In this exclusive interview with BusinessDay’s GM, Northern Operations, Bashir Ibrahim Hassan, the Managing Director/CEO, Federal Mortgage Bank of Nigeria (FMBN), Arch. Ahmed Musa Dangiwa addresses the issue of affordable housing and the various innovations that he has so far implemented to position the Bank to meet the challenges in the housing sector.
Could you take us through your vision and plan towards moving the FMBN forward since you assumed duties as Managing Director/CEO about 4years ago?
FMBN was established to provide an affordable mortgage for Nigerians. The challenge was how to make affordable mortgage more accessible, and even if you have to provide mortgage there have to be underlining houses. Most of the houses I met were those built by developers, who sourced their funding basically from open markets at high-interest rates and high cost of land, other costs which majorly increases the cost of houses.
That is why you see that people looking for mortgage for houses are not forthcoming because of affordability. Civil servants do not have affordability because of the low income they earn.
So we had to enhance our construction panels in such a way that you will have to provide construction panel for developers, to give them affordable interest rates to create affordable houses and then we give mortgages.
Then we later discovered that for the house that are there, a civil servant cannot pay 30 percent equity for a house. So we had to reduce the equity to 10 percent for a house that he has to buy for N10 million. The equity for houses between N5-10 million was reduced to 10 percent.
But any mortgage that is below 5 percent is 0 percent, which means they don’t pay any equity. With that I was able to get more mortgage for Nigerians, especially the low and middle-income earners, and some in the informal sector.
I realized that some of the houses that banks have built are lying down somewhere because people can not access them due to their equities being too high. So we created another program called “Rent to Own”.
With this, if you want to get any of the houses, you approach any of our offices in the states, who will give you the keys to enter as a tenant; while you are living as a tenant, you pay either monthly or annual rents until the house becomes yours.
We also have the insurance portal, in the event that the house is destroyed by a storm, rain or other causes. Insurance will be there to cover you, which insurance also covers the eventuality of death. This insurance will pay up the house on behalf of the deceased family.
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We also have an initiative targeting an individual with certificates of occupancy (C of O) for lands. Instead of them buying houses, we can give them individual construction loans to build the houses at their own pace on any location the land is situated.
All you need to do is just visit our offices where the land is located. We give you a form, you provide the plan approval, provide bill of quantities, and the C of O. The land is processed and money is given in 3 phases. First, we give 30 percent to start it; we give you 30 percent to roof it and the remaining 40 percent we give you to finish it up.
Immediately you finish we start deducting. All our mortgages are meant to be affordable at single digits between 6-9 percent, which are easy to pay. It is convenient because you pay over a longer period of time.
All these things you cannot get anywhere, because if you go to the open market, they give you loan at 25-30 percent. They cannot give you a loan of more than 5 years.
How many houses have you been able to provide for Nigerians?
We have provided over 9,000 houses, and have provided mortgages worth more than N110 billion within the last three years. Apart from that, we have also created a microfinance loan which is given to individuals, especially to renovate their houses.
The liberal conditions make them because all you need to do is just to provide two guarantors, and just fill the forms without collateral. For this reason, people in local government areas have keyed into that loan very easily and conveniently.
They use the loan to purchase lands and construct houses in their locality. We have given over N42 billion loans to over 40,000 individuals across the country within the last three years. It has yielded a lot of results because people are attracted to it.
So our own focus is on those who wish to renovate houses, build or renovate houses.
What are the major challenges to affordable housing in Nigeria, and how can we bridge the housing deficit?
There are many challenges, but the most important is that you must know that first and foremost before you build a house there has to be land, and these lands are owned by the state governments, and these state governments are not forthcoming in ensuring that there is ease in the access to land.
All the state governors have conditions for getting land. Some government agencies take a lot of time to issue C of O. State governments have to ensure that they make access to land easy and they also have to make it easy for estate developers. Governments have to make sure that even if the lands are subsidized, there should be access roads into the land.
Here in Abuja, we have many plots of land inside the bushes but no developer will go in there except there are access roads. So accessibility to land is very important.
The next is access to finance, and this has become very tedious. You can’t blame developers for building expensive houses. First and foremost, they got the lands at very high costs – as high as 25 to 30 percent.
