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Mortgage

Revisiting FMBN’s informal sector and co-operative housing scheme

As access to mortgage continues to be an exclusive preserve of the privileged few in Nigeria, good initiatives that could ease access to the facility by low income earners and those in the informal sector of the economy should be encouraged by the government and its agencies.

This is why there is need for the Federal Mortgage Bank of Nigeria (FMBN) to go back to its very inspiring and commendable ‘Informal Sector Co-operative Housing Scheme’ which was launched in Lagos a few years ago with the primary aim of bringing more people into the mortgage net.

The scheme, also tagged ‘Affordable Home Ownership Through Co-operative Financing’, was launched as part of  the apex mortgage bank’s efforts at bridging the housing demand-supply gap  and giving the vast majority of  this economically-disadvantaged Nigerians, who constitute this sector, the opportunity to have decent and affordable housing.

The informal sector in Nigeria comprises low income earners struggling to earn their daily living such as artisans, the road-side mechanics, the market traders, farmers and so on. Basically, these are individuals who do not wear suits, ties or polished shoes to work in air-conditioned offices, yet they contribute immensely to the national economy.

 The National Housing Fund (NHF) scheme, whose operations are supervised by the FMBN, is accessible only to those in the formal sector, but by the launching of this new scheme, FMBN assured that Nigerians in the informal sector would be registered as bona fide contributors to NHF and become eligible for affordable loan to build, purchase or renovate residential accommodation.

The bank explained  that the loan facility under the scheme could be accessed in one of two ways, namely Cooperative Housing Development Loan (CHDL) and the Cooperative Housing Funds Loans (CNL).

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The CHDL 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 would act as the facilitator on behalf of its members and in the loan transaction and would also facilitate construction of the housing units.

To qualify for this loan, the cooperative society must have been in existence for a minimum 12 months; the proposed estate must have good title that can be sub-leased to individual allottees/ purchasers of the housing units therein, and  the tenor for the loan shall be 24 months with a moratorium period of 12 months at an interest rate of 10 percent.

CNL, on the other hand, offers individual cooperative members a mortgage loan to buy a house developed through the cooperative housing development loan or to renovate an existing one. Individual cooperator shall enjoy the housing loan at 6 percent interest rate repayable over a maximum period of 25years. Cooperators shall make a down payment of 15 percent of the approved selling price/value or improvement as their personal stake in the loan.”

But like many things Nigerian, nothing is being said about the scheme at the moment after all the funfare at its launching. The federal government, at various times, has adopted strategic policies aimed at integrating the informal sector into mainstream national economy.

Such policies include the promotion of small and medium scale enterprises (SMEs), directive to commercial banks to engage in rural banking , encouragement of micro- finance banking  among others. These policies are usually aimed at enhancing the contribution of the informal sector to the growth of Nigeria economy.

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Unconfirmed report indicates that the informal sector in Nigeria constitutes about  85 percent of the country’s total workforce. In terms of economic output and employment, the informal sector accounts for as high as 60 percent of  gross domestic product and about 70 percent  of total employment across all economic sectors.

In other jurisdictions, the informal sector generates about 6.2 percent of aggregate employment in the United States, 22.3 percent in China, about 50 percent in Israel and 80 percent in India which means that given the needed support and regulatory frame work, the informal sector should be a major facilitator in fighting unemployment and poverty in Nigeria.

But all these do not make any meaning to the government and that is why it is every man, mind your business. No structured policy that is targeted at growing this important component of the economy.

Amal Pepple,  the minister of housing at the time of the launch of the scheme described it as a significant step towards improving access to affordable housing to a good number of people who may not have the opportunity of owning a home, in their life time, unless they are assisted to do so.

“It is important to resolve the housing challenges of this important segment of the population  who constitute about 60 percent of the productive labour force in urban areas; housing finance in Nigeria is encumbered; there is scarcity of long term funds for housing/mortgage finance; there is also unsatisfactory state of housing delivery which is accentuated by other factors such as high cost of land acquisition, difficulty  in obtaining land title, high cost of perfecting  legal processes and of building materials”, she noted.

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The minister noted further that the new product was remarkably different from the existing NHF; Estate Development Loans (EDL) for estate developers and the Cooperative Housing Development Loan (CHDL) which were for formal and private sector operators, adding that the new product had been designed  specifically with the informal sector operators in  mind to enable them to have access to cheap, reliable and affordable funds, with more relaxed condition for  access.

As Nigeria settles in with the President Muhammadu Buhari administration and its next level agenda coupled with the good strides which FMBN is making in recent times, consideration should be given to moving the country’s mortgage system to a new level by improving both access and affordability.

From all indications, this good scheme may have ended its journey at the launch, but Nigerians are still hoping that,in the spirit of economic diversification, the mortgage industry will be given attention.

By Chuka Uroko

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