By Geoffrey Kemboi, Associate - Tax

The Finance Act, 2026 amended the Fourth Schedule to the Income Tax Act by extending mortgage interest relief to borrowers who obtain qualifying housing loans from financial institutions licensed under the Microfinance Act. Previously, this relief was generally available only for loans obtained from specified financial institutions, excluding licensed MFIs.

Main Rule

  • Licensed Microfinance Institutions (MFIs) are now recognized as qualifying mortgage lenders for purposes of mortgage interest relief.

  • Borrowers financing home ownership through licensed MFIs can claim mortgage interest relief, subject to the Income Tax Act requirements.

  • MFIs can develop and market housing finance products with an added tax benefit, making them more competitive with commercial banks.

  • The amendment is expected to increase access to housing finance, expand MFI mortgage portfolios, and support home ownership in Kenya.

Business benefits

  • Expand your customer base by appealing to individuals seeking affordable homeownership financing.

  • Distinguish your lending solutions by providing customers with access to a tax benefit.

  • Broaden your housing finance offerings.

  • Gain a stronger edge in an increasingly competitive housing finance landscape.

Conclusion

The amendment broadens access to mortgage interest relief by including licensed MFIs as qualifying housing finance providers. It enhances the competitiveness of MFIs, promotes affordable housing finance, and encourages more Kenyans to access home ownership through tax-efficient mortgage products while ensuring compliance with the Income Tax Act.