NBS boss lays out game plan, vision
THE National Social Security Authority (NSSA) has established the National Building Society (NBS) to champion the provision of affordable housing to low income earners. The Financial Gazette’s Senior Business Reporter, Shame Makoshori (SM), this week spoke to NBS managing director, Ken Chitando (KC), on the new bank and its objectives.
SM: This should be a busy period for you?
KC: There have been quite a lot of expectations from the market. The reception has been very good. It has been awesome and we are excited by the number of customers that pass through our branches.
SM: NBS is a parastatal. Or you are indirectly State owned. We have had problems where State firms are mismanaged through government interference. But what makes you different is that you are a bank. Are we assured that public savings will be safe in NBS?
KC: NBS was set up in terms of the Companies ACT. We are a public company, and unlike parastatals that are set up in terms of a statute, we are set up in terms of the Companies Act. We have oversight being given by the Reserve Bank because we are registered as a building society.
I think our mandate is very clear, which is to provide housing and to do so in a profitable manner. The shareholders of NBS are the very members of the national pension scheme and the compensation fund. NSSA plays the role of a fund manager.
SM: If government instructs you to do certain things, will you say no?
KC: We have got a corporate governance framework that is intended to safeguard the interest of depositors, which is intended to protect the interest of shareholders. I believe it is robust enough to be able to achieve those objectives.
SM: NSSA started a bank, Capital Bank, and it closed. My experience is that when you start a bank and you fail to run it, you lose market confidence. What gives you the confidence that you will succeed?
KC: You need to be aware of the investment portfolio of NSSA. NSSA has investments in CBZ, ZB and FBC, which are fairly good counters. It has investments in FML, in NicozDiamond and Fidelity. And Capital Bank was just one of the investments that it had. They did not form it. They invested in Capital Bank after it had been started by ReNaissance. I believe that there has been a lot of change that has taken place at NSSA as well. There is a lot of focus on corporate governance. You are going to see that the way this organisation is going to be run, and oversight accorded to it, is going to be a lot more stringent than has been the case. So I believe that there is a very strong corporate governance environment. The recent changes to the Banking Act also give further focus on how best to give oversight management to the bank. So we believe that this is going to be a successful investment by NSSA.
SM: Seriously? I was also saying to myself these guys are starting a bank when others are closing.
KC: I guess it (progress) is a reflection of the product that we are selling. While we are a financial institution, we have a focus on mortgages. And as you realise, it is something that is exciting. There is quite a lot of interest, if you look at the housing waiting list, currently it is at 1,25 million. And the people out there are eager to have a place they call their own home.
SM: The working class, which is your primary focus, is being eroded by the economic turbulence. Where is the market then?
KC: We are playing in a segment which is the low end of the market. What we have is a product offering which is affordable in terms of the structure and funding costs. We are looking at a house for the low end of US$15 000 to US$25 000. You can see that it is for the low end. It is not a secret that there is high unemployment. But we still have people that are still paying rent. Because it’s fairly affordable, we believe that we can tap into the informal sector and be able to get people that have good saving habits, who have good paying habits that can afford the type of product that we have.
SM: Almost everyone is going into mortgages. Will you withstand the competition? The giants, FBC, CBZ, CABS are all in that market.
KC: We talking of 1,25 million people on the waiting list. That is the potential demand out there. Demand is the function of the means of those people to (repay) a loan. And we are playing in a very specific market, which is the low end of the market. We would like to ensure that we include the informal market into this product. I think the competition is good because it is the complementary effort that will address the challenges that we have in this country.
SM: How will be the interest rates like?
KC: This is one of the key issues that we are trying to address. We have got extended loan repayment periods of up to 25 years depending on how old you are when you apply for the loan. The second one is around the costs where we are coming in for first time home owners at 9,5 percent. So it has resulted in the lowering of the burden. It makes it affordable and it addresses potential non performing loans.
SM: When do we expect a dividend?
KC: The reality is that we are a profit making organisation. We are expected to turn to profit in the not too distant future. We believe that we should be able to break even in about two years and thereafter we should be able to pay a dividend to our shareholders. But we should be in a position where we indirectly benefit our clients. They should be able to get new houses. In the process they benefit even before a dividend is declared to the shareholders.
SM: How many accounts have you opened?
KC: We are in line to achieve our targets; we are on course and we should be able to achieve the numbers that we had forecast to achieve.
SM: Can we reduce the housing waiting list in five years?
KC: I believe that those efforts (by banks) added together will enable us to reduce the waiting list.
SM: How much are you looking for?
KC: The initial capital was US$25 million, but if we see that there is need to supplement whatever we will have lent out, we will do so. We are quite prudent in the way we approach lending. We believe that lending is not the first step. The first step is saving; the first step is being in a position to ascertain the spending habits. We need to get to know the clients and ordinarily we look at a three month period to be able to have a feel of how a person behaves before considering lending.
SM: There is a project you are involved in Chinhoyi. What is happening there?
KC: The position is that our parent, NSSA, has a number of land banks in a number of towns. We are going to be looking at commencing some work in Chinhoyi before the end of the year. We are bringing housing to that piece of land. That is a primarily low income scheme and we are hoping that the cost of the houses would not exceed US$20 000.
SM: After launching NBS in Harare and Bulawayo, what will be your next destinations?
KC: We obviously are going to stabilise those branches. There are a few other products that we are rolling out. We want to make sure that the working environment is stable. And thereafter we are going to be looking at the distribution networks. We will be pursuing a number of other distribution channels. But we want to take advantage of the infrastructure that our parent shareholder has. NSSA has offices in 19 towns so we want to take advantage of that. We are hoping before the end of the year, we roll out our first units. We don’t believe that we can do it alone. We should be able to provide houses for some people during the course of 2016.
SM: Where are you looking for credit lines?
KC: The Zimbabwean market.
SM: Will you get it?
KC: We have pension funds that need to have prescribed assets, and certainly secure assets like mortgage loans. If we securitise those through the bond market, it provides quite a solid investment for pension funds. Pension funds should be able to take advantage of this investment channel.
SM: Is there no risk that you build houses and there are no takers?
KC: Our approach is different. We will build only against determined demand.
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