Mobolaji Adewumi is the MD/CEO of Abbey Mortgage Bank, one of the old generation primary mortgage banks (PMBs) operating with national licence and market capitalization in excess of N20 billion. In this interview with CHUKA UROKO, Property Editor, he speaks on inflation and other macro-economic indicators and how they impact on various sectors of Nigeria’s economy, including mortgage. He also offers insights on Abbey Mortgage and its numerous products and services. Excerpts:
Rising inflation has made savings in money deposit banks unattractive. What is the story in mortgage banking which thrives chiefly on customers’ deposits and products origination?
The rapid spread of imported inflation due to exchange rate fluctuations has posed a significant challenge for both consumers and businesses across the country. The rising costs of imported raw materials and finished goods have led to cost-push inflation, which has eroded the purchasing power of consumers, compelling them to dip into savings to stay afloat.
To combat the rising inflation, the CBN has raised the Monetary Policy Ratio (MPR) rate for the 8th consecutive time to 18.75 percent in July 2023. The floor savings rate is pegged to the MPR rate, and increasing the MPR rate has required banks to also increase their savings deposit rate.
However, the persistent upward rising inflation has not allowed the average Nigerian to enjoy the increased benefits of the savings deposits. This has forced mortgage banks to look inward and come up with innovative products that are mutually beneficial to both the customers and the banks.
In August 2023, we lunched the Women in Real Estate (WIRE) product to empower female entrepreneurs in real estate by financing construction projects owned or managed by women. We have our Save-2-Own product which ensures that moderate earners and business people can own a home or a piece of property of their choice. There are also several customized products for institutions and individuals, created and managed by our team of experts within the private banking and financial institution space. We thrive on developing attractive products for our customers.
Mortgage products and loans are largely targeted at housing – to build, buy or renovate existing ones. How do you cope now that bad economy has constricted many Nigerians to just feeding and being well?
It’s important to acknowledge that economic challenges can make homeownership a significant hurdle for many Nigerians. However, stakeholders in the housing and mortgage industry continue to adapt and innovate to ensure that housing remains a feasible goal for as many citizens as possible. This is because shelter is a primary need for every individual or business, and we must be innovative to ensure we are the first choice in bridging the housing deficit in Nigeria.
To do that, we have leveraged our extensive partnerships and experience to drive down the direct and indirect cost of doing business.
Over the years we have established relationships with developers with reputable track records in delivering quality houses at affordable prices. These developers consistently provide houses to off-takers who are customers of Abbey.
Furthermore, we have produced several products that ensure individuals can now Pay Small Small (PSS) or Buy Now, and Pay Later (BNPL), reinventing some of the key FinTech sell strategies to make housing affordable. We have also leveraged government policies like accessing 25 percent of your retirement savings account (RSA) as part of the contribution towards owning a house and the processing of the National Housing Funds (NHF) loans where possible.
Abbey Mortgage Bank is just another primary mortgage bank in Nigeria. Why must a potential customer or loan seeker come to Abbey and not another bank? What sets you apart from the crowd?
Abbey mortgage bank has a market capitalization in excess of N20 billion as of Sept 21, 2023. The strong capitalization shows investors’ confidence in our vision for the company as well as our financial strength to withstand economic challenges.
Speed of delivery: Our processes are streamlined and handled by young energetic leaders which makes service delivery prompt and seamless. The speed of delivery allows customers to achieve their goals of purchasing a house or closing any real estate-related transaction in a short time without losing value or such opportunities.
Understanding of the market: At Abbey, we have executives and a management team with deep understanding of the market and the subsector, which makes transactional discussion with clients more interesting. With the combined experience and capacity of the workforce and leadership of the bank, we can structure bespoke solutions and render advisory services to our customers as add-on to the credit relationship they have with the bank. We are also able to dimension the inherent risks in each transaction and develop mitigants that allow the execution of such transactions rather than closing our doors to customers’ needs.
Again, Abbey has been around for 32 years. Good judgment, they say, comes from experience. We are one of the oldest primary mortgage banks and, like fine wine, we have gotten better with the years, we have also opened our minds to new ways of doing things. That’s why Abbey is the most active mortgage bank across all social media platforms. We have created this multitude of options to allow our customers multiple channels of interacting with us.
Not long ago, Abbey launched a Mobile App aimed to boost financial engagement with customers. Tell us more about that App. What level of acceptance is it enjoying in the market?
