In this chat, Mr Madu Hamman, the Managing Director of Abbey Mortgage Bank PlC, spoke extensively on Abbey’s 30 years journey in the mortgage sector and other development.
It’s Abbey Mortgage’s 30 years anniversary in the banking industry. How was the industry when it started and why did you choose mortgage banking?
It’s a big privilege for every organization to celebrate major milestone and we at Abbey are very privileged in the mortgage sector to be celebrating 30th anniversary because I believe we are one of the resilient mortgage banks still operational since the first mortgage bank licenses were issued. It was tough but we remain standing.30 years later, whilst others in the business were not as fortunate.
The mortgage sector or primary mortgage banking came into existence by the Mortgage Institution Act of 1989 which enabled private players to come into the market. Before then, the Federal Mortgage Bank of Nigeria (FMBN) was the only institution in the mortgage banking sector. So the Federal Government deemed it necessary to de-centralize the mortgage sector to allow private investors to come. This decision brought about the first batch of Primary Mortgage Banks (PMB) to be licensed in 1991.
In 1997 Central Bank of Nigeria (CBN) became the major regulator of the sector, ensuring compliance with clear operational guidelines and structure which has enabled the sector to grow and thrive.
What was competition like when you came into the industry? How is competition now 30 years after?
The competition 30 years ago was quite stiff because of the numbers of players in the market. We were in the market where there were 4 or 5 mortgage banks, but new entrants were not consistent, leading to customer mistrust. So as the failing banks left the market, competitiveness continued as the major commercial banks were, and are still competing with the mortgage banks on mortgagee offerings.
But when you have been in the industry as long as 30 years, then you can say we have matured and understand the ever-evolving market and are able to evolve with it.
What was the regulation like 30 years ago and what is the regulation like now?
30 years ago, FMBN was the main regulator for the PMBs, but CBN took over after the first crash and they were able to nuture and guide the PMBs on expectations, with regulatory policies and guidelines that stabilized the operations of the market.
Since then, the Nigeria Deposit Insurance Corporation (NDIC) came in to insure the deposits of PMBs, which gave additional comfort to our customers in the area of safety of their funds. This improved the market tremendously. Of course, CBN continues its interventions in the sector one of which was the establishment of the Nigerian Mortgage Finance Company (NMRC). A few more regulations have come to support, guide and safeguard the industry a lot better over the years.
How has Abbey Mortgage Bank contributed to the industry as a whole?
The contribution of Abbey in the industry has been quite substantial over the past 30 years. We were part of the founding members of Mortgage Banking Association of Nigeria Banks (MBAN).
It was primarily set up to look out for the interest of mortgage banks within the corporate banking services industry. Through that, we have been able to put in a lot of initiatives to work with the regulators and government in the areas where interventions are needed to sanitize and provide the rights for the sector to thrive.
As a financial member for the past 25 years. We have been able to finance estate/property developers; we also financed our customers who are interested in buying properties.
A significant number of customers have benefited from their relationship with Abbey to secure their houses. Our corporate customers also include private schools from early 90’s have benefitted in developing and financing their school projects.
In what ways has Abbey customers benefitted from its services?
Over the years Abbey has continued to grow its services to customers in the area of excellent service delivery and access to their funds and mortgage services promptly. Our customers can attest to our reliability.
To improve our services to customers, we have invested a lot in technology in the past few years to improve access and ease in transacting on their accounts with us. Recently, we deployed our USSD banking channel, Internet banking channel and most recently launched our Mobile Banking App (Abbeymobile). All these are channeled towards improving our customer service delivery and also increasing the level of customer satisfaction.
In terms of product development, how would you rate your products vis-à-vis competition?
I have said the competition and mostly what you find in the mortgage banking sector are quite similar the differences are in minute details in terms of what you put in and what you expect to get out of that product. Most products that we have been linked to eventually benefit you to get a property if interested.
It is not just for you to give us your money, but we want to encourage people to save towards owning their own houses and you can only do that only if you discipline yourself and are able to put aside a certain sum that you can eventually use
What are some of the challenges so far?
The challenges have been quite a lot. Everybody knows the issues we have around our Land Use Act and how difficult to acquire transfer in the mortgage practice. It is a long period and an expensive venture which is one of the challenges that has been hindering the growth of the sector.
A lot of clamouring and lobbying of the government to try to amend the Land Use Act to allow for ease of transaction on landed properties. Where you must get government consent for each transaction, which we find very bureaucratic and costly. It’s time-wasting for transactions and is expensive for customers.
Other challenges include the high default rate within the market and the difficulty for banks to realize its investment as well as the marginal gain in investment as such customers capitalize on that to pay up their default.
Others include having access to the right funding window. Like I said earlier most of the mortgage funding we have is short-term. Meanwhile, mortgage banks are expected to give 10 to 15 years loans to customers but the maximum deposit you may have in your book might be 1 year.
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