Kudzanai GeredeÂ Business Correspondent
THE RECENTLY launched National Building Society (NBS) by the National Social Security Authority (NSSA) is expected to boost housing to millions of home seekers in the country and hopes are high that it will stimulate the construction industry which has been subdued owing to high cost of mortgage lending.
The NBS whose majority shareholder is NSSA following its capital injection of US$ 25 million into the bank has inspired most low income earners who harboured hopes of owning a house in the cities and towns.
The scheme is earmarked to give preference to low income earners who have conventionally been isolated in accessing mortgage lending from most financial institutions. The interest rate for first time home owners has been pegged at a reasonable 9.5 percent with the maximum being 11 percent for those who already have houses.
NSSA says it will work closely with local authorities to identify interested beneficiaries and ascertain if they have other properties in order to avoid the scheme being hijacked and benefit the already privileged.
Cost of finance has been the countryâ€™s biggest undoing as it has grossly affected both business and mortgage lending as the interest rate rank highest in the region. The average interest rates are at 18 percent compared to the regional average of just below 10 percent.
NBSâ€™s 9.5 percent interest rate on mortgage over a period of 25 years is therefore viewed as palatable for the domestic population and it gives a fresh lease of life to the financial services sector. This comes at a time when the Central bank was waging a fight against high cost of finance and recently RBZ Governor implored with banks to lower their interest rates to 15 percent.
Such unfavourable rates in the mainstream financial services sector have resulted in the majority of Zimbabweans reluctant to take up mortgage risks, especially at a time when disposable incomes are generally lower and inconsistent.
The economy is dominated by a huge SMEs sector which is highly informal which has resulted in weaker levels of financial inclusion which tends to dampen access to loans especially for housing.
The NBS is however expected to also cater for the emerging SMEs sector with the hope to embrace all the low ends of economic strata.
â€œI think itâ€™s a noble idea (NBS) because it increases the capacity for people to build houses particularly the low income earners, so itâ€™s a noble in that regard.
â€œHopefully the workers that contribute to NSSA will be able to benefit from the scheme and not end up with chefs taking all the money then we lose the whole noble essence,â€ noted economic analyst Mr Trust Chikohora.
Analysts also say the move is expected to instil some economic activity in the economy as the NBS will have multiplier effects.
The construction industry will benefit immensely particularly the downstream industries such as cement production, brick production and asbestos production among other segments of the value chains.
However economic commentators have noted that the success story of the NBS will be determined by professionalism and sound ethical practices by the national social security authority.
There are also worried of the timing of the scheme which comes at a time when most banks having been struggling with non performance of loans as business is generally low in the economy particularly in the SMEs sector which has a direct impact on their capacity to services the loans.
There is lack of satisfactory mechanisms in place to prevent the scheme from being a fertile ground for self aggrandizement by corrupt officials as the country has become accustomed to whenever huge public funds are availed.
Issues of trust have remained prominent in the countryâ€™s financial sector with memories of the hyper inflationary [period which saw many losing their savings.
â€œItâ€™s just about discipline, I mean if it (NBS) has the same controls which are found in other banks then the scheme is safe.
â€œThe problem is when those controls are circumvented, that is when chefs start giving orders as to who should be given first preference then it becomes problematic.
â€œItâ€™s a matter of attitude and culture, we need to change our culture of business,â€™â€™ added Mr Chikohora.
However some analysts like Mr Pepukai Chivore argue that the scheme has some loop holes which will end up with unintended outcomes serving the high income earners at the end of the day.
â€œTheir minimum mortgage rate of 9.5 percent and the reports that they are charging 13 percent upfront for transfers and bond registration is beyond the reach of low income earners they are targeting.
â€œAdd the 25 percent deposit it then means you need 38 percent upfront before the loan is processed so where do the low income earners get such an amount?, If you involve a lawyer be prepared to part with at most 5 percent for transfer fees and bond registration . It does not make sense and we are still to get cheaper loans and mortgages in Zimbabwe,â€ he said.
The introduction of bond coins which are still a contentious issue is likely to scare most customers into getting under such schemes as there is a general uncertainty in the countryâ€™s monetary regime.
Observers also quiz the yardstick set to see transparency in the scheme in the proposed partnership with local authorities to assess the assets of beneficiaries citing corruption would still reign.
The financial services sector is however hoping the introduction of the Credit Reference Bureau will help in the vetting system of borrowers.