Under the scheme, CBN will support the MFBs with two technical firms that will help them with product development and construction of technical assistance, which the apex bank authorities to see as very critical to successful housing delivery.
The Head National Housing Fund Programme (NHFP) at the CBN, Adedeji Adesemoye disclosed this in Abuja at the second Housing Micro finance Academy organized by Lafarge Africa plc.
Housing microfinance “seeks to fill the void created by the traditional housing finance and building on the lessons of the recent Micro finance revolution. It shows how the shelter needs of the poor can be financed in a way that is economically viable, affordable, and consistent with tested methods of delivery of Micro finance services to the poor. It is micro finance service to the poor, it is not a mortgage. Housing Micro finance is a component of the Nigeria Housing Finance programme and we have started to deliver on it” Adesemoye said.
With the model, the CBN is targeting the informal sector, which is the larger part of the economy in developing countries. Adesemoye explained that this is important because with access to finance, people in the lower income bracket can build decent homes in well laid out areas.
“We are not building slums, we want to avoid high cost of urban renewal and this will focus on the larger part of the segment of the country. Most of the people who have been borrowing money from MFBs have been using them largely to build houses so what we are doing is not all together new”, he said.
According to Adesemoye, the institutions that will participate include licensed Micro finance banks with state or national licenses with large assets, that will fully comply with micro finance laws and regulations, prudently and supervisory standards. “That means they have capital adequacy with robust capital and we will be looking at the possibility of having tier two capital”.
He explained that this would be discussed between the investors and equity owners so that they have tier 2 capital that is long and theses institutions can always move on along this line because we would need to have confidence that the institutions have funds with longer gestation. He added that they must have strong risk management and their loan loss provision must be within the bands and lower than their peers”.