{MAGAZINE} Mortgage Banking: Omoluabi Bank In The Face Of Challenges

 

Since it has been observed that owning a home does not only provide a sense of economic security, but plays a significant role in providing individuals with greater economic security as well as reducing the temptation to engage in corrupt practices, SOLOMON ODENIYI takes a look at the efforts of the Omoluabi Bank Limited, Mortgage Bank industry in Nigeria and the quest to finding innovative ways of providing the required finance to make housing available for a large number of people.

The Federal Mortgage Bank of Nigeria was established by the Federal Government in 1977 to provide long term credit to Nigerians to afford them the opportunity to own houses of their own, being one of the basic needs of man, at affordable interest rate.

A report by the Federal Mortgage Bank of Nigeria in 2011 estimated that Nigeria still has a housing deficit of about 16 million housing units shows that there are still much to be done.

In another recent report by the Nigeria Bureau of Statistics, it was submitted that an average occupancy rate in the country is seven persons per house. It also noted that about 112 million Nigerians are homeless. This implies that 80% of Nigerians are without shelter.

Meanwhile, Houses have been built in the country through various schemes, for instance the National Housing Fund which was established in 1992 to enable Nigerians regardless of their economic status own houses. But this has been said to represent an infinitesimal proportion of 0.38% of the nation’s current housing deficit. A major cause of this was pointed out in a report carried out by the World Bank which shows that these houses were sold at target prices of N 1.0 million ($6,024) to N 5.0 million ($ 30,120). However, going by the World Bank’s estimate which shows that 70.2% of the total populations in Nigeria live on an income of less than US$1 a day, these houses are unaffordable to the poor, which constitute majority of the country’s homeless population.

Also, the former CBN governor, Charles Soludo was once quoted as saying that the institutions lacked the wherewithal to mobilise requisite resources for commitment towards the fulfillment of their objectives and this has remained the reasons their impact has remained unfelt by the populace as indicated by the low percentage of mortgage loans to Gross Domestic Product (GDP), which has been poor compared with what obtained in other countries. He noted that mortgage banks contribute 63 per cent to the United States, Britain-64 per cent, Germany-55 per cent, Thailand-15 per cent, South Africa-20 per cent, India-five per cent and Ghana-three per cent.

But the chairman, Board of Directors, Omoluabi Mortgage Bank, Alhaji Adebayo Jimoh believes that with the significant increase witnessed in the last few years in the Mortgage Industry, it can become the mainstay of the Nigerian Economy in the future  if only the government can leverage on the huge level of untapped potential waiting to be tapped in the industry.

At the bank’s annual general meeting last week, he said: “Nigeria has a very modest growing mortgage market. The Federal Government has, through various programmes encouraged and supported the growth in the Mortgage Banking Industry. Refinance Company (NMRC) which earlier commenced operations and are providing secondary mortgage market services to mortgage lenders through bonds in 2015 has continued the trend.

“The good story of 2017: the exit of the Nigerian economy from recession which came in the second quarter of the year brought about an improvement. The impact trickled down to various sectors of the economy. The impact was felt in the capital market as the Nigerian Stock exchange posted strong performance during the period under review delivering about 42%. The figure was the third largest in the world in the year 2017.

“Modest positive signals emerge from the base scenario showing some strengthening in qualitative growth factors, such as more advanced technology, improved labor force skills, and greater productivity. Businesses have to be prepare for more disruptions from geopolitical tensions, policy uncertainty, financial market volatility, and rapid changes in technology, but they also need to stay focused on leveraging the qualitative sources of growth with investment in technology and business productivity even – or especially – in times of stagnation.’’

He spoke of some of the policies in place to enhance the effectiveness of the industry in the country, saying, “In the Mortgage Banking Industry, there has been an increasing trend of mergers and acquisitions e.g. Aso Savings & Loans Plc has acquired Union Homes Savings and Loans Plc. There are also indications that some illiquid mortgage banks might be forced to downsize their operations to become microfinance banks, following their failure to attain the CBN’s recapitalization mandate.

”Mortgage Banks are aware of the impact of non-performing loans and aggressively commenced the recovery of those funds. Our bank was not left out. Likewise, the Nigerian Mortgage Refinance Company (NMRC) which earlier commenced operations and are providing secondary mortgage market services to mortgage lenders through bonds in 2015 has continue the trend, hence improving liquidity to some members in the industry has NMRC continues to refinancing eligible legacy loan with the mortgage lenders.”

He lauded the  commitment of the Federal Government to considerably improve housing, highlighting some of the various programmes it promised to embark on like the  N500 billion it proposed to inject into the Federal Mortgage Bank to enable it meet the housing needs of Nigerians and financing 5000 housing scheme in each state for civil servants.

Omoluabi In The Face Of This

When it came to the business, it was known as Osun Building Society Limited, a name it later changed to Living Spring Savings and Loans Limited and now to Omoluabi Mortgage Bank Plc in January 2016, which was to reflect the virtues of the people of the state. The bank was however licensed for business by the Federal Mortgage Bank of Nigeria in March 1999. In 2014, the bank was listed on the Nigeria Stock Exchange.

