When PMBs cease to create consumer products for customers

Nigerians live in very austere and trying times when they have to struggle to get virtually everything from an otherwise buoyant economy they find themselves with enormous effort and pain.

One of the major social problems of Nigeria today is housing whose scarcity has created many ‘homeless’ people in the country and the main cause of this sorry situation is the absence of a functional mortgage system. This has been made worse by the inability/failure of primary mortgage banks (PMBs) to create consumer products that could aid potential home buyers to buy or build their own homes.

In many respects, Nigeria exhibits what could be termed growth reversal. As the country progresses, many of the things that could be used to measure growth and development are either retrogressing or diminishing. The country’s mortgage system is an example of such growth reversal.

Some years ago, happenings in the mortgage market were quite interesting with the foray of many commercial banks into retail mortgage market after the banking sector consolidation and recapitalisation which led to the evolution of a competitive business environment and a culture of efficiency and innovation among the operators.

Institutions had to develop this competitive spirit not only to remain in business but also to increase and make good returns on shareholders’ funds such that innovative ideas, especially in products creation, became the norm rather than the exception.

The market was awash with products, especially those that would enable consumers have easy access to homeownership. Some of the mortgage institutions took it a step higher with the creation of products that would enable property owners build wealth from their property and yet enjoy the comfort of such property.

The First City Monument Bank (FCMB)’s ‘Unlock your Cash’ and defunct Bank PHB’s ‘Home Owner’s Advantage’ readily come to mind here and these were the kind of products that consumers need today in the face of an economic downturn that has reduced household income and purchasing power.

‘Unlock Your Cash’, a variant of the bank’s flagship mortgage product, ‘MyHome’ was one of the most popular refinance products in the Nigerian mortgage market then. People who have worked hard to build or buy their homes had the opportunity of letting those homes work for them by releasing the funds commensurate to the value of the property towards meeting other life needs.

Some customers who had been forced, in the past, to borrow short tenured loans of 3 to 5 years had the opportunity, through this refinancing option, to access the product where the bank paid off the loan owed the financial institution and provided more manageable repayment amounts that eased customer’s cash flow through the bank’s longer tenor.

For existing home owners, the bank allowed them to unlock up to 70 percent of the value of the property if they lived in it and 60 percent if they didn’t. It also provided home owners the opportunity of registering their titles making their properties mobile and ensuring that they were working for them just like share certificates made stocks fluid.

“We have been able to offer long tenured loans to the Nigerian mortgage market. Our observation before we entered the market was that only short term loans were available, making mortgages very unaffordable to the average salary earner. Now, with a longer pay back period, repayments are more manageable, with the option of reducing one’s principal outstanding when his economy improves or even leveraging more funds as the property price appreciates”, Ladi Balogun, the Bank’s GMD/CEO at the time, explained.

Home Owners Advantage was a wealth building product that, by its name, gave advantage to homeowners to build wealth on such homes. The product was different from traditional mortgage financing in the sense that it allowed those who owned their homes and had legal titles to them, to raise finance out of their property for a fixed period. The finance they raised could be used to buy new assets or create new investments, grow their wealth and have an even better life.

The foregoing are just a few examples of the kind of products that the mortgage market enjoyed in “those good years” and both home owners and those who wanted to own one enjoyed them. Today, several years after, there are hardly any mortgage products that give that kind of advantages or opportunities these ones offered.

Most of the products in the market today are those that enable subscribers pay house rent or school fees, and they come with impossible conditions and at outrageous interest rates. Consumers are insisting that mortgage products should be able to meet their needs. What obtains in the market presently are generally unaffordable and do not give any advantage to existing and prospective homeowners.

Recently, Safetrust Mortgage Bank, one of Nigeria’s leading primary mortgage banks (PMBs), offered small business, traders and professional firms what it called Safe Annual Rental Scheme (SARS) to enable them pay rent for their homes, shops and offices.

The facility is for subscribers who have established business relationships with the bank for a minimum of 6 months while a fixed amount is saved monthly with the intention of taking twice their contribution for rent purpose.

The product which offers a maximum amount of N1.5 million, a repayment period of 9 months, attractive and competitive interest rate, is coming on the heels of the company’s call on the federal government to put in place measures to ensure lower interest rate regime so as to support economic activities that will lead to sustained growth of the national economy.

Chuka Uroko