serviced land, stiffer requirements limiting access to long term loans and, process elements such as financing, planning, external environment, execution, and construction. The study concludes that the uptake of pension backed mortgages has not significantly contributed to provision of affordable housing in Kenya, and recommends vigorous public sensitization, creation of awareness, and legal reforms geared towards enhancing and streamlining use of pension funds for wider access to affordable housing among public sector pensioners in Kenya.