As a bank, we understand how technology is shaping the whole banking and financial sector. Hence, we are keen on providing the best mortgage banking services leveraging technology. We launched the Abbey Mobile Application last year and we are already on course to release version 2 of the app. The version 1 centred on the basic banking activities like Inter and Intra bank transfers, airtime, and bill payments.
In version 2, we will be launching the mortgage application, loan calculators, movies and events, tax collections, account opening etc. We will also be improving the user interface in the version 2 without losing one of the big pluses of version one, which is app stability. We saw over 500 percent surge in the use of the application brought about primarily because of its stability and reliability.
We have also launched our corporate internet banking as well as individual internet banking platforms. We will keep producing new digital innovation and improvements on existing platforms to meet the changing needs of our customers. We regularly collect feedback through the different touch points and analyze this information with a view to improving the Abbey Brand and serving our customers better.
Back in the days, Abbey had a good product on Child Education which was well received in the market. How about that product and others coming after it?
Yes, the kids are not left out. We had the Child Education product but in line with feedback from customers. We have improved that product to our Bloom Kidz product. We understand that beyond education, a Child has several other needs requiring financial security. We have created a product to capture the Kidz entire journey to adulthood, starting with the Bloom Kidz account which is from 0 – 14 years; the Bloom Teens which is from 13 – 18 years and the Abbey Zoomers which is from 18 to 30 years.
With our Bloom Kidz/Teens product you can save towards your child’s tomorrow. The product has interesting features like higher interest rate. For example, on our Bloom Kidz, Teens or Zoomers product, you get 50-100 basis points more than you will get on an ordinary savings account, including reducing fees for cards, free debit card for the Zoomers, Zero minimum balance, etc. We have seen increased adoption of products following these revamps.
If you were to do an objective analysis of the mortgage system, especially as it operates in other economies, would you say, in truth, there is anything called mortgage in Nigeria?
I would prefer to rephrase that question, are there any two identical economies in the world? The answer is obviously No! One of the problems faced by Nigerians and Africa in general is that we measure ourselves by the same yard stick as a developed economy. For instance, a child who is good at Arts but lack arithmetic knowledge, if you measure that child based on his success of algebra, you will continue to categorize that child as a never-do-well. But if you were to give that same child an art to draw, your perception will change.
In Nigeria, today we have a mortgage system and its working. But, is what we have sufficient? The answer is No. Is the mortgage process perfect, the answer again is No!, Are there things we can do to improve the space? The answer is YES. Abbey as one of the biggest mortgage banks in Nigeria has a capitalization of N20billion and a balance sheet just shy of N50billion.
We have only 32 active mortgage banks. This means that, at best, the financial strength of Nigeria’s mortgage industry is not up to 1.5 trillion naira and Nigeria needs N21 trillion to address the housing deficit. This clearly shows you that there is a lot of work yet to be done. And our commitment as Abbey is to grow exponentially to close this gap working with relevant willing collaborators.
What measures would you suggest to both the government and operators for the growth of this subsector so that home buyers don’t dip their hands in their pockets to pay?
You must part with value to gain value. That’s what basic economics teaches us. For you to own a property, you must be willing to give the seller some value. However, there are several conditions that can be improved to allow for a more competitive landscape of the mortgage space. One is the issue of funds mismatch within the sectors. Most mortgage loans require a minimum of 3 – 10 years to be repaid. Our primary providers of funds prefer to stay at the short end of the market say 30 – 90 days.
Managing the mismatch requires extensive treasury activities which takes its toll on cost. The government can create dedicated funding programmes accessible to primary mortgage banks at single digit and long tenors to cushion this effect.
Another problem is the issue with land registry, double sale of land and other unwholesome activities surrounding land ownership in Nigeria. We spend a lot of time and money with registration and perfection of land titles, when we can digitize the entire process like government has achieved largely with CAC, Road Safety, and Immigration/Customs.
We also have issues around infrastructure inadequacy, rising cost of raw materials, increased default on loans, delays in issuance of permits, FX free fall, etc. which when addressed through enabling policies, partnership increased knowledge will see the financial burden on the ultimate homer owner reduced significantly.
Finally, the foreclosure laws have to be amended to ease the process of obtaining foreclosure orders, an efficient and effective foreclosure process will boost the confidence of financiers and enable them to avail more credit towards supporting home construction finance and personal home acquisition.