Ayo Olowookere is the President, Mortgage Banking Association of Nigeria (MBAN) and Managing Director, Imperial Homes Mortgage Bank Limited. He spoke with CHINEDUM UWAEGBULAM on mortgage penetration and expectations from the various governments’ housing initiatives, as well as recapitalisation.
As Nigeria continues to battle a housing deficit estimated at over 20 million units, Nigerians are turning to the mortgage industry for solutions. What immediate changes should stakeholders expect under your leadership?
The housing deficit stems from the fact that we don’t have enough of appropriately priced housing. I try to avoid the word affordable, because people try to attach that to substandard and cheaply built houses. And by appropriately priced houses, I am talking of houses from the price of N15 million up to the price of N100 million. This covers essentially the lower segments of the market in all the major cities.
The long-standing deficit is caused by a dearth of the right type of financing on the supply side and eventual demand not backed by ability. Most developers don’t want to touch this type of housing because it’s difficult to break even, deliver good housing at this rate, and make a profit. These types of housing don’t have the appropriate and sustainable financing that is well-priced.
What the Mortgage Banking Association of Nigeria (MBAN) will be doing differently this time under the new leadership is active collaboration with players across the value chain – secondary mortgage institutions, on-lending institutions, providers of matching credits – to actively provide needed mortgage financing for the effective demand side.
The second way is advocacy. A lot of people don’t have information that there’s mortgage at six per cent, which is the National Housing Fund (NHF), Ministry of Financing Incorporated Real Estate Investment Fund (MREIF) at 12 per cent, Family Home Funds at half commercial borrowing rate and that there’s the opportunity for blended mortgage solution that gives them single digits.
Nigeria’s mortgage penetration remains below one per cent. What’s holding the sector back?
The last researcher I looked at shows something in the region of 3 to 4 per cent, which is very low, and one of the lowest in Africa. That is a dismal metric for a country that has one of the largest youthful demography in Africa. In the next decade, all of them will start working, have a family, and want to own a house.
The main factor causing this is leadership. Over time, leadership at the federal and state levels never deemed it fit to see the problem for what it is – in terms of impact and magnitude. It is a major financial and economic issue. This also led to a direction—challenge as several administrations would rather focus on embarking on building projects that eventually resulted mostly in abandoned and inhabitable projects.
Younger Nigerians have lost confidence in the mortgage subsector because products aren’t tailored for them. How can this change?
Yes, there is an obvious need to rethink mortgage products as currently structured. There need to be a shift from the old structure – we need to rethink repayment; we need to rethink the evaluation procedures, the messaging and platforms.
The reality is that the market has evolved over time and our approach as mortgage banks has to evolve as well. So, we’re doing engagement workshops, which involves bringing practitioners in the industry from the supply side, which is the property developers, the marketing side, the realtors, the marketing side of the mortgage banks, so the respective heads of business development, sales and marketing at the mortgage service ends and the Chief Executive Officers to look at the how can we structure these products better to meet the expectations and aspirations of the younger ones and align with their current earnings, as well as design affordable or appropriately priced, in terms of mode of payment.
For example, a bold consideration is why we do not have housing-related consumer loans – for furnishing, inverter systems, household appliances, and rent.
The Act establishing the Pension fund, which holds trillions of naira in assets, has been amended to enhance access to mortgage finance. How has this reform impacted on the mortgage business?
The amendment of that Pension Act was driven by suggestions of MBAN and other stakeholders. Overall, it’s been successful. I know that more than N50 billion have been so far accessed, and over 9,000 pension contributors have been able to access the scheme for mortgages. We will continue to support and work with the National Pension Commission (PenCom) and other stakeholders to ensure the program continues to achieve its objectives, especially from the side of the mortgage banks.
Several housing interventions have been launched by the Bola Tinubu administration to support homeownership. What reforms would you like to see from government agencies?