In banks they give construction finance at 25-30 percent interest rate, but here we give construction finance to developers at 10 percent, so we have reduced in such a way that constructions done by developers for FMBN subscribers are meant to be more affordable.
Another challenge is infrastructure within the estates. To improve the situation, the federal government has to come on board to ensure that they strengthen institutions that are into affordable housing. For the likes of FMBN, there is a need for increased capitalization to at least N500 billion. That recapitalization will help a lot to ensure the availability of affordable houses to Nigerians.
We have done and sent all the necessary documentation to the minister who will take it to FEC for approval. Of the N500 billion, we are looking for N200 billion as equity contribution from the government, while N300 billion will be sourced from investors who want to invest in FMBN.
Even the N200 billion does not have to come at once; it can be in two tranches, because we know the government has other priorities. But the point needs to be stressed that housing is also a priority, because it is one of the social responsibilities of the government to ensure that citizens have access to houses.
Are there lessons we should learn from other countries as regards how we deal with mortgage issues?
Well, there are many lessons to learn. We should understand that there are no countries that have succeeded in providing affordable houses to its citizens without subsidy, which is very important to strengthen the institutions that are responsible for doing that. If institutions such as ours are not strengthened to function properly, it is going to be difficult for them.
People used to say most developed countries are not giving free houses, but they ensure that there are institutions that cater for the housing needs. For the high-end users, who usually buy their own houses at market prices, they may not be concerned but for the low and middle-income earners, mortgage is the most important and convenient way of owning a house. You find out that once you start working in the foreign land, they make it easy for you to access mortgages for you to pay over a period time and make sure you own a house.
Which country is your best example?
My best example is Malaysia, which has been able to achieve that. Their mortgage system works very well. So does Canada’s, which also has compulsory contributions by individuals from the day they start working. That is the only way to have a pool of funds to ensure that people have their own houses.
What innovations have you come up with to ensure productivity in the institution?
When we came on board we found out low morale at work for which many factors are responsible. There are people who are given housing loans, but you find out that their rental income is too low for even senior staff to own houses even on the outskirts of Abuja. So we had to make sure that their rental allowances are increased by 100 percent. And we discovered that most staff have stayed for 10 years without promotion. So we had to promote staff, to motivate them to do better.
And we found out that in the bank, there were some staff that were employed as casual staff — I met 276 of such casual staff, who were denied permanent employment by the previous leadership. They kept on picking and using people as casual staff, some of who were graduates, on a monthly salary of N40,000.
I had to ensure that we set exams for them and absorb more than 50 percent of them into the system. For those with National Certificate of Education (NCE) and other lower certificates, will want to set exams for them and absorb them into the system. With that, there won’t be any casual staff around. Whoever is working should dedicate himself and work.
What legacy do you want to leave behind?
When I came on board I realized some abandoned projects. We have met with the departments handling the supervision and management of such projects. In view of our in-house expertise in construction finance, we are we can supervise projects.
The bank is making sure that professionals do their jobs to ensure that we deliver value for money. We have also decentralized operations. We now ensure that when staffs retire from service their contributions are promptly refunded, unlike the practice in the past when the refund took two years to be made.
Through decentralization, states now have the right to process and recommend for disbursement to head office, so they do the checks and balances and send to the head office. We have currently disbursed over N 31 billion since we came 3 years ago. In the past 25 years of the bank from (1992 to 2017), the disbursement was only N10 billion.
One last thing we want to leave as a legacy is digitalization of the processes. Most of the operations were carried out manually. Before you only had a passbook and when you contribute; you didn’t even know what you were contributing. There was no transparency, no accountability. However, we are ensuring now
We should understand that there are no countries that have succeeded in providing affordable houses to their citizens without subsidy, which is very important to strengthen the institutions that are responsible for doing that ‘
that there is accountability and transparency. We are working to have shortcodes which customers can use at the comfort of their homes – e.g. just dial *219#. So, one of our legacies is the digitalization of the operations of the bank.
Another very important legacy I would leave behind is the 5year strategic development plan for the bank, developed to put the bank on track of prosperity to increase the contributors and contribution base astronomically through exploring the informal sector market that constitutes over 70 percent of the population.
This document, developed by an international consultant (KPMG), was approved by our board that rebranded the bank with new vision, mission, and core values towards professionalizing the bank for effective and better service delivery.
