Govt’s intervention, self-education critical for mortgage sector growth

Like every other sector of the Nigerian economy, the mortgage sector is having a fair share of challenges. Besides low capital base which typifies an average mortgage institution in the country, the sector also contends with poor perception, lack of faith in its operations, and macro-economic problems such as unemployment and inflation which have eroded incomes and reduced purchasing power.

The story of banking system in this part of the world is a story of slow growth which operators and financial analysts link to the aforementioned problems and more. Poor capital base, more than anything else, was reason for the drastic reduction in the number of primary mortgage banks (PMBs) from almost 100 to 36 pre- and post- recapitalization and consolidation respectively.

 “The problem of the mortgage banks revolves around their small capital base and so there isn’t much they can do”, says Ayodele Olowookere, CEO, Omoluabi Mortgage Bank Plc. “For all the money I have, unless I raise additional capital, I don’t think I can do 1,000 mortgages”, he said in an interview in Lagos.

Omoluabi is one of the old generation banks operating in Oshogbo, the Osun state capital. It was set up initially in 1992 but started operations as Living Spring Savings and Loans in 1999. In 2011, it was changed to Omoluabi Savings and Loans, and in 2014 when it was listed on the Stock Exchange and recapitalized to increase shareholders fund to N2.5 billion, it was licenced to operate as a state Primary Mortgage Bank (PMB) and became known as Omoluabi Mortgage Bank Plc.

Olowookere  joined the bank in November 2015 and  has, since then, been trying to change the perception of the bank as one set up to service civil servants or government employees by bringing in transparency and efficiency in its operations and also by delivering results in a way that is sustainable.

He agrees further that the mortgage sector has not growing in terms of enlightenment and awareness. “My experience is that our usual deposit banks are the ones usurping the functions of mortgage banks.  They own everything in the property industry from funding development to providing mortgages”, he says. He notes that a mortgage bank like Union Homes was a very strong player in the market and was also quite focused, but there was a bit of a gap which is why there is need for the mortgage banks themselves to do a lot of self-enlightenment and mortgage education.

Over time there has been wrong perception of the mortgage industry which Olowookere thinks  is understandable because some mortgage banks have also done what is not right like collecting money from people and not giving back. A lot of people would therefore, say they will never go near mortgage banks because of these unethical practices.

“But people need to know that mortgage banks are here to stay because they are not going to close shops”, he says, hoping that government will put policies in place that will help the industry to grow to be able to attract sustainable funding.

Continuing, he says, “give or take, I think if there is a particular way government can call all the mortgage banks together, it will be quite beneficial for the economy. This is one sector that can grow Nigerian economy more than any other sector because if people take mortgages to build houses, the multiplier effect will be unimaginable. A lot of jobs will be created for professionals, skilled and unskilled labour, artisans, manufacturers; there will economic activities and incomes will rise”.

There is need for government to sit down with the mortgage banks and discuss and Omoluabi CEO explains that this is necessary because they are the ones that meet the off-takers and so they understand the market more than the government. “These operators also understand the market more than the federal mortgage bank and that is why the apex mortgage bank says anybody who wants to get a mortgage should go through a PMB”, he explains further.

Arguably, if the mortgage industry is well run and there is a good policy thrust from government to support its operations, it will diversify the economy with job creation. Olowookere reasons that the focus on agriculture is good because the country needs to feed its people, but everybody also needs shelter.

“We have been demanding, since 2005, that there should a change in the Land Use Act of 1978 to no avail. There is need to quicken processes leading to title transfer and building approval. Cost and time line of perfecting titles need to change. The federal mortgage bank needs to be restructured to meet the demands of today. The National Housing Fund (NHF) also needs to be restructured for same purpose. There should be special focus on the sector, especially on how it is funded”, he advises government.