role of pension funds in mortgage finance · corporate bonds/debt 30% fixed deposit 35% listed...

ROLE OF PENSION FUNDS IN MORTGAGE FINANCE

AUHFPresentation|September2016

InvestmentBanking|GlobalMarkets

2

GHANAHOMELOANS(GHL)–Overview

Commencedin2006.Currentlytheonlyspecialisedresidentialmortgagefinance

institution

SupervisedbyBankofGhanaasanNBFI

Promotedby3GhanaianswithexperienceinPrivateEquity,MortgagesandInvestment

Banking

FoundingfundersincludeFMO,StandardBank(SA),BroadCovePartners,laterjoined

byIFC

CommencedoperationsinSept.

2006tofocusonlowtomiddleincomeearners

CurrentlyownedbyHarborough

(70%-Abraajand30%-Ghanaian

managementteam)

OperatesfromAccra&Kumasiwithtotalstaff

of105


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OverviewofProducts

GhanaHomeLoansproductofferingsinclude:

I. PurchaseMortgage -Firsttimebuyers -Buytolet

II. HomeOwnersLoan -Equityrelease -RefinanceandImprovement

III. ConstructionMortgage -Homecompletion -Homeconstruction

IV.LandPurchaseMortgage

V.RemittanceServices,PropertyService&Insurance


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StrongGrowthOpportunities

Relativelylowmortgageloanoutstandingas%ofGDPratio

Housingdeficitofover1.7millionunits

Growingurbanpopulationandemergingmiddleclass

Lowpenetrationoffinancialproducts

Long-termfinancingiskeytoaddressinghousingdeficit

Immenseopportunityforexpansioninlowtomiddleincomehousing


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OurOperationalProcess

• GHLCallCentre

• GHLWebsite

• Strongrelationshipwithdevelopers(includingon-sitepresence)

• Radio,TV,leafleting,bulkemails,monthlynewsletter

• Presentationstoinstitutions

• External/Internalsalesteam

• Conductpre-closingcounsellingonborrower

• Reviewofinsurancedocuments

• Conductfinalfilereviewandcreditchecks

• Ensuremortgageagreementsaredulyexecuted

• Authorisedisbursementoffunds

• Responsibleformonitoringclientrepayment

• Ensureallclientaccountenquiriesareattendedto

• Initiateandmanageforeclosureandrecoveryproceedings

• Monthly,Quarterlyandannualreportingtostakeholders

• Dedicatedteamresponsiblefor:

1.LiaisingwithoutsourcedCollateralAgent

2.RegistrationofTitleandMortgage

3.Ensuringcompliancewithlendercovenants

Origination Underwriting Disbursement Servicing

GHLhasanintegratedandcoordinatedteamresponsibleforthedaytodayactivitiesoftheCompany

CollateralManagement

• Duediligenceonmortgageapplicants

• Duediligenceonpropertyvendor

• Duediligenceonproperty

• CreditBureauchecks

• CollateralRegistrychecks

• Titleverification

• Visitingborrowers’premises(forself-employed)

• Valuationofproperty

...the mortgage specialist

Portfolio By Currency Of Income

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GHS USD GBP OTHER GHS USD GBP OTHER


Portfolio by Residence of Borrowers

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Non-Resident Resident Non-Resident Resident

AveragevalueofNon-Residentloans- $74,134.34AveragevalueofResidentloans- $55,071.33


Portfolio By Product Type

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BuyToLetEquityReleaseHomeComple\onHomePurchaseLandPurchaseQuickCashRefinance

BuyToLetEquityReleaseHomeComple\onHomePurchaseLandPurchaseQuickCashRefinance


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GhanaHomeLoanshasstrongtrackrecordinraisinglongtermfunds

• Over the years, GHL has successfully raised long term funds from reputableinternationalinstitutionstocreatehomeownersinGhana

• In addition to the above, the Company has also raised GBP 5mm from GhanaInternationalBank,aleadingfinancialinstitutionbasedinLondon

OPICI(2007)USD30mn

FMOI(2008)USD15mn

IFC(2009)USD10mn

DEG(2014) USD10mn

PROPARCO(2013)USD7mn

SHELTERAFRIQUE(2013)

USD5mn

OPICII(2012)USD30mn

FMOII(2016)USD22.5mn


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GHLhashoweversoughttoblendDFIfundingwithothersources

