---
description: >-
  The Act provides for establishment of building societies which provide loans
  or credit to borrowers for development of housing.
---

# 2.	Building Societies Act, 1956 (Cap 489)

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Quick Link: [https://new.kenyalaw.org/akn/ke/act/1956/29/eng@2022-12-31](https://new.kenyalaw.org/akn/ke/act/1956/29/eng@2022-12-31)

·         Section 22 of the Building Societies Act, Cap 489 restricts resource mobilisation capabilities of Building Societies to two-thirds (2/3) of their mortgage portfolio.

·         In addition, Section 24 (1 & 2) dictates the type of security that Building Societies may take as collateral to secure their lending while Section 24 (3) restricts the amount of credit that Building Societies may lend to an individual borrower.

·         These legal provisions have the overall effect of reducing available financing to housing developers to construct houses thus reducing overall housing supply, even though Building Societies were established for this particular purpose of providing mortgage finance.\[1]

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\[1] Gerhard Coetzee, Kamau Kabbucho and Andrew Mnjama, “Understanding the Re-Birth of Equity Building Society in Kenya” (2002) <[http://www.microsave.net/files/pdf/Understanding\_the\_Re\_birth\_of\_Equity\_Building\_Society\_in\_Kenya.pdf](http://www.microsave.net/files/pdf/Understanding_the_Re_birth_of_Equity_Building_Society_in_Kenya.pdf)> accessed October 29, 2021.