Ever since, Omoluabi Mortgage Bank has been offering residential and commercial mortgage financial services.  It has been providing mortgage products which include national housing fund mortgage loans, commercial mortgages, property acquisition loans, and loans for business and trading purposes.

Also, it has been offering construction loans and other financial services. The company also offers personal banking products comprising accounts, such as children’s, savings, gold personal current, corporate, home ownership, and call accounts; term and fixed deposits; certificate of deposits; and housing investment funds.

In addition, it has been providing corporate banking products, including overdrafts, and property development finance and trading.

Ownership Structure

Osun state government and Osun state local government councils represent public sector participation in the ownership of the bank; however, they are not majority shareholders in the bank. The lists of shareholders consist of individuals, public sector and institutional investors.

Performance in 2017

Despite challenges of the country’s economy in 2017 with implications for business and various sectors; Mortgage Banking Sector was not an exception, Omoluabi Bank revenue increased as well as its level of business and operation in the mortgage banking sector during the stated year.

This, the Board Chairman, Jimoh attributed to the commitment of the Management team and employee who worked under intense pressure to deal with the business complexities.

He also added that some of the major changes in structure within the year aimed at repositioning the Bank for greater impact for the future helped strengthen the bank.

“In 2017, the bank achieved a profit before taxation (PBT) of N187, 536,516 and Gross earnings increased by 70.39% from N304 million in 2016 to N518million, while total operating expenses increased by 26.18 % from N275 million in 2016 to N347million in 2017. Customers deposit grew by 208% from N389 million in 2016 to N1.2 billion in 2017. Also, during the period, the quality of our loan and advances portfolio rose from N549 million in 2016 to N862 million in 2017, an increase of 57%.

“In addition to the above, total assets grew from N3.3 billion in 2016 to N4.2billion in 2017, a growth of 27.27% over 2016 while our shareholders funds grew from N2.4 billion to N2.6 billion in 2017. The indices above show that despite the harsh economic and operating environment prevalent in the mortgage banking industry, our strategies of expansion and increasing customer base are paying off. Our commitment and passion to increasing the number of home owners are evident in the 2017 report”, he said.

The bank also recorded a landmark achievement, the Managing Director, Ayo Olowokere, said, “Our performance, as we have seen from revenue of N200m in 2015 to N380m in 2016 to N534m in 2017 from loss of N164m in 2015 to profit of N78n in 2016 and N174m in 2017. The results are making the statements for us.

“The banking industry is very competitive. What we are doing is to continuously monitor the industry to understand our customers and how they want us to react to trends. As a result, we now have ATMs which we introduced two years ago. Now, we have launched our USSD. It is just like that of any bank whereby you can do your transactions on your phones.

”We are also very competitive in the area of interest rate, of course, we realized that it has been going down and rising and we offer one of the best in interest rate in the country. Our mortgage is from 18-19 per cent, no one does that in the country.

“We have also engaged the small and medium enterprises through our Karakata and Sowojere scheme which are used in supporting people in the market in all the senatorial districts of Osun. This, no doubt, enhanced our profitability”, he said

The Change of Guard

At the bank’s 4th AGM in Osogbo, it elected Mrs Olaitan Aworonke as the bank’s director, while Prince Adetilewa Sijuwade, Mike Omolaja, and Gbadebo Adekunle were re-elected as Non-Executive Directors.

Before her appointment as Director, Aworonke has served as group Head, Operations and Business Development of the bank. She has over 15 years experience in Banking with Access, Fidelity and Stanbic IBTC banks before joining Omoluabi.

The new officers were given the onerous responsibility of maintaining the enviable tradition of excellence and also help their quest to provide houses for the teeming populace in the state which the bank has commenced.

The Future For Omoluabi

The chairman, Jimoh sees the bank bridging the housing deficit gap in the state and the country at large by leveraging on the plethora of untapped opportunities in the mortgage industry.

“Being a mortgage, we see the future, we see a lot of opportunities in the industry because as we speak, the country is under housed. We need more people to have homes, first time buyers and we are also supporting people in expanding the mortgage industry.

“The real estate sector has been seen as a growing sector and that’s where we will be operating in and it will be a great opportunity for the Bank to reducing the housing deficit as well as improving our profit.

“We have identified the need for “gated estates” we have one already called Olufunmilayo estate off Osun state secretariat. We are identifying some at Ile-Ife. We are working with SUBEB to build houses for teachers. We are working to build houses for hospital management, when we do this, apart from making profit, we will reduce the number of those without a house in the state and the country at large,” Jimoh explained.

Bola Oyebamiji, the Commissioner for Finance noted that the future of Omoluabi is great as the development of the bank has had and would continue to have a multiplier effects on the economy of the state.

He added that he is assured that going forward, the bank will continue to increase in its performance and its impact would be felt the more in the state.