Mortgage market still waiting for MBAN and the Sukuk model

The saying that Nigeria is never in lack of good ideas but implementation is a fact and it is reflected in virtually every facet of the country’s life- economic and political; at individual and institutional levels. From public and private sector operators, Nigerians have seen brilliant ideas that, if implemented, could turn around the economy of the country and the well being of its people.

A couple of years ago, mortgage sector operators under the aegis of the Mortgage Banking Association of Nigeria (MBAN) gathered in Abuja for its chief executive officers retreat, to finalize its Uniform Mortgage Underwriting Standards for non-interest mortgages and to create platforms for better education of the employees and mortgage brokerage companies on the proposed model.

The operators also looked at other aspects of their business and decided to get a veritable funding source for the sub-sector. They moved to explore the suitability, applicability and possibility of adopting the non-interest mortgages to unlock the potentials of the Sukuk model.

These were good ideas that raised hope and expectations among mortgage-starved Nigerians. High Interest rate on mortgage

loans remains the deep gulf between most Nigerians and homeownership.

This is why any move aimed at reducing interest rate and making mortgage not only accessible, but also affordable triggers expectations that some Nigerians would be taken off the housing market where over 20 million families are marooned, unsure of what to do next to exit the over-crowded space.

The Sukuk model which guarantees non-interest mortgages remains green in the minds of many home-seeking Nigerians, not the least other good ideas that came up at the Abuja chief executive officers retreat. And expectations continue to mount as MBAN and its members perfect their strategies.

It should be noted, however, that actually, MBAN and its members are, by these moves, plotting and pushing for the unbundling of mortgage origination process, further reduction in loan origination period, introduction of computerised land titling registration, land title insurance, introduction of uniform mortgage underwriting standards (UUS) for informal sector, enactment of foreclosure law, and wider public awareness for the sector.

This, they reason, has become necessary given the slow growth of their sector amply reflected in its low contribution to GDP which stands at 1 percent. They want to push this contribution to, at least, 5 percent in the short run, 30 percent in the medium term, and about 65 percent in the long run.

The sector is challenged in several ways which the operators blame on low mortgage penetration. This, according to them, explains why less than 5 percent of the housing stock in the country estimated at 13.7 million units are in formal title registration or mortgage.

Rose Okwechime, CEO, Abbey Mortgage Bank Plc , blames the slow growth of the sector on its relative newness and lack of public awareness on its operations and benefits. “A lot of people don’t even understand why they should put their money in a mortgage bank”, she says.

The operators advocated that MBAN should explore collaboration with building materials manufacturers to reduce the cost of houses and make housing affordable. They also resolved to explore viable options for cheaper sources of funds with a view to reducing the interest rate on mortgages to single digit.

Consequently, they planned a tripartite advocacy for intervention fund for the sub-sector in partnership with Central Bank of Nigeria (CBN), National Pension Commission (PENCOM) through the