A study of the potential role of pension funds in housing provision in Kenya

Abstract

This study exammes pension funds investments in Kenya with special reference to the potential role that this sector can play in financing housing production especially for members of the pension fund. Pension funds are known to accumulate huge sums of money. Most of this money lies idle until pensioners retire. The accumulated returns from the investments of these funds are by then amounting to millions of shillings. On the other hand, most of the pension fund contributors live in poor environments, are unable to own houses and are subjected to more suffering after retiring. Pension funds in Kenya have thus invested negligible amounts into housing, even less in housing for their members. Given the importance of housing as a socio-economic good and the many problems existing in the housing sector, this study set out to seek ways in which pension funds in Kenya can be. applied as an additional source of finance for housing. The study examines the stocks of accumulated funds held by and the investment portfolios of the three case studies of NSSF, East African Industries and University of Nairobi. This study also established the proportion of the assets that these funds have invested in housing. Views of members of these funds were sought in order to establish their preferences on how their funds are managed and invested. To obtain the required information, the researcher conducted oral interviews and administered questionnaires to the fund managers of the case studies. Official records like annual reports of accounts of the Funds were also examined in detail where they were available. In addition, the researcher interviewed members of these funds (contributors) by use of questionnaires. Data was analysed by textual description with the aid of frequency tables and charts. The main findings of the study supported the view that pension funds have not played a significant role in housing supply in Kenya, although this sector holds a momentous accumulation of funds. A great potential thus exists for pension funds to play a greater role in housing provision. The study also established that members of pension funds would wish to see their funds invested in affordable housing that they can acquire even before they retire. The study recommends, therefore, that the Retirement Benefits Act be amended to include a clause requiring pension funds to devote a proportion of their investible funds in housing for their members. Investment of funds should also be handled by investment consultants in order to prevent loss of funds in bad investments.