Madu Hamman, managing director, Abbey Mortgage Bank Plc in this interview with Iheanyi Nwachukwu speaks on the company’s 30 years journey in the mortgage sector and other development, excerpts
What will you say is responsible for getting Abbey to where it is now in 30 years?
We have a lot of factors that has helped us to survive all these years. One of which I will say is the tenacity of the initial investors i.e the initial family members of Abbey who through their disciplined management has helped us to survive and thrive as an institution. They are quite calculated and careful in undertaking risky ventures; where the banks need additional funding, they are always there to give their additional funds and they have been quite prudent. As banker who are experienced in the history of mortgage banking, they knew that Mortgage banking is long term but most mortgage loans are not.
What we have in the market generally in terms of funding is Short term loan and we can’t rely only on short term to fund long term investment because it’s always large. It is a mismatch so we have to be very careful and calculated in our approach to mortgage banking especially in Nigeria. That’s one of the main factors that has sustained the bank. The other is the staff; most of the staff have contributed a lot by putting their working career in the company. Some are founding members who are invaluable and loyal. Recently we have new investors who also injected funds and strategic forward thinking to move the bank forward.
Most of all, we have had very faithful and reliable customers who have sold the bank to other customers which has aided the growth and stability of the bank. for it to remain relentless. Finally, our regulators and other stakeholders also helped in directing the institution on a straight path and if you have great regulators that knows how to advise you on how you approach matters, then definitely the institution will keep growing and will have many more years to contribute to the industry.
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.
Abbey was incorporated as Abbey Building Society in August 1991 after which we applied for our license in October 1991. We were part of the second batch of PMBs to be licensed in February 1992, then opened out doors to our first customer on March 11th 1992 when business commenced. Initially the sector was seen more as a “greenfield” area for investors who may or may not have fully understood the nature of the business.
By 1994, there were close to 300 licensed mortgage banks operating in Nigeria and the competition was so stiff but because most mortgage operators did not understand the dynamics of the business or overlooked the expectations of their role, and engaged in risky investments and over ambitious products to entice the general public. By 1995 the “bubble” burst which led to the crash that affected both finance houses and mortgage banks known as primary mortgage institutions. The ripples effect impacted a few banks that crashed having a wider impact not only on the mortgage sector but on the financial sector as a whole. During the recovery period, the Federal government took measures to clean up and provide regulatory measures to prevent a reoccurrence.
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, we matured and understand the ever-evolving market and 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 Nigerian Mortgage Finance Company (NMRC). A few more regulations have come to support, guide and safeguard the industry a lot better of 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 account 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 increase the level of customer satisfaction.
Can you please tell us some of your flagship products?
In terms of products, there are lots of products in the mortgage banking sector which includes savings and there are various types of savings– we have various forms of savings like target savings, traditional savings but in terms of products we encourage our customers to actually access the new product ‘Save To Own’ account where you can set a target for property or amount to save in order to meet the minimum amount required for you to access mortgage from us.
We give a period of time of about 2 or 3 years and you will be saving a fixed amount and the rate on such savings is quite attractive and not as high as the rate you get in the market. By the time you save enough for your equity, you can then approach us or before then you can start discussing with us the range of houses you need to be able to access our mortgage to finance that kind of house. So is a unique product, is available in the market in most institutions but the way we structured ours gives special returns to the customers and eventually we add value in terms of property.
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 are linked to eventually benefiting 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 able put aside certain sum that you can eventually use
What will you say is the contribution of Abbey Mortgage Bank in the area of Social Investment?
In terms of our CSR over the years, Abbey had been able to contribute immensely to the less privileged in the society. We started out very early to identify needs of the less privileged, mostly children and elderly in the society. We have had a lot of contributions to places like the old people’s homes, hospitals to put smiles on children faces. In the 90s we used to collaborate with national TV stations to organize Easter, Christmas & Sallah parties at various levels for children then for elderly in hospitals and so on
Going into the future, what are the plans Abbey Mortgage Bank have for customers and the industry?
Our current Vision is “To be the leading mortgage bank out of Africa”, so we see ourselves in next few years as the market leader that is easily identified from the African continent. To our customers, we are promising them a strengthened relationship with Abbey. We will continue to give them products that will meet their needs and we will continue to partner with them to deliver value for their investments as well as their unparallel customer experience.
For the industry, Abbey with its current records is setting the pace as the market leader. The leadership in this sector has not been visible. With the leadership of Abbey, our contributions to the real estate sector, partnership with the regulators and the mortgage sector at large, it is our firm belief that we will continue to make a difference in the industry as we remain the voice of change.
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 clamoring and lobbying of government to try to amend Land Use Act to allow for ease of transaction on landed properties. Where you must get government consent for each transaction, we find very bureaucratic and costly. It’s time wasting for transaction and is expensive for customers. Other challenges include 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. So how do you know that at the end of 1 year, a customer that has given you the money will not call for it and you have lent it to somebody for 10 years. So there’s that issue within the market but in spite of all these challenges, the opportunities in the market are substantial. So as players, we try as much as possible to be innovative in how we carry out our services so that the challenge will not defeat the purpose for us to deliver value to shareholders, customers and all our stakeholders.
What is your final message to staff, customers and other critical stakeholders?
My final message is that 30 years is a long time but when you are building a legacy, it is a very short term, it is mostly to acknowledge the founders of this institution who envisaged the possibilities and had the courage to pursue the goals.
As such, for us the new management we intend to create opportunities to be the first choice in mortgages, finance and investment whilst we build on the foundation of the past leaders, we will ensure continuous satisfaction and that all stakeholders are continuously proud to partner with us. I see Abbey creating a mortgage bank that remains relevant in the next 30 years and beyond.