• EventhoughGHLhasdevelopedastrongtrackrecordwithDFIs,wehaveresolvedtointroduceothersourcesoffundingsuchascapitalmarketsinstruments

➢ DFIsoffercompetitivelypriced,appropriatelystructuredcreditfacilitiesandpromotethedevelopmentalagenda.LenderssuchasOPIChavemadeitpossibleforustooffer20yearfixedratemortgagesinamarketthatisotherwisedominatedbyshortterminstruments

➢ Howeversometimes,otherfactorscanleadtothe‘taps’beingturnedoff

➢ Capitalmarketsoftenseekhigherpricingbutaresometimesmoreflexibleintheirapproach

➢ Weseeparticipationoflocalinstitutionsasafurthervalidationofourbusinessmodel


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Reformsinpensionsindustryoffersanexcellentopportunity

• TheGhanaianpensionindustryhasrecentlyundergonereforms:

➢ Inthepast,individualpensiondeductionswerepassedthroughtoSSNIT,thestateownedpensionfundmanager

➢ Since2013,athreetierpensionschemehasbeencreated–Tier1goestoSSNIT,whileTiers2&3aregiventoprivatepensionmanagers,regulatedbytheNPRA

➢ Theseprivatepensionfundsthereforehaveaccesstoc.22%ofemployee’smonthlyincometomanage


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Regulatorylimitshoweverconstraintheuseofpensionfunds

Regulatory LimitsGoG Securities 75%Local Govt. Securities 30%Corporate Bonds/Debt 30%Fixed Deposit 35%Listed Equities 10%Open and Close-end Funds 5%

• CorporatebondshavetobelistedonarecognizedexchangetobeeligibleasanNPRAassetclass

• Itisstillearlydays-eventhoughtheguidelinestalksabouttheuseofpensionfundcontributionstowardstheacquisitionofhomes,theoperationalguidelinesareyettobefullyspeltout


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In2016,GHLlaunchedaUSD100mmNoteprogrammetotestthemarket

• Notwithstandingalltheconstraints,inJuly2016GHLlaunchedamediumtermnoteprogrammetofundourmortgageportfolio

• Thekeyfeaturesareasfollows

➢ Tenor–5years

➢ Interestrate–firsttranchec.8%p.a.

➢ Currency–USD

➢ Coupon–paidsemi-annually

➢ Listing–GAX,Ghana


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MarketresponsetoGHLTranche1

• Generally,theinitialUSD5mmofferwaswellreceivedbyamarketthatotherwisereceivesbetween0%to1%forUSDbankdeposits

• Participationbyprivatepensionfundswasnotasaggressiveastheirearlierexpressionsofinteresthadsuggested

➢ Mostpensionfundsarebenchmarkedtothe182governmentT-billwhichcurrentlyoffersc.24%p.a.,thereforea8%p.a.USDinstrumentinastablelocalcurrencyenvironmentdoesnotlookthatattractive

➢ Somepotentialinvestors,concernedabouteaseofliquidationofpositions,wouldliketoseehowtheinstrumentstradesbeforeparticipatinginthenexttranche

• Weremaincautiouslyoptimisticaboutprospectsforfuturetranchesandwilltakeourprogrammetointernationalinvestorsthathaveappetiteforthiskindofrisk

• AGHStranchewouldworkbutdifficulttowritemortgageswith


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GHL–lessonsfrom10yearsofmortgagedelivery

• Marketeducationhasbeenakeychallenge–gettingborrowerstoappreciatethemortgageproductandwhatitisfor

• Affordablehousinghasbeenhardtodefineandremainsachallengethathasnotbeenresolvedbyverticalconstruction,newtechnology,PPPetc

• Constructionfinanceforlocaldevelopersremainsakeychallenge–ithasthereforeattractedbetterfundedforeigncompetition

• Aggressiverateofprepaymentreflectsacultureaversetobeingindebt.Flexibilityinlendingiskey

• Abilitytocreditscoretheselfemployedandinformalsectorhasbeenlimitedandconstrainedthegrowthoftheportfolio

• Targetedandwellthoughthroughgovernmentinterventionisreallyrequired–inthecaseofpensions,apercentageoftheportfoliocouldbededicatedtoeligiblemortgages

role of pension funds in mortgage finance · corporate bonds/debt 30% fixed deposit 35% listed...

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