CBN Launches Uniform Mortgage Underwriting Standards for Informal Sector

By Bennett Oghifo

T he Central Bank of Nigeria, during the week, launched a uniform system for use by all accredited Primary Mortgage Banks to provide loans for people in the informal sector of the economy.
The system, known as Uniform Mortgage Underwriting Standards, was launched during a two-day meeting hosted, this week, by the Nigeria Housing Finance Programme (NHFP), an initiative of the federal government that is supported by a World Bank (International Development Association) loan of $300 million and implementation by the Central Bank of Nigeria.

The meeting was attended by all managing directors of mortgage banks in Nigeria, officials of the NDIC, participating commercial banks, NMRC, FMBN and executives of CBN, among other stakeholders.
The standards were developed as a collaborative effort between the Mortgage Bankers Association of Nigeria (MBAN), in conjunction with Nigeria Mortgage Refinance Company (NMRC) and the NHFP.

“The unveiling of the standards is expected to open a new vista to the housing market, which is predominantly composed of clients from the informal sector,” said the President, Mortgage Banking Association of Nigeria (MBAN), Mr. Adeniyi Akinlusi, who is the Chief Executive Officer of Trust Bond Mortgage Bank Plc.
Akinlusi said with the launch of the standards, “It is time for us to fold our sleeves and get cracking and get to work. What I mean by this is bringing into the housing market through the mortgage market- this is a bridge- for people to own houses and many people have been left behind. These are in the informal sector that contributes about 60 per cent of the GDP. They are left behind because, hitherto, we never had tools in terms of uniform mortgage underwriting standards to give them access to mortgages. Now, we have the tools and it is time to get to work; we are quite excited with this development because we know that all our members – 34 banks all over the country, can really engage with our environment and with the people there. The important thing for us is to see how we can reduce the housing deficit and make Nigerians proud homeowners.”

The Chief Executive Officer of NMRC, Prof. Charles Inyangete, represented by the Head of Business Unit, said, “We are very delighted. We go out there we meet with developers, and most of the people we come across are those in the informal sector. When you talk about the informal sector, you’re not just talking about people who are low income. You’re talking about people who have plenty of money, who have little money, who are medium income earners, but don’t have structured salary scale system, like people who are self-employed.”
She gave examples of tailors, who could have millions of Naira but have not placed themselves on a salary scale. “This is a welcome development.

According to Mr. Joshua Etopidiok, Director, Special Insured Institutions Department of NDIC, which has oversight on the microfinance banks and primary mortgage banks, as at December 31, 2016, “it was evident that 41.6 per cent of the population are financially excluded, and by FSS 2020 we are expected to be doing an exclusion level of only 20 per cent.”
He said there was need to narrow the numbers, adding that the launch of the underwriting standards was a move in the right direction to fast-track the process of financial inclusion.
About advocacy work to be done now that the underwriting standard had been launched, National Housing/Mortgage Finance Specialist, CBN, Adenike Fasanya –Osilaja said, “the first thing was for policy to be in place; now we are going to push the message, capacitate the industry. So, we want to train the underwriters to understand that we don’t want to be too rigid in developing the character of a borrower.

“These standards actually give multiple alternative documentation options. We want underwriters to be able to think and use common sense underwriting principles to determine a good borrower.”
Head, Project Administration Team, Nigerian Housing Finance Programme, CBN, Adedeji Adesemoye said, “This is another milestone in transformation which we think will change the game, particularly bringing housing finance and access to home ownership to the people, who will ordinarily not want to come to the bank or who over time have been coming to the bank but because they are not in the formal sector, we have not been able to serve them.”
He said this was another threshold in financial inclusion, providing access to those, who hitherto, have been an economic agent but have not been participating, as a result of the fact that they are not meeting the documentation.
“We have worked on both the formal and informal underwriting standards under the programme, NHFP that I am managing,” saying there is also the housing microfinance that deals with incremental housing.