LETSHEGO Namibia has received approval to receive a N$738 million loan from the International Finance Corporation (IFC) to finance low-cost housing – a move set to benefit those typically overlooked by commercial banks, the IFC says.
The company announced this last week, with chief executive officer Ester Kali saying now that Letshego is funding mortgages, an increased range of financial solutions are available to its Namibian customers.
It is the first time the IFC extends funds specifically for the construction of homes in Namibia.
The deal comes at a time when low-cost housing remains in demand.
In June this year low-cost houses (of N$500 000 and less) were on demand in the country – comprising 56% of the 2 435 residential mortgages granted by local banks from January to April this year.
The above figures paint a picture of a housing market in Namibia with a huge demand for low-cost houses.
It indicates that many individuals with low-cost houses are taking out mortgages to improve their properties, and cash in on the appreciation of value.
Letshego already has the lion’s share of the microlending space and is now targeting low-income earners.
Last year analysts’ calculations showed the average cost of a house in Namibia was just over N$1 million.
However, this cost is bloated by the cost of land and property developers’ expenses.
At least 78% of Namibia’s population have access to a bank account.
Despite this, only 12% of households have mortgage-financed homes.
The remainder does not qualify for mortgages from commercial banks.
According to the IFC’s summary of investment note on the deal, the cash injection would be a five-year senior loan and will help Letshego Namibia promote access to “housing finance via affordable housing mortgages and home improvement loans to un(der)served individuals”.
The loan will come with a two-year grace period.
“Through this project, the IFC aims to support access to mortgage finance for qualifying individuals, complementing public-sector subsidies and guarantees available to this segment. The IFC expects that the project will demonstrate the attractiveness of the housing finance sector focused on low-middle-income individuals,” the note reads.
Namibia’s four commercial banks, First National Bank Namibia, Standard Bank Namibia, Bank Windhoek and Nedbank Namibia, dominate the mortgage space.
These four banks also own over 95% of the banking sector’s assets, however, expected competition is to be introduced.
“The project is expected to increase the market’s competitiveness as other market participants replicate the company’s success in segments mostly overlooked by commercial banks,” the IFC note reads.
In addition to the loan, the IFC would also assist Letshego with non-commercial risk mitigation, and provide assurance to other future potential lenders.
The deal would also involve knowledge, innovation and capacity building, through the IFC’s advisory services that would offer guidance to formulate strategies and business plans for the desired segments.
“By supporting partners like Letshego to increase the availability of affordable housing loans, we hope to enable more individuals to access quality housing in Namibia,” Adamou Labara, the IFC’s country manager for Eswatini, Lesotho, Namibia, South Africa and Zimbabwe, says.
Data from the central bank shows commercial banks at the end of April had a residential loan book worth N$42 billion, and earned above N$250 million in interest from these loans every month.
According to a Namibian Stock Exchange news update, Letshego Namibia’s 2021 interim statements for the six-month period ended 30 June 2021 are expected to be materially (20% to 25%) higher than the restated reported earnings for the previous comparable period.
The company will release its unaudited interim financials on or before 24 August.
Shares on Friday closed at N$1,70 per share.
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