Maduka Nweke, [email protected]
Despite being among the fastest urbanising cities on the African continent, Lagos is also growing speedily too.
But one of the major challenges facing the nation’s economic capital and the Nigeria at large in the face of rising urbanisation is the dearth of affordable housing for the citizens.
Simply put, there is urban housing crisis not only in Lagos but nearly all cities in the country face similar crises. Nigeria’s housing crisis exists in urban and rural places, manifesting more in the form of slum dwelling, homelessness, overcrowding, squatter settlements and substandard housing units.
But in the ongoing effort to solve this challenge, financial institutions readily come to mind given that they have the highest number of business networks and outlets in the various states. This means that they must be involved in all efforts being made to provide shelter for both their staff and customers doing business with them. Shelter does not come from absolute, it comes through concerted efforts with government providing the needed impetus. Although financial institutions in Nigeria especially banks are know to be providing financial support to customrs to meet various needs, the challenge really borders on the type of collateral requirement which in most cases seems to target materials presented. Collateral requirements often discourage several would-be participants from the bazaar. There are big banks that can aside giving loans also go into building housing schemes.
Today however, many are no longer doing so for reasons best known to them and government that ought to be propping them to action seems incapacitated doing so. This problem is noticeable in the urban areas where you have banks, multinationals and other financial institutions.
In the rural areas, poor housing quality, deficient environmental condition as well as inadequate infrastructural facilities are the order of the day. The causative factors of this problem include: poverty, population increase due to urbanization, high cost of land, non-implementation of the housing policies, failure on the side of the government, high cost of building materials and corruption. As more and more Nigerians make towns and cities their homes, the resulting social, economic, environmental and political challenges need to be urgently addressed. House prices and rents, on the other hand, have grown ahead of general inflation. This is why government should latch on the rules and corporate social responsibilities of these institutions to bring about housing provisions for the public. In a situation where a bank like Zenith Bank takes up 5,000 housing units scattered all over the country; UBA, First Bank, GTBank, Fidelity Bank, Union Bank, Access Bank each taking 5,000 units and other banks taking 3,000 units on a two year basis scattered in various locations in the country, these shortages would have reduced drastically. Even if they sell these to the public, using their customers as point of contact, these would not have reached this crisis dimensions.
To make matters worse, the composition of houses for sale and rent on the market has been inexorably shifting towards very expensive house. The problem of adequate housing is not peculiar to Nigeria. According to the UN Habitat, 30 percent of the world’s urban population live in slums, deplorable conditions where people suffer from one or more of the following basic deficiencies in their housing: lack of access to improved water; lack of access to improved sewage facilities (not even an outhouse); living in overcrowded conditions; living in buildings that are structurally unsound; or living in a situation with no security of tenure (that is, without legal rights to be where they are, as renters or as owners).
There is so much criticism towards our financial system for not making credit more readily available, especially for mortgages. Banks are in business to lend, and today unlike troubled counterparts in Europe, they have good balance sheets and plenty of money available. So what’s with the apparent reticence to open the money spigot? Remove your negative emotions towards these maligned institutions for a moment and look from their side of the ledger. In today’s world of low interest rates and a flat yield curve a bank has less than a 3 percent net interest margin….the amount between what it pays depositors and its loan rates. The very best possible outcome on a loan for our forever criticized bank is to get paid back all its principal and make a small spread on the interest. Get paid back 95 per cent of every loan and it goes broke. Careful scrutiny of any type of loan is judicious business practice and necessary to remain solvent. A top quality financial lending institution can be lucky to earn is 1 to 1.4 percent on total assets.
Although, banks in Nigeria have not been lending to public expectations but proffer reasons for not doing much lending anymore. Whether, that is true or false, one is allowed to do what he chooses with what belongs to him. Since the financial crash of 2008, new regulations have made operating a bank much more cumbersome and expensive. Banks in the United States were (sometimes with government coercion) proactively raise hundreds of billions of dollars in fresh capital and this was after writing down billions in mortgages and other problematic credits. Some bad mortgage assets still linger, not yet fully resolved after five years on the balance sheets of our the US biggest banks like Citigroup (C), JP Morgan (JPM), Bank of America (BAC), and Wells Fargo (WFC). A new study from Habitat for Humanity says that housing microfinance can and should become a mainstream offering for financial institutions in Sub-Saharan Africa. Housing microfinance consists of small, non-mortgage backed loans starting at just a few hundred dollars that can be offered to low-income populations in support of incremental building practices.
The business case study, released recently entitled “Building the Business Case for the Housing Microfinance in Sub-Saharan Africa.” This builds on a project carried out over six years in Kenya and Uganda called “Building Assets Unlocking Access”.
The project was a partnership between Habitat’s Terwilliger Center for Innovation in Shelter and the Mastercard Foundations. So far, the project has reached over 47,000 households and mobilised more than $43 million in capital to benefit over 237,000 individuals. The business case study argues that housing microfinance, small non-mortgage backed loans for short terms, can become a mainstream offering in the market to address growing housing needs in the region, incremental building patterns, and the land tenure realities of low-income households. There are an estimated 1.6 billion people in the world living in substandard housing. This figure is climbing, especially as the world becomes more urbanised and people migrate to cities for economic opportunity. In Sub-Saharan Africa, however, as much as 99 percent of people do not have access to formal financing – credit, savings, mortgages – that can enable them start building or improving their homes.
Traditionally, they build homes gradually as their resources allow. Developer-built, bank-financed homes are rare in Africa, serving fewer than five percent of households in most countries.
Solving the housing challenges in Africa will require a massive amount of capital investment and most of that will need to come from the private sector which the financial institutions are the only sector that can provide such huge sums of money.