We have the Renewed Hope Housing Development Initiative, which is supposed to roll out and develop, maybe in the first phase, over 250,000 affordable housing units on one side. Outside that on the housing finance side, we have the launch of the MREIF at the first closing of N250 billion to create mortgages for first-time home buyers.
Also, as part of the administration’s support for home ownership, we have the new drive of the Family Homes Funds programme, as well as ongoing discussions around the recapitalisation of the FMBN.
So, I would like to first touch on what the industry players are expecting from these initiatives and agencies. As Primary Mortgage Banks, what we would like to see is leadership, collaboration, cooperation and focus amongst these agencies.
Secondly, we would like to see mechanisms for engagement and feedback between the various government agencies running these initiatives. They need to listen more to the markets – MBAN, Real Estate Developers Association of Nigeria (REDAN), the realtors, the refinancing institutions, and the capital markets.
Thirdly, we will like to see aggressive roll-outs and implementation. The administration is halfway through its tenure and most of these agencies are yet to hit the ground running. Expectations are quite high.
I will say, that we’ve had enough now in the kitty to roll out and achieve what everyone has been looking forward to in terms of long-term-single digit mortgage financing programmes and this is expected to drive up mortgage to Gross Domestic Product (GDP), to the region of 10 to 15 per cent over the next five years, to create additional one million mortgages over the next five years, as well as to use mortgage financing as a tool to support the vision of the government in achieving its aim of having a $1 trillion economy in the next few years.
Fintech is transforming other sectors. How can it drive innovation in mortgage banking?
The plan is to partner with Fintechs with established business models and look for ways to adapt these proven business cases to the mortgage banking sector.
There are models that can be adapted for automation and efficiency in underwriting, especially in the area of profiling, evaluation, and end-to-end management of the loan origination and management process.
I am sure that with such innovations in the loan origination spaces, this can also be something that we can take to the mortgage sector to build more efficiency into what we’re doing, in terms of originating this risk asset. We also see an opportunity for FinTech and innovation in the area of Know Your Customer (KYC), anti-money laundry, direct debit to repayments management, collections and recovery.
There’s a whole gamut of opportunities along the valuation of activities, of things we do, where we can build more efficiency, and where the FinTech and innovation side can come in to make a lot of these things better.
We’re very open to working with these very strong and innovative minds to bring fresh ideas to the table to make sure that we can tap into this innovation and have a much more effective, more upwardly mobile, responsive mortgage banking sector.
There have been calls for the recapitalisation of mortgage banks. Do you agree? Are MBAN members adopting self-regulatory measures?
Everybody is expecting that after the capitalisation of the commercial banks, looking at where we were in the devaluation of the naira and the need to also improve on the balance sheet of the mortgage banks and the ability to do bigger businesses.
That might not be out of place, you know these things depend on the evaluation of our regulatory body, which is the Central Bank of Nigeria (CBN). I am sure they are looking at all these in respect of the need to have a more vibrant mortgage banking sector. Once they do these evaluations, it is left for them to make their decisions.
For now, our focus will be on government initiatives and if the regulator eventually unveils its plan for the mortgage sub-sector, definitely, we will approach the market and we think people will respond to this in a positive way.
One other important aspect I need to mention is the role the Diaspora people are also playing in housing investments and with the new platform opened by CBN, this will ensure that Nigerians home and abroad invest in the housing sector, especially the mortgage sector and across the value chain.
Finally, what legacy do you hope to leave as MBAN President?
As a team, we will like to leave a legacy of proactive advocacy and enlightenment as far as the mortgage subsector is concerned. We will like to leave a legacy of collaboration that leads to improved business for the members. This we intend to achieve by working with stakeholders, regulators, government agencies to extract market opportunities and business for our members.
We will like to leave a better equipped and organised MBAN with an efficient secretariat that will set up better, faster, and simpler ways to deliver on our objectives of the association.
Lastly, we think the housing and mortgage finance sectors are due for reform. We have seen how reforms have driven growth in several aspects of our life – telecoms, and pension.
