The business case for a housing finance bank is being promoted by experienced and reputable professionals and business men at a time when housing financing and mortgage loan from private sector banks has almost become unavailable except for the lucky few and/or has become a forgotten service by most banks in the country. Nearly all banks in the system have rescinded this service genera from their service menu or grudgingly provide it as an incentive and bundled service to attract very few high value customers. All kind of housing finance, be it for construction, acquisition, modification/improvement, change of purpose, or for the purpose of build-and-rent, build-and-sell, build-and-lease-then-sell, etc. are unavailable or are available at a premium which make housing, real estate and commercial property production and supply expensive.
In Ethiopia, it is not uncommon for commercial banks to provide secured loan routinely for terms ranging from 1-5 years and in some instances for up to 10 years when the financing is used for hotels, resorts, machineries and other similar fixed asset loans. However, banks outright reject any request by individuals or group of individuals involving housing finance, even for a short-term. This is in contradiction with the love of strong collateral, for which Ethiopian Banks are known or blamed for. Although the underlying collateral of any kind of housing finance is strong, banks are scared to provide housing finance or other housing properties, because they believe the income stream of individuals may be unpredictable or the price of housing property may deflate and/or because of cumulative risk factors embedded in housing finance which is longer term in nature. Or even worse, in some cases, the hassle involved in the review and administration of this loan genera puts it in the lowest rung of the business model of most Ethiopian banks.
Recent estimates put the national housing deficit of key urban centers at over 1 million units and it is also indicated that, at least, 100 thousand houses are required annually to meet the needs for housing arising out of demographic growth and replacement. In over a decade since the introduction of the Integrated Housing Development Program (IHDP) by the GoE, only a little over 200,000 units were built and distributed in 23 major towns covered by the program, according to a study undertaken with the support of European Commission. This is a drop-in-the-bucket in comparison to the size of housing need and demand in the country. Although there is no organized information on houses built by individuals and real-estate companies, it is believed that such efforts are not in a position to meet the huge demand for housing in fast growing cities and towns of the country. The Ministry of Housing and Urban Development identifies lack of appropriate housing finance and absence of institutions providing mortgage finance as one of the major causes for the slow production and distribution of housing units. This is not far from the truth.
Studies conducted in to the housing finance market in Ethiopia indicate that very few choices are available for would-be-home owners when it comes to obtaining the finance they require to own a house. The aim of Goh Betoch Bank (GoH) is to address this gap. As is often indicated, a house is one of major investments a household makes and a valuable asset it owns in their lifetime. The ORGANIZERS of GoH believe that by pioneering a bank that provides resources to households that enables them achieve ownership of an important asset, it is possible to create a valuable relationship that lasts a lifetime with the whole members of the household. The ORGANIZERS of GoH also believe that a relationship that is created through home and property financing and ownership can be leveraged to create a profitable and sustainable housing finance bank, that provides bundled services to households, which it is associated with through this primary financing scheme. The ORGANIZERS of GoH further believe that it is possible to launch a financially successful bank that sustainably affords customers various kind of loans which enables them build, purchase, expand, modify, and in general, help them own property for income or business and, in the meanwhile helping them hedge against inflation. The ORGANIZERS believe that such a bank is economically viable, financially profitable and socially desirable. The essentials for such bank to become successful, the ORGANIZERS believe, are the following:
The ORGANIZERS believe that such a bank is economically viable, financially profitable and socially desirable. The essentials for such bank to become successful, the ORGANIZERS believe, are the following:
- A well articulated business strategy which views business in a longer-term horizon and focuses on sustainability;
- Meaningfully mix housing finance business with other commercial banking businesses with portfolio risk and income diversification in mind;
- Governance system attenuated to the business challenges and demands of a housing finance bank;
- An innovative business model that recognizes and works to overcome the various challenges relating to maturity mismatch, interest rate and inflation risk;
- A business partnership model which involves various stakeholders (agents, institutional partners, self-help associations, kiosks, etc.) in the prospecting and acquisition of customers in both the liability and assets side and in the provisioning of services, thus helping provide service cost effectively;
- The deployment of a technology platform that helps the bank seamlessly get across to customers and vice versa, irrespective of the service channels and touch-points used for distribution of service;
- Leadership and cadre of trained staff who are knowledgeable in the intricacies of housing finance; and
- A well oiled marketing and sales system with a well popularized bra
The mission and business objective of GoH Bank is, therefore, to facilitate the profitable provision of home and property finance to individuals, housing cooperatives and businesses in all sectors of the economy along with other universal banking services. With this business objective, the Bank is determined to add value to its shareholders wealth comparable to the banking industry, if not more. Thus the organizers invite all Ethiopians and Ethiopian diaspora to be founding shareholders of the Bank