A tale of Uganda’s only indigenous bank

Housing Finance Bank celebrated 50 years in Uganda recently. The golden jubilee is a big milestone and symbolises a unique heritage as an indigenous bank that has been growing in a profitable and sustainable manner.
It also re-affirms the bank’s commitment to provide tailor-made financial solutions in housing and other sectors of Uganda’s economy.
Housing Finance’s story has been shaped by the commitment to serve customers over the years. The banks continues to look to the future and seize the opportunity to make meaningful impact on Ugandans.

Governance and customer centricity
One of the key pillars that have kept Housing Finance going is the presence of strong governance framework with elaborate and strong leadership.

Banks sell trust and once this trust is eroded, chances of collapsing are high. Housing Finance Bank has built a legacy that is based on the core values of excellence, respect and integrity and customer- centricity.

We are always willing and are committed to service over and above the minimum standards and we always uphold high moral and ethical principles in our actions towards customers and all other stakeholders.

We respect and recognize the ideas and opinions of customers and are focused on the superior satisfaction of those we serve at all times.

These are the guiding principles that have kept the bank strong for the last 50 years and will continue to guide all our actions in coming years.

Role in housing sector
The evolution of Uganda’s housing sector is punctuated by rapid urbanisation and population growth.
With an urbanization rate of 5 per cent per annum, a large percentage of the population will be urban dwellers in the coming few decades.

The National Development Plan 2015 to 2020 estimates that Uganda will need at least 12.6 million new housing units within the next 30 years to keep up with its population growth.

This backdrop clearly demonstrates the challenge and opportunity for development and investments in the sector.
As the flagship provider of mortgages and housing finance since 1967, we started hosting a dialogue that brings together stakeholders and key players along the housing value chain both in the public and private sector to address fundamental deficiencies within the sector.

Majority of new housing units in Ugandan target high end users yet there is an acute housing deficit at the middle and bottom end of the income pyramid that is not being served.

Key interventions
At the time of holding the first dialogue, in 2015, the cheapest mortgageable home was Shs135m. However, as a result of advocacy for affordable housing, we are now seeing a steady supply of fairly priced units as low as Shs70m.

This is still a long way in combating the deficit all together but it is a major step towards creating affordability.
We have actualised a number of initiatives as an institution; among them vibrant engagements with government to support the housing policy as well as developments and interventions from a policy perspective.

We have also had interventions from the infrastructure perspective and here we look at the critical elements that make housing expensive and how they can be lowered, say for utilities.

We have also gone on to fund developers and off- takers as well as introducing up to 100 per cent financing.
Ordinarily in a home loan, one contributes 20-30 per cent, but because of the challenge in Uganda, we can now give up to 100 per cent financing to prospective home-owners.

The operating environment
Uganda’s banking industry is robust and is operating in an exciting era of digital transformation, financial deepening and growth of the financial sector.

The amendment of the Financial Institutions Act in 2016 to allow Agent Banking, Bancassurance and other lines of business have created new opportunities to grow revenues outside traditional interest income to non-funded income streams.
From a digital perspective, banks are now partnering with Fintechs and telecoms to increase their reach, with many banking platforms now being inter-operatable with telecoms conveniently pushing and pulling funds across the mobile money and financial eco-systems.

Furthermore, the creation of the agent banking shared platform has increased collaboration within the sector with the banks now able to bring services closer to the public.

All these have put the sector on the right path for growth and will continue to transform the sector in the coming years.

The Future
We are aiming to improve our standing in the industry by positioning ourselves as the most preferred bank. We expect to achieve this by focusing on the delivery of a dynamic customer experience to drive growth as an institution.

We will also continue to devise solutions and interventions that speak to the customer value proportion of convenience, responsiveness, reliability and affordability and we shall increase our footprint across our existent agents and digital channels that we have continuously rolled out such as internet banking, investment management, mobile banking and alerts.
We shall also strengthen our focus in the housing space as we drive affordability and flexibility in our mortgage and housing finance offerings.

We would like this journey to be an inspiration to many indigenous organisations in Uganda.
There is enough room for growth and development of our economy with consistence, hard work and a strong workforce.

REVIEW OF THE HOUSING SECTORS
On a whole, the banking sector still has some way to go particularly in addressing the adequate supply of affordable units.
Many developers are still growing their capacity to build to scale and as such they build a small number of units for the high income segment where margins are higher.

Stakeholders also need to address further constraints to affordability such as design and cost of materials by exploring the use of new building technologies.

However, a key factor contributing towards the cost of housing is infrastructure for instance, water, electricity and roads. Most people have to build some public infrastructure as part of their home and research shows that this contributes anywhere between 15 to 25 per cent of the cost of a house.

But for larger projects, the cost of public infrastructure may contribute as much as 40 per cent to the final price of a house.

Therefore, it is clear that by simply providing public infrastructure; it is possible to bring down the price of a completed house by at least 30 per cent and with these supply side bottlenecks sorted out, the supply of affordable houses will be matched with demand which already exists for well-priced homes that can be acquired through mortgages.

The good news is that unit costs are coming down due to the benefit of densification and the economies of scale made possible with the condominium law.

As a result of this and our efforts to bridge the gap between developers and home buyers, affordability is now more than ever before a reality and the future of the sector in Uganda is very bright.