FMBN Set to Deploy Core Banking Solution to Improve Affordable Service Delivery

John Terhemen Ikyaave

A digital Federal Mortgage Bank of Nigeria (FMBN) is now in sight. After decades of unsuccessful efforts to modernise its operations and business processes to meet global banking standards, Nigeria’s apex mortgage Bank, the FMBN, has begun digitising its business processes.

 The historic development followed the rapid implementation of the 2020 federal government’s approval for the bank to procure and deploy a core banking software application. 

According to the new Managing Director/Chief Executive of the FMBN, Mr. Madu Hamman, contract implementation for the core banking solution is at an advanced stage. Some components of the enterprise banking system are already undergoing live testing while others are due to go live before year-end.

The FMBN MD/CEO gave the progress update last month while hosting the leadership of the Mortgage Banking Association of Nigeria (MBAN) at the bank’s headquarters in Abuja.

“To bolster FMBN’s operational efficiency, we have prioritised speedy implementation of the FMBN Core Banking Software since we assumed office. We are happy to report that the first module covering Treasury Services and FINCOM is live, and we are currently posting to it.

“The next module to go live covers credit and NHF, which form the engine room of FMBN’s operations. Other modules, including budgeting and human resources, are planned to go live within July and August this year. By September, we hope to be fully online with the core banking software,” Hamman, the FMBN MD/CE.

Implementing the Core Banking System for FMBN will have a significant and far-reaching impact on Nigeria’s housing and mortgage market. Once operational, the digital banking system will help the FMBN create an integrated and technology-driven platform to drive its operations. The Bank would then have the capacity to tackle the many systemic challenges it has had to contend with over the years due to the largely manual nature of its operations.

Real-time access to NHF Account Transaction Details

Top on the list is fixing the longstanding inability of the Bank to update, in real-time, subscribers’ monthly contributions to the National Housing Fund (NHF) Scheme. The scheme was set up by the federal government in 1992 and all Nigerians who are above eighteen years and work in the public, private and informal sectors of the economy are eligible to register and participate by contributing 2.5 percent of their monthly incomes.

The NHF scheme presents a convenient and cost-effective opportunity for Nigerians, especially those within the low- and medium-income segment, to become homeowners. Six months of consecutive contribution to the NHF Scheme qualifies a subscriber to apply and access a suite of affordable home loans on offer by the FMBN. This includes the FMBN’s NHF Mortgage Loan which provides up to N15 million at a six percent interest rate to NHF subscribers to purchase their dream homes; the FMBN Individual Home Construction Loan designed for NHF contributors that have unencumbered land, legal titles, and approved building plans to undertake self-construction and the FMBN home renovation loan which provides up to N1million to beneficiaries who already own their homes to carry out improvements.

Recent FMBN product additions available to NHF subscribers include the Diaspora Mortgage Loan and the Interest-free Rent-to-Own scheme. Recent statistics show that over five million Nigerians contribute to the scheme.

As manager of the NHF Scheme, the FMBN has drawn much flak from workers, stakeholders, and the general public regarding the operations of the NHF scheme. Much of these issues arise from the multi-stakeholder structure of NHF operations as it empowers employers in public and private sectors deduct and remit to FMBN 2.5 per cent of the monthly income of their workers, who are registered contributors to the NHF Scheme. NHF subscriber complaints and investigations have shown that many employers are dutiful and prompt in shaving off the 2.5 per cent of workers’ monthly salaries but sluggish and unwilling to remit the amounts to FMBN.

The Subscriber Management Component of the Core Banking Solution is set to fix this issue in a sustainable manner. It will ensure seamless back-end integration with employers to ensure timely deductions from workers’ salaries and transparent remittance to the FMBN. Once functional, it will ensure that NHF subscribers get real-time alerts on all transactions on their NHF Accounts and stay informed on the status of their accounts.

Reduced Turnaround Time for Mortgage Loan Applications

The core banking system would help redress the time it takes for subscribers to access credit from the Bank. The FMBN management projects that the software application would streamline the multi-layered mortgage loan process steps and eventually crash the time it takes NHF subscribers to access credit to less than two weeks when implemented. The result will be faster mortgage loan application processing and disbursements, leading to enhanced customer satisfaction and experience.

Seamless Business Transactions

Besides improving turnaround time, the credit risk management component of the core banking system will aid digital credit scoring and appraisal for improved accuracy. It will also enhance the visibility of NHF subscribers’ credit performance in the records of primary mortgage banks, as well as ensure early warning to primary mortgage banks where the likelihood of delinquency is observed on specific subscriber loans. 

Equally important would be its ability to ensure better management of credit collaterals and online interactions with stakeholders, and collateral valuation entries and alerts. The application also includes the ability to help the bank achieve efficient document management systems by enabling it to work paperless in loan documentation, appraisal, disbursement, remediation, and loan recovery processes.

Standardisation of Financial Reporting

Standardising financial reporting is another essential improvement the core banking system would help the bank achieve. Once implemented, it will aid the bank in keeping proper records of its financial transaction of payments and receipts, general ledger, etc, that would provide the base for financial reporting.

Standardising reporting requirements gives business entities the same leverage international companies have as well as a greater level of confidence by market operators, potential investors, and analysts. This Integrated solution would allow for quick decision-making by management by providing various management and financial reports in record time. Automating financial reporting would eliminate many mundane and time-consuming processes associated with manual accounting. It would help improve audit readiness and promote reliable consolidation of financial statements, team sharing, optimised collaborations, electronic review, and monitoring while ensuring transparency and credibility of financial data. The entire process of preparing accounts becomes faster, and reports can be generated instantly at the click of a button.

Internet Banking Capabilities and Improved Treasury Management

Other notable components of the system include the internet banking system which would provide seamless NHF customer contributions and loan activities from the comfort of their homes. It would allow NHF customers to make remittances to the bank by leveraging Internet technology to make the payments through digital platforms such as mobile phones, laptops, tablets, personal computers, etc.

Other components include the treasury management system for better management of the bank’s activities related to investment. The data warehousing and business intelligence platform would drive business analytics and provide a data-driven decision-making process using big data to achieve insight into crucial business objects and trends for better strategic management and profitability.

Also, the treasury management module of the core banking is crucial because it would help aggregate financial and investment data and improve its accuracy, reduce the bank’s exposure to credit and market risk, and strengthen security.

Overall, the implementation of the FMBN core banking solution would mark a historic shift in the style of the bank’s operations. On the back of a modern digital enterprise banking system, the nation’s apex mortgage institution would make a clear break from its largely manual history of operations.

The benefits of the technology infrastructure would make it better positioned to deliver quality and timely service to the millions of NHF subscribers there by boosting confidence and by extension participation in the NHF scheme. The bank’s innovative new product additions such as the Diaspora Mortgage Loan and the Interest Free Rent to Own Scheme would be fully provisioned online to ease access. Furthermore, the core banking system would help FMBN as a wholesale mortgage financial institution to forge a more seamless integration with key housing industry stakeholders especially the primary mortgage banks through whom it lends to Nigerians. The broad implication is that it would usher in a new era where FMBN’s operations become more transparent to industry stakeholders, regulatory institutions such as the Central Bank of Nigeria (CBN) and its owners the federal government thereby paving way for increased investment and turbocharging of the bank’s affordable housing interventions to meet the housing deficit.  

Ikyaave is a housing policy analyst based in Abuja and can be reached via  housingtoday@gmail.com