Ever summed up the monthly rentals you pay to your landlord, plus the stress and inconveniences caused month in month out? You also cannot afford equity contribution (percentage) to benefit the house mortgage.
Do not worry, Soras Assurances Generales Ltd (SORAS) the leading Insurer in Rwanda and Kenya Commercial Bank (KCB) Rwanda Ltd have jointly launched an exciting product called Collateral Replacement Indemnity (CRI)—a product that takes the place of collateral so that the lender (KCB) can provide 100 per cent of the loan and the borrower doesn’t have the added burden of saving for a deposit (equity contribution).
Mortgage is now a common product by most financial institutions in Rwanda, especially commercial banks but most of them require borrowers to provide up to 30 per cent purchase value of the property which is usually a burden to most borrowers. As a result, most of the low income earners are either left homeless or having to part with exorbitant monthly rentals.
Innovatively, SORAS has moved in to provide a full (insurance) cover for the otherwise required equity contribution (deposit of 30 %), in that, the lender (KCB) can now comfortably loan full amount to the borrower. But of course the insurance cover comes with affordable premium and the mortgage loan with a competitive interest rate of an average between 15-16 per cent per annum.
At the official launch of CRI product Friday March 16 at Hotel Mille Colline, Kigali Mr. Marc Rugenera the Managing Director of SORAS explained that the lender (KCB) purchases CRI product to cover the equivalent of the required equity contribution (deposit) in the event the bank suffers a loss after default at a legal sale of the mortgaged property. This way, the lender remains in an equivalent risk exposure as it would have with cash deposit requirement, but enables the bank access to mortgage finance to buyers with affordability while growing its mortgage finance book.
Clearly, it is a win-win for the bank, borrower and insurer.
The Managing Director of KCB Rwanda, Mr. Maurice K. Toroitich explained that, in rolling out this project the bank targets borrowers in the middle to lower income mortgage market; borrowers who can afford to repay a home loan but do not have the deposit required. CRI product thus benefits borrowers with monthly income of Rwf1.8million and below—intending to own any property (of merchantable quality and standards) worth between Rwf1-Rwf45million. From the monthly income of the borrower, Mr. Toroitich explained that the bank only takes a small portion to service the mortgage loan—usually just a quarter of the net income. This way, he/she is left in sound financial position to manage other necessities of life.
Representing the National Bank of Rwanda (BNR), the Director of Non Bank Supervision Mr. Sangano Kagaba remarked that in the quest to achieve the targets of vision 2020, Rwanda strives to provide decent housing to its citizens, especially the poor. “Access to finance and financial inclusion is remarkably still low in Rwanda. For instance, at only 1.7 % insurance penetration in Rwanda, we are among the lowest in the region—the East African Community (EAC),” he observed.
In terms of product development, there’s limited innovation and product differentiation within the insurance sector in Rwanda; a reason largely attributed for low penetration. Products on offer are usually identical and of uniform prices. Mr. Kagaba welcomed the innovation, noting: “We applaud SORAS for this innovation; which is quite unique of the insurance sector. The national bank will provide all the support to SORAS and KCB in rolling out this product”. Notably, the Non Bank Supervision Department of BNR has issued an operational license to SORAS to trade the CRI product.
SORAS is the first private insurance company to be registered and to operate in Rwanda. It was established on July 2, 1984.
Taking on such risky covers necessitates the insurer to have a stable and reliable reinsurance programme. Mr. Rugenera assured that: “We have in place a very strong and well organized and dynamic re-insurance programme that gives us the capacity and technical support to take on any risk for the safety of our clients.
This programme is reviewed annually to increase SORAS’s capacity and flexibility to take on new risks in keeping with International Insurance dynamism”. SORAS re-insurers with the following global insurers; MINICH RE, SUISS RE, AFRICA RE, BEST RE, ZEP RE, CICA RE, and SCOR.
CRI is an exciting product and is expected to attract big demand, especially the middle and low income earners. Mr. Toroitich assures KCB is ready to take on any demand that may come by. “We have earmarked Rwf4billion for this product.
That is funding between 100-150 units (of houses) on average of between Rwf30-40million”, he said. The interest rate on CRI mortgage loans will vary between 15-16 per cent, he added. However, Mr. Toroitich cautioned that the bank will not fund homes/houses of temporary nature…it has to be durable, built with quality materials.
SORAS, in its business approach, aims to provide total and competitive secure cover to its clients backed by unequivocal professional and personalized service.
This way, the insurance firm focuses so much producing innovative products.
SORAS Group Ltd has grown into a multifaceted entity to include; SORAS A.G Ltd; specially for short-term Insurance business and SORAS LIFE Business Ltd for long term business.
The split is aimed at complying with local and international insurance laws and regulations. SORAS Group has diversified into other business activities such as majority shareholding in CFE Ageseke Microfinance and GENIMMO, real estate company.