Following plans to introduce a public private partnership scheme that seeks to increase access to housing finance, the Central Bank of Nigeria (CBN) has selected 34 primary mortgage banks and 4 commercial banks to stimulate housing finance for low-income earners in the formal and informal sectors.
The banks will join nine other micro finance banks in the ‘My Own Home’ scheme, which is an offshoot of the Nigeria Housing Finance Programme (NHFP) set up by the Federal Government and implemented by CBN with the support of World Bank’s $300 million loan. The objective of NHFP is to catalyse the growth of the housing sector through de-risking the housing finance value chain and improving access to finance. Its objective is increase access to housing finance and housing in Nigeria and to inspire young Nigerians on the need to key into mortgage process and start owning homes.
Essentially, the banks will benefit from US$15 million Housing Micro-finance Fund and $10million Technical Assistance Fund, with LAPO Microfinance Bank as pivot of the pilot scheme in the housing sector. Unlike the conventional mortgage, the scheme allows beneficiaries to use the loan for purchase of land, incremental building or renovation.
The scheme has broad-based stakeholders and partnerships that include; the Federal Government of Nigeria, Federal Ministry of Finance, Central Bank of Nigeria, World Bank, Federal Ministry of Power, Works & Housing, Federal Ministry of Justice and Mortgage Banking Association of Nigeria (MBAN).Others are mortgage originating institutions such as Mortgage Lending Banks (MLBs) that are participating in the scheme through equity/investment in Nigeria Mortgage Refinance Company (NMRC).
NHFP is creating the enabling environment for strengthening the nation’s housing sector by setting up sustainable framework by mortgage originators such as financial institutions to access long-term refinancing. The new scheme is also expected to scale-up mortgage and housing finance awareness through mortgage literacy, customers’ right, responsibilities and education.
Speaking to journalists in Lagos, MBAN President, Mr. Adeniyi Akinlusi explained that the scheme would revamp the housing finance sector and also make access to housing finance a lot easier. He said that Nigeria Mortgage Refinance Company (NMRC) would be providing long-term refinancing of mortgages and standardizing mortgage procedures.
According to him, most initiatives that are solely funded and run by the government as Social housing programmes were usually not successful and are usually not sustainable. “My own Homes’ being a PPP is highly likely to succeed going by our experience with other PPP programs such as NMRC, Infrastructure provision and even the Pension Scheme Reform, which also had the private sector stakeholders.”
For instance, he said that the scheme offers mortgage guarantee that allows borrowers with insufficient or no equity contribution (initial down payment) can access mortgage for home ownership. Besides, it would stimulate increased lending to low-income earners in the formal and informal sectors in Nigeria through micro finance Banks for incremental housing construction or housing improvement.
Akinlusi noted that despite the challenges of the initiative, public awareness is gradually being created, although there is no available statistic on the extent of coverage yet, adding that more would still need to be done along this regard. He stated that the scheme holds the interest of every Nigerian.“ However, being a new initiative, there is still no statistics to quantify the response of Nigerians to it. And it will require some time to take firm root and have imprint on the minds of the public,” he said.
On the availability of funds, funding and sustaining the scheme, MBAN president, said that it would depend on the NHFP and how it could synchronize the scheme to generate public interest that would make it run on “auto-pilot.”The Guardian gathered that the mortgage guarantee and insurance product would provide a platform for potential mortgage clients who do not have the required equity contribution- initial down payment of 20 per cent of the value of a property- for a mortgage but have the capacity to make the regular payments, to access a mortgage on the basis of a third party guarantee.
Intending homeowners with insufficient or no equity contribution can approach their lenders for a mortgage guarantee. The mortgage guarantee firm will insure only the equity contribution required so that the lender can advance the full value of the mortgage loan for the property.On the unfavourable investment climate affecting the industry, he listed high (and sometimes erratic) exchange rate, traditionally stringent operational guidelines for mortgage banks and general difficulty in doing business in Nigeria. Other problems include lack of Foreclosure Law and inhibitions from the Land Use Act 1978.
He explained that the low mortgage penetration which stands at less than one per cent is affecting the operators. Among the problems are dearth of titled property as creation of mortgages is hinged on the certainty of title to land; high cost of title registration/transfer usually 15 per cent of property value but as high as 22 per cent in some states as well as non-automation of government process in registration and land titling. Akinlusi also noted the difficulty in accessing National Housing Fund (NHF) by majority of Nigerians due to inadequacy of funds to support the scheme as some key stakeholders are not making any contribution into the scheme as stipulated by the NHF Act.
On ways to ensure a robust sub sector, Akinlusi suggested inclusion of the informal sector with its distinct Uniform Mortgage Underwriting Standards and amendment of Pension Act to facilitate withdrawals from RSA for down payments on equity contribution to boost inclusion; reduction in Cost of Title Registration and Transfer from 13per cent of property value, and Collateral Replacement Indemnity (CRI) to boost inclusion for up to 95per cent from 80per cent Loan to Value (LTV)