role of pension funds in mortgage finance · in 2016, ghl launched a usd100mm note programmeto test...

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,laterjoinedbyIFC

CommencedoperationsinSept.2006tofocusonlowtomiddleincome

earners

CurrentlyownedbyHarborough

(70%- Abraaj and30%- Ghanaian

managementteam)

OperatesfromAccra&Kumasiwithtotal

staffof105


3

OverviewofProducts

GhanaHomeLoansproductofferingsinclude:

I. PurchaseMortgage- Firsttimebuyers

- Buytolet

II. HomeOwnersLoan- Equityrelease

- RefinanceandImprovement

III. ConstructionMortgage- Homecompletion

- Homeconstruction

IV. LandPurchaseMortgage

V.RemittanceServices,PropertyService&Insurance


4

StrongGrowthOpportunities

Relativelylowmortgageloanoutstandingas%ofGDPratio

Housingdeficitofover1.7millionunits

Growingurbanpopulationandemergingmiddleclass

Lowpenetrationoffinancialproducts

Long-termfinancingiskeytoaddressinghousingdeficit

Immenseopportunityforexpansioninlowtomiddleincomehousing


5

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

Portfolio By Currency Of Income

...the mortgage specialist 6

70%

17%

7% 6%

ByNumber

GHS USD GBP OTHER

60%24%

8%8%

ByValue

GHS USD GBP OTHER

Portfolio by Residence of Borrowers


19%

81%

ByNumber

Non-Resident Resident

24%

76%

ByValue

Non-Resident Resident

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

Portfolio By Product Type


0%

12% 5%

79%

2%

0%2%

ByNumber

BuyToLet

EquityRelease

HomeCompletionHomePurchase

LandPurchase

QuickCash

Refinance

0%

14% 4%

79%

1%

0% 2%

ByValue

BuyToLet

EquityRelease

HomeCompletionHomePurchase

LandPurchase

QuickCash

Refinance


9

GhanaHomeLoanshasstrongtrackrecordinraisinglongtermfunds

• Over the years, GHL has successfully raised long term funds from reputableinternational institutions to create home owners in Ghana

• In addition to the above, the Company has also raised GBP 5mm from GhanaInternational Bank, a leading financial institution based in London

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


10

GHLhashoweversoughttoblendDFIfundingwithothersources

• EventhoughGHLhasdevelopedastrongtrackrecordwithDFIs,wehaveresolvedtointroduceothersourcesoffundingsuchascapitalmarketsinstruments

Ø DFIsoffercompetitivelypriced,appropriatelystructuredcreditfacilitiesandpromotethedevelopmentalagenda.LenderssuchasOPIChavemadeitpossibleforustooffer20yearfixedratemortgagesinamarketthatisotherwisedominatedbyshortterminstruments

Ø Howeversometimes,otherfactorscanleadtothe‘taps’beingturnedoff

Ø Capitalmarketsoftenseekhigherpricingbutaresometimesmoreflexibleintheirapproach

Ø Weseeparticipationoflocalinstitutionsasafurthervalidationofourbusinessmodel


11

Reformsinpensionsindustryoffersanexcellentopportunity

• TheGhanaianpensionindustryhasrecentlyundergonereforms:

Ø Inthepast,individualpensiondeductionswerepassedthroughtoSSNIT,thestateownedpensionfundmanager

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

Ø Theseprivatepensionfundsthereforehaveaccesstoc.22%ofemployee’smonthlyincometomanage


12

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


13

In2016,GHLlaunchedaUSD100mmNoteprogramme totestthemarket

• Notwithstandingalltheconstraints,inJuly2016GHLlaunchedamediumtermnoteprogramme tofundourmortgageportfolio

• Thekeyfeaturesareasfollows

Ø Tenor– 5years

Ø Interestrate– firsttranchec.8%p.a.

Ø Currency– USD

Ø Coupon– paidsemi-annually

Ø Listing– GAX,Ghana


14

MarketresponsetoGHLTranche1

• Generally,theinitialUSD5mmofferwaswellreceivedbyamarketthatotherwisereceivesbetween0%to1%forUSDbankdeposits

• Participationbyprivatepensionfundswasnotasaggressiveastheirearlierexpressionsofinteresthadsuggested

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

Ø Somepotentialinvestors,concernedabouteaseofliquidationofpositions,wouldliketoseehowtheinstrumentstradesbeforeparticipatinginthenexttranche

• Weremaincautiouslyoptimisticaboutprospectsforfuturetranchesandwilltakeourprogramme tointernationalinvestorsthathaveappetiteforthiskindofrisk

• AGHStranchewouldworkbutdifficulttowritemortgageswith


15

GHL– lessonsfrom10yearsofmortgagedelivery

• Marketeducationhasbeenakeychallenge– gettingborrowerstoappreciatethemortgageproductandwhatitisfor

• Affordablehousinghasbeenhardtodefineandremainsachallengethathasnotbeenresolvedbyverticalconstruction,newtechnology,PPPetc

• Constructionfinanceforlocaldevelopersremainsakeychallenge– ithasthereforeattractedbetterfundedforeigncompetition

• Aggressiverateofprepaymentreflectsacultureaversetobeingindebt.Flexibilityinlendingiskey

• Abilitytocreditscoretheselfemployedandinformalsectorhasbeenlimitedandconstrainedthegrowthoftheportfolio

• Targetedandwellthoughthroughgovernmentinterventionisreallyrequired– inthecaseofpensions,apercentageoftheportfoliocouldbededicatedtoeligiblemortgages

role of pension funds in mortgage finance · in 2016, ghl launched a usd100mm note programmeto test...

Documents