News Column

Optimism As FMBN Sees Success in New Products

August 13, 2014

Bamidele Ogunwusi

The nation's secondary mortgage institution, the Federal Mortgage Bank of Nigeria (FMBN) has for the umpteenth time said the bank is on the right path with some of its products aimed at taking mortgage to people who ,hitherto, are not benefitting from them.

Notable among these products are the Cooperative Loan and the Diaspora Mortgage schemes.

Cooperative Loans was brought about to extend the bank's services to people who can be termed disadvantaged in the society because their income is low, irregular and difficult to access under the National Housing Fund (NHF) loan window, while Diaspora product is to assist Nigerians living abroad to own homes in Nigeria. The Diaspora product came in to give large number of Nigerians in Diaspora who wish to own homes in Nigeria and also as a means of reducing the housing deficit in the country.

Speaking on the Diaspora product, Managing Director of FMBN, Gimba Yau Kumo, said: "We realised that about 17 million Nigerians are living outside the country and most of them have plans to have houses, and they have not been able to do so. We understand that over the years, people have been remitting money to build or buy a house, but has not been getting good results. Stories have followed this money.

"What we are trying to do is that by the time we develop the Diaspora mortgage model, it will be one whereby Nigerians living abroad who want to buy houses can resort to FMBN. And at the end of the day, if they do not take the mortgage, they can get refund of their money with interest.

"The reason why the bank has chosen the US is because, out of the 17million Nigerians all over the world, America has about 58 per cent. We are going to do our case study here and in the UK. If it works well, we will try to replicate it in Asia and other parts of the world".

The move, Daily Independent gathered, would also lead to the inflow of finance from the Diaspora to Nigeria, which would further assist to reduce the housing needs in the country.

"The inflow of Diaspora money to Nigeria is about $10 billion. If the housing sector takes about 25 per cent of that inflow, we are expecting that about $2.5 billion is coming to us in the form of inflow from Diaspora people that would need houses and investments in the housing sector.

That would translate to about N4 billion, and with that we can fund mortgages and build about 30,000 units and that would be an opportunity for those who would want to have houses in Nigeria. That is within the envelope that we are allowed to operate which is N15 million or $90,000", he said.

On the Cooperative Loan Scheme, Kumo said, it is designed for people that are not earning salaries and it is a way of ensuring that everyone is privileged to enjoy mortgages.

"By this product, we are giving people that are not earning salaries opportunities in the sectors, we have made provisions for them such that they can form cooperatives and also access loans in the housing sector. The only way you can do that is through cooperatives or organised informal sector involving farmers, traders, carpenters etc. who can form cooperative societies and benefit from corporate mortgage facility from us. With that, we hope to grow the sector and contribute to the development of Nigeria.

"Those in the lowest strata of the society have not benefitted from loans, because they have limited capacity to pay for houses as the income they generate is very small. This led to the introduction of the Cooperative Loan Scheme.

"What the bank has now done is to use corporative societies in the informal sector. The services are to people who can be termed disadvantaged in the society because their income is low, irregular and difficult to access under the NHF loan window. Since they do not get salaries on a monthly basis, what the bank has done is to look at ways to reach them so that they can contribute and also benefit by owning their own houses.

"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 which would facilitate construction of the housing units. The root of the title of the estate land would be subleased to the beneficiaries", he stated.

On how it works, Kumo said the FMBN will not give loans to individual members of the cooperative to go and build houses, but instead give a loan to the corporative as a group, the corporative goes and identifies a plot, does all it needs to do and then applies to FMBN for a loan.

"When we are satisfied that the corporative has met all our conditions, provided all the necessary documents and passed our internal credit test, we then approve the loans. If they have professionals among them, we will allow them build, subject to our monitoring.

"It is when the cooporative has finished building that we will then again give loans to individual members to enable them purchase the houses overtime which is either 35 years of service or 60 years of age which is retirement time. I normally use retirement age which is 60 years to calculate repayment period. Labour law provides that a worker should not spend more than 33 per cent of his income to service any loan. We apply that principle and try to establish the average income of the person and situate what he can service within that income.

"Income for this sector may not be regular, but it has to be reasonable for the person to qualify for the loan. We give the loans at four per cent interest to the primary mortgage institutions (PMIs), while they in turn give it at 6 per cent to the customers" he added.

Accessing NHF loans:

On the NHF loans, Kumo said those who want to access the loans need to have equity contribution of some percentage of what they are asking for as loan. If for instance they require N5 to N10 million from the bank, the equity contribution is 20 per cent; for N10 to N15million, the equity is 30 per cent; while for N5 million and below, the equity contribution is 10 per cent.

He said the bank does not deal with individuals in its transactions as individuals wishing to buy a house or access the loans have to go through PMIs.

Loans to property developers:

Up till now, Kumo said the bank does not have any problem with the loans it has given to developers, but the ones issued before he came on board have been problematic and that the new board is trying to revive them.

But generally, Nigeria has an issue that has to do with titling, mortgage business is based on title, and for you to get title in Nigeria, it is difficult. Example, you are given a land in Abuja under a development lease agreement to build 500 houses. For you to be able to create mortgages for these houses, you need an individual certificate for each of the houses. If you apply to FCTA to get this, it takes you not less than two years. That of Lagos is worse.

But on our own, what we have done is to create a buffer zone which we call the internal record office whereby you will sign our legal mortgage documents, and we give you your mortgage, leave us with the responsibility to get the title. By this, we are trying to reduce the burden to beneficiaries.


For the ones issued before we came in, it has not been encouraging and that is why we have embarked on an aggressive drive to recover loans in order to meet our obligations to our shareholders.

The move is in line with the resolution of the last management meeting held in Abuja. The board of the bank mandated management to go all out to recover loans given through the NHF. It also resolved that PMIs be included in the loan recovery exercise.

e-collection platform:

Kumo said one major step taken by the bank in recent time to streamline the collection of the NHF funds was the e-collection platform, adding that it is a platform that would revolutionise the NHF collection system and that it became necessary so as to ensure payment compliance by employers and allow transparent transactions as well as build an interactive customer base.

"This system will automate NHF deduction and remittance from employers' salary payments account domiciled with any of the 23 commercial banks enlisted in the project. The e-collection form will ensure compliance by employers and provide contributors with transaction alert in addition to online, real time access to records of their contributions.

"We expect an increase of at least 300 to 500 per cent, although right now we have recorded over 100 per cent increase in the collections, we are working hard and hope that very soon we will attain our desired goal.

He added that one of the problems the bank has faced in the past was that of non-remittance of contributors by the employers, assuring that with the new platform in place, the bank will be able to access contributions almost immediately as they are being made.

"We had a problem of non-remittance with people contributing and they are not remitted. That is why we started the new e-payment system, so you pay directly to us. Some ministries collect, but they don't remit to FMBN, so the money does not get to us, now we are doing e-collection and we know that things will improve

"Over N100billion has been lost in revenue to the NHF scheme due to loopholes in the collection process that encouraged flagrant violation of the NHF Act by employers

"Some of these challenges include failure to effect statutory deductions, failure to remit deductions and failure to provide remittance schedules by which unscrupulous employers use the opportunity to misappropriate such monies," he concluded.

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Source: AllAfrica

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