Understanding how FMBN’s loan products enable access to affordable housing


Unknown to quite a good number of home buyers in Nigeria, the Federal Mortgage Bank of Nigeria (FMBN) is easing access to housing finance and boosting home ownership. The apex mortgage bank, established as a wholesale mortgage finance institution, is, on consistent basis, changing Nigeria’s homeownership story through its rich portfolio of housing loan products which, in some cases, come at zero equity contribution and single digit interest rates, reports CHUKA UROKO


Worldwide, mortgages take the lead as the preferred means for owning a home. In countries such as the United Kingdom, USA, France, and other Organisation for Economic Co-operation and Development (OECD) countries, it is rare to see people pay outright for homes using savings, loans from friends, family members or cooperative societies.

The mortgage process entails granting of monies to obtain a home with good faith that the debtor will repay the loan with interest attached to life of it. Both the debtor and lender benefit if nothing goes wrong.

Over the years, the borrower repays the loan, plus interest, until she or he owns the property free and clear. Mortgages have helped millions of people all over the world to buy homes. Even if you do not have N5 million cash, you can buy a home worth that amount using a mortgage and pay gradually over time till the loan is defrayed.

“High mortgage adoption leads to high homeownership levels.  In the United States, for instance, the proportion of households that are occupied by the owners is over 65. e1 percent,” notes Terhemen Ikyaave, a public policy analyst based in Abuja.

Ikyaave  notes further that, in the United Kingdom, homeownership rate is above 67.69 percent and 90 percent and 84 percent in Singapore and Indonesia, respectively. In contrast, Nigeria has a homeownership rate of about 25 percent, which is much lower than even Kenya – 73 percent, Benin Republic – 63 percent and South Africa, 56 percent.

According to him, it is against this backdrop that the role of the Federal Mortgage Bank of Nigeria (FMBN) in boosting access to affordable housing finance is so significant. “Established as a wholesale mortgage finance institution, the FMBN provides primary mortgage banks with low-cost funds to provide affordable mortgages to Nigerian workers,” he explained.

Notable features of FMBN mortgage loans include zero equity requirements for loans less than N5 million, and 10 percent equity down payment for loans ranging from N5million to N15million. Others include single digit interest rates ranging from 6 to 9 percent per annum and payment tenors of up to 30 years.

FMBN’s housing products are available to contributors to the National Housing Fund (NHF) Scheme, a social savings scheme designed to mobilize long-term funds from Nigerian workers, banks, insurance companies and the government to boost access to affordable housing finance.

The bank also has a wide portfolio of housing products that target low to medium income earners.

Consider the FMBN-supervised National Housing Fund (NHF) Mortgage Loan. FMBN leverages funds from the NHF scheme to grant concessionary loans to its accredited Primary Mortgage Banks (PMBs) at a 4-percent interest rate. The mortgage banks in turn use these funds to give loans to qualified workers that contribute to the NHF scheme at 6 percent interest rate per annum with payment tenors of up to 30 years.

Loans under N5million attract zero equity down payment while only 10 percent equity is required for loans ranging from N5m-N15. Subscribers are qualified to apply after six months of contributions of 2.5 percent of monthly salaries.

For comparison, interest rates on housing loans in the open market range from 18 percent to 25 percent  per annum. Maximum loan repayment tenors hover between 10 – 20 years and lenders demand between 30 percent to 50 percent equity contribution depending on the borrower’s risk level.

Balancing Housing Products and Worker’s Financial Capacity

Besides the NHF Mortgage Loan, FMBN in the past three years under the leadership of Arc. Ahmed M. Dangiwa, the bank has introduced innovative housing products and upscaled legacy ones.

The first is the individual Home Construction Loan. The loan enables NHF contributors with unencumbered land, appropriate land titles and approved building plans to undertake self-construction. It provides up to N15million to NHF subscribers at 7 percent interest rate per annum with up to 30-year payment tenors depending on their age and number of years left in service.

The second product is the FMBN Rent-To-Own Product. The loan allows beneficiaries to move into an FMBN-owned housing property as a tenant and pay towards ownership of the property in monthly or annual installments over 30 years at an interest rate of 9 percent!

Third is the home renovation that provides up to N1m for home improvement. In the past three years, about 43,000 Nigerians have benefitted from this facility.

FMBN has also revamped its legacy Cooperative Housing Development Loan (CHDL) in line with the initiative of the Minister of Housing, Babatunde  Fashola (SAN) to adopt cooperative societies as the channel for the aggregation and delivery of houses to members of cooperative societies. Key features include tenors of up to 24 months with a moratorium of 12months and interest rate of 10%. Up to N500million is accessible by qualified cooperative societies under the facility.

Leveraging FMBN’S Structures to Implement FG Housing Interventions

To reverse the housing deficit in the country, bolder and more aggressive policy actions are required to strengthen both the demand side of housing in the country as well as the supply side.

This entails supporting existing institutions such as the FMBN to scale their operations for greater impact. The recent announcement by the Central Bank of Nigeria (CBN) that it plans to inject about N500billion into the housing sector is a right step in the right direction.

One sustainable way to guarantee judicious use of the funds and ensure direct impact on those who really need homes in the country is leveraging the institutional framework that the FMBN already provides and increasing the capacity of the bank to give more affordable loans to Nigerian workers.

For one, the bank has the largest registry of potential homeowners in the country. Recent data show FMBN has over 5 million contributors to the National Housing Fund (NHF) Scheme. The list of subscribers includes civil servants, workers in the private sector, self-employed persons, traders etc with comprehensive information about their income levels and financial capacity to pay back mortgage loans.

“Deploying part of the CBN stimulus funds to enhance FMBNs’ ability to provide loans to subscribers to the National Housing Fund (NHF) scheme will be a good starting point for any housing intervention,” Ikyaave reasons.

Housing Products that Target Low-Medium Income Earners

Another related point is sustainability and affordability. Interventions must be anchored on institutions and proven systems with track record of delivery and improvements over the years. FMBN has maintained a trajectory of high performance over the past three years under the Dangiwa-led management with key reforms that are gradually improving service delivery and creating historic impact.

Overall, Ikyaave is of the view that,  to achieve high mortgage penetration levels in the country and increase homeownership rates, especially within the low-medium income segments of the economy, there is, of course, the need to think outside the box giving the perennial stagnation of growth in the sector, noting hoewver that re-inventing the wheel is not an attractive option.

“A low hanging fruit is to empower strong institutions and systems that have shown capacity to deliver affordable housing to do more. FMBN presents one such platform as the CBN seeks to stimulate growth in the sector. The current Board and Management should, therefore, be encouraged, and its finances bolstered to enable it to create greater impact as the foremost government tool for social housing delivery,” he says.

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