To Beat Corruption, Kenya Looks At Blockchain For Help In Allocating Low-Cost Housing

To Beat Corruption, Kenya Looks At Blockchain For Help In Allocating Low-Cost Housing

When it comes to state housing allocations in Kenya, experience is the best teacher and housing officials are taking past lessons seriously.

Corruption has riddled state housing allocation programs in the East African country for decades, with some state officials awarding units to themselves and their associates.

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That will be a thing of the past if plans by the Ministry of Housing are adopted this year to introduce blockchain technology, which uses a distributed ledger to keep immutable records.

“Our past is littered with cases of people that had beaten the system. When we did affordable housing it never went to the right targets,” Charles Hinga, Kenya’s principal secretary for housing, told Moguldom in an interview.

“This technology, through this distributed ledger like blockchain, is going to help us to ensure credibility,” he added.

Like many other African countries, Kenya has ambitious plans to build half a million low-cost houses across the country by 2022 for its rapidly urbanizing population, according to the housing ministry.

low-cost housing
Kenyan President Uhuru Kenyatta waves to his people. Image – AP – Ben Curtis

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It hopes that this will be achieved through the creation of a housing fund, The Kenya Mortgage Refinancing Company. All employees in the East African nation will contribute 1.5 percent of their gross salary towards this fund, with employers matching their employees’ contributions.

The country would then utilize public land to construct low-cost housing within 12 to 18 months, Hinga said. The homes would then be allocated to contributors via a blockchain system that will help avoid any corruption.

How low-cost housing allocations will work

Low income earners will benefit from this social housing plan by getting free houses from the state, while those in the middle income bracket will be able to get houses on a subsidised mortgage plan.

Those who do not want houses or who will retire before they are allocated a house will be paid back their contribution as part of their retirement benefit.

“It is incumbent on us to put together a very credible system that starts to buy us some trust capital,” Hinga said.

“We are targeting that in the next 12 months we will have implemented all these systems,” he added.

This plan has, however, not gone down well with both employers and employees.

The country’s largest employees union, the Central Organization of Trade Unions, vowed to call a nationwide strike if they are not involved in deciding of how the funds will be used, while a court halted the implementation of the levy that was scheduled to start on Jan. 1, 2019.

Ranked 143 out of 180 in the Transparency International 2017 Corruption Perceptions Index, Kenya had dozens of public officials charged with graft involving conspiracy to steal from state agencies, including the national insurance fund and the state retirement fund, last year.

These scandals have dented the integrity and basic functioning of the state, according to the auditor general who has highlighted several discrepancies in his reviews on how state agencies use public funds.

“Blockchain is an attempt to automate trust and one way of doing that is to have a trusted identity so that every person who gets allocated (a house) moves to the block,” said Bitange Ndemo, who heads a team developing ways of integrating blockchain into state systems.

“If they are not going to do that, rich people would take everything like before and resell. We need blockchain-AI. This is blockchain using biometrics.”

Housing deficit

Kenya, with a population of about 45 million people, has a housing deficit of about 2 million houses that grows by double digits annually, according to official statistics.

This has pushed up house prices both for home buyers and tenants who are renting. The majority of the country’s youthful population are moving to cities and towns for better job opportunities. Most of them end up living in slums like Kibera – one of Africa’s most congested informal settlements.

There are only about 24,000 mortgages issued across Kenya’s 42 commercial banks, as many people still can’t afford credit and lenders prefer to keep their money in safer government treasuries that give better returns than loans after the government capped interest rates in September 2016.

“We expect that the demand will continue growing so this (housing program) needs to be seen beyond this political term,” Hinga said, referring to 2022 when President Uhuru Kenyatta is expected to step down for a new head of state via a democratic election.

Corruption has plagued most of Kenya’s low-cost housing programs, with government officials giving houses to their relatives and friends, sometimes even allocating hundreds of houses to themselves.

But a plan to introduce a blockchain system that will use an immutable digital ledger system to allocate these 500,000 planned low-cost houses will rebuild public trust in the government’s low-cost housing program, Hinga said.

“Before, I as the principal secretary would have had the mandate of allocating those houses as I wish. That’s why there was a lot of corruption when it came to the issue of housing,” he said.

“Blockchain will ensure that no one is able to beat the system by having different names or different persons, and no one will be able to allocate houses arbitrarily.”