FMBN plans for informal sector workers

When in 1956, the Federal Government established FMBN, the mandate was clear- to ensure the provision of housing for the teeming populace of the country. This is by way of providing mortgage finance assistance to Nigerians desirous of such support. This is because the mortgage bank, from inception, is expected to play a pivotal role […]

When in 1956, the Federal Government established FMBN, the mandate was clear- to ensure the provision of housing for the teeming populace of the country. This is by way of providing mortgage finance assistance to Nigerians desirous of such support.
This is because the mortgage bank, from inception, is expected to play a pivotal role in developing a robust mortgage finance system for the country. With a mandate that among others, include promoting the growth of Primary Mortgage Institutions (PMIs) to service the need of those desiring such services, through the mobilisation of both domestic and offshore funds into the housing sector; linking the capital market with the housing industry, establishing and operating a viable secondary mortgage market to support the primary mortgage market and collecting and administering the National Housing Fund (NHF) in accordance with the provisions of the NHF Act, the FMBN, as it were, has been an onerous task before it to date.
The bank says it has wrought processes for improvement in housing finance in Nigeria as it has become the key driver of economic development, political stability and forming a substantial part of Nigeria’s Gross Domestic Product (GDP) especially in the last four years.
FMBN’s Managing Director, Mr. Gimba Ya’u Kumo has attributed the progress to government’s reforms – a direct result of the Housing Retreat earlier organised by President Goodluck Jonathan. He said it is the retreat that kick-started the launch of the Nigeria Mortgage Finance Company (NMRC) that signalled the beginning of a process that is today increasing opportunities for Nigerians to own their homes at an affordable price.
Before now, the lack of healthy mortgage financing system in Nigeria had made the rate of home ownership in the country one of the lowest in Africa. Nigeria’s homeownership rate was put at about 25 percent which is much lower than contemporary countries.
This is why FMBN changed ways to ensure that the housing deficit is bridged and this has led to the introduction of mass housing schemes in various parts of the country. Some of the mass housing schemes are done on a rent-and-own model that allows low income participants to rent a home for 15 to 20 years and own the property at the end of that period. Expectedly, this new approach to the housing market has resulted in thousands of new mortgages at low, double to high interest rates. This is hinged on maintaining a stable macroeconomic environment with low single digit inflation.
But notwithstanding its limitation, particularly that of the housing deficit, Kumo said the apex mortgage bank initiated projects, which have delivered about 53,000 houses through the NHF, as well as launch of the housing scheme for the informal sector, and the Estate Development Guarantee (EDG) scheme amongst others.
For instance, with the informal sector’s Cooperative Society Loan Scheme, Kumo explained that operators such as farmers, traders and artisans will be able to tap into the benefit from the National Housing Scheme, like those in the formal sector.
The MD said, “The mortgage industry in Nigeria is just starting. If you look at the size of our contribution to the GDP, it is less than one percent, but my target before I leave here, is that we should be able to contribute at least 15 percent. That is why we’re putting a lot of issues on ground to be able to drive this process.
“And how do you do that? If you look at NHF that we’re managing, out of the 170 million population, less than one percent is contributing. So, we said this is not good enough. How do we reach the other segments of the society that are not in formal employment?”
Kumo observed that people in the lowest strata of the society have not benefited from housing loans because they have limited capacity to pay for houses, as the income they generate is very small.
This, he said led to the introduction of the Cooperative Loan Scheme, which according to him, was brought about to extend the bank’s services to people who can be deemed as “disadvantaged” in the society because of their low income level, which may be irregular and difficult to access under the NHF loan window.
Therefore, he said, the FMBN, under the scheme, is now using cooperative societies to benefit a certain group of people operating in the informal sector category, especially because of the nature and structure of their income, which is not definite or regular.
“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 should have title in the name of the society which can act as facilitator on behalf of its members in the loan transaction and facilitate construction of the housing units. The root of the title of the estate land will be sublease to the beneficiaries,” Kumo explained.
He said his bank’s mortgage charges are at the rate of six percent on a long tenure basis- 15, 20 and even up to 35 years. Kumo said what this means is that an average Nigerian can identify a house in any location in Nigeria and approach FMBN for a loan through a PMI for financing for either outright purchase or for renovation.
Kumo believes that NMRC will help FMBN bridge the cost of residential mortgages, stimulate availability of good houses to Nigerians and reduce affordability and gaps to finance.
According to him, FMBN’s reforms like  NHF e-card launched in 2013 is a huge step forward in delivering the advantages of speed, accuracy, transparency, accountability and superior customer experiences to NHF contributors.
The NHF e-collection platform is to ensure proper record-keeping, transparency and accountability for NHF collections. The platform prevents the flagrant violation of the NHF Act and unlawful practices by employers who fail to effect statutory deductions, remit deductions to the FMBN or provide remittance schedules by which contributors’ money is easily misappropriated.
Kumo announced that since introduction of the NHF, collection to the fund has improved by more than 500 percent.