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Business, Mortgage & Finance

Mortgage finance: Creating access to informal sector

Posted: Apr 13, 2015 at 3:23 am   /   by   /   comments (0)

The past three years have witnessed a drastic improvement in housing finance in Nigeria, as it has become the key driver of economic development, political stability and forming a substantial part of Nigeria’s Gross Domestic Product (GDP). Our Correspondent, Bamidele Ogunwusi, writes;



Records have shown that the demand for housing and housing finance in Nigeria is significantly growing with huge potential to launch the nation’s economy on the stride to fortune. And key players in the sector, including FMBN’s Managing Director, Mr. Gimba Ya’u Kumo, have attributed the progress to the “Transformation Agenda’’ of President Goodluck Jonathan – a direct result of the Housing Retreat earlier organised by the President. It was the retreat that kick-started the launch of the Nigeria Mortgage Refinance Company (NMRC) that signalled the beginning of a process that is today increasing opportunities for Nigerians to own their homes at an affordable price.

Before now, the lack of healthy mortgage financing system in Nigeria had made the rate of home ownership in the country one of the lowest in Africa. Nigeria’s homeownership rate was put at about 25 per cent, which is much lower than contemporary countries.

This is why FMBN under the present management has embarked on drastic measures to ensure that the housing deficit is bridged and this has, no doubt, led to the introduction of mass housing schemes across the country. Some of the mass housing schemes are done on a rent-and-own model that allows low income participants to rent a home for 15 to 20 years and own the property at the end of the period. And expectedly, this new approach to the housing market has resulted in thousands of new mortgages at low, double to high interest rates. This is hinged on maintaining a stable macroeconomic environment with low single digit inflation, a feat which the country has shown over the past few months that it can achieve.

But notwithstanding its limitation, particularly that of the housing deficit, the apex mortgage bank initiated projects, which have delivered about 53,000 houses through the NHF, as well as launching of the housing scheme for the informal sector, and the Estate Development Guarantee (EDG) scheme, amongst others. These initiatives, coupled with its appeal to recapitalise, are set to place the industry on a new pedestal.

For instance, with the informal sector’s Cooperative Society Loan Scheme, Kumo explained that operators such as farmers, traders and artisans would be able to tap into the benefit from the National Housing Scheme, like those in the formal sector.

“The mortgage industry in Nigeria is just starting. If you look at the size of our contribution to the GDP, it is less than one per cent, but my target before I leave here, is that we should be able to contribute at least 15 per cent. That is why we are putting a lot of issues on ground to be able to drive this process.

“And how do you do that? If you look at the NHF that we are managing, out of a population of 170 million, less than one per cent is the ones contributing. So, we said this is not good enough. How do we reach the other segments of the society that are not in formal employment?” he queried.

Explaining the reason for the establishment of the scheme, Kumo observed that people in the lowest strata of the society have not benefited from housing loans, because they have limited capacity to pay for houses, as the income they generate is very small.

This, he explained, led to the introduction of the Cooperative Loan Scheme, which according to him, was brought about to extend the bank’s services to people who can be deemed as “disadvantaged” in the society because of their low income level, which may be irregular and difficult to access under the NHF loan window.

According to him, the FMBN, under the scheme, is now using cooperative societies to benefit a certain group of people operating in the informal sector category, especially because of the nature and structure of their income, which is not definite or regular.

“The loan enables a cooperative society that has acquired a plot of land to develop houses for allocation to its members. The parcel of land would have title in the name of the society which would act as facilitator on behalf of its members in the loan transaction and facilitate construction of the housing units. The root of the title of the estate land would be subleased to the beneficiaries,’’ Kumo said.

While the various strides by the agency may not have met all the expectations of stakeholders, majority of stakeholders are of the view that going by the steps taken so far, a bright future lay ahead for the industry. They expressed confidence that the FMBN has done well with its schemes and only needs some propping to deliver greater benefits to the people.

Sometime last year, President Goodluck Ebele Jonathan launched National Housing Fund (NHF) e-Card and commissioned the FMBN-financed ‘Aviation Village’ Housing Estate.

The ‘FMBN Aviation Village’ Housing Estate was developed by Suntrust Real Estate Investment Limited, a private developer based on funding for both construction and infrastructure financing provided by FMBN to the tune of N2.4 billion. The estate, which covers a land mass of 11.9 hectares comprises a total of 270 housing units of 144 units of 2 bedroom flats, 50 units of 3 bedroom semi-detached bungalows and 76 units of 3 bedroom detached bungalows.

In an address, President Goodluck Jonathan described the Housing sector as very critical to the economy of any country. He expressed joy at the number of practical steps the present administration has taken in resolving the housing problems in the country since the Presidential Retreat that was held in December 2012.

According to President Jonathan, a strong collaboration between the newly established Nigerian Mortgage Refinancing Company (NMRC) and the FMBN will stimulate affordable mortgage financing to reduce the cost of housing in Nigeria.

“Our economic programme as a government is to provide the enabling environment for the private sector to drive the economy and not to play a monopoly”

“What make changes are the little things we do that makes a big difference. Our policies should be workable and sustainable and our ability to recreate and replicate them across the country is what makes the difference.

In his speech at the event, the managing director of FMBN, Kimba Ya’u Kumo commended the President on his commitment in ensuring that the current housing deficit which now stands at 17million is reduced drastically in the nearest possible time.

Kumo announced that since the introduction of the National Housing Fund (NHF), collection to the fund has improved by more than 500 per cent and has also assisted to ensure transparency and accountability.