Will diaspora mortgages re-ignite the Zim dream?

17 Feb, 2023 - 00:02 0 Views
Will diaspora mortgages re-ignite the Zim dream?

eBusiness Weekly

Rufaro Hozheri

The idea of the Zimbabwean Dream speaks to the ability to have access to and own land, and by extension own a house. This concept is similar to the American Dream, which was extensively pushed prior to the mortgage crisis of 2008, to the extent that the American government had institutions like the Fannie and Ginnie Mae to foster that.

Unfortunately, in Zimbabwe, the economic situation has been very turbulent and most of the young working professionals in the country cannot even imagine, let alone dream of owning a house.

In fact, a new maxim has been coined in social circles which goes like this, “The Zimbabwean Dream is to get out of Zimbabwe”.

Whether it is true or an exaggeration becomes another debate, but at least the official numbers will tell you that over nine hundred thousand Zimbabweans are living abroad and the number should be increasing by the day with the demand for caregivers and nurse aids in Europe.

If you don’t believe that statistic perhaps you might also look at what this Diaspora society is remitting back home. Official numbers will indicate that in 2022, Zimbabwe received US$1,67 billion, the highest number of diaspora remittances in the history of the country.

This was 14 percent of our foreign currency receipts and the number was up 16percent from the US$1,43 billion recorded in 2021.

Of course, intellects and champions of the industry have already started discussing and analysing how this money can be harnessed for productive rather than just consumptive use.

Of interest to me and this article, is whether this money can revamp the Zimbabwean mortgage market.

Whether diaspora remittances are sustainable enough for banks to significantly increase the mortgages they issue out and maintain profitability.

A mortgage in simple terms is a long-term loan to purchase a property, and therefore it will be backed by a property. In essence, a young working professional with a good credit rating should be able to approach a bank, get this long-term loan and buy a house which will be owned by the bank until all the repayments have been made.

Banks, on the other hand, mobilise depositors’ funds and finance these mortgages.

For this to be possible there should be a relatively stable economic environment anchored by low inflation and positive real interest rates, which then promotes the savings culture.

These savings together with other patient capital will then finance all these infrastructural projects.

The unpredictable and volatile environment in the country has been the best to allow for such long-term agreements to thrive.

For a country that witnessed at least two hyperinflationary experiences in under 25 years, it wouldn’t be ideal for banks to issue any 25-year mortgage or even 15 years for that matter.

Those institutions with the most risk appetite to issue mortgages have restricted the mortgage tenure to a maximum of 10 years, and extended mortgages only to employees of specific sectors e.g. those who work for NGOs.

This makes the instalments costly and the overall deal unattractive.

This has actually secluded a significant portion of the workforce from participating in and having the ability to get mortgages.

Working professionals have been left with no choice, but to build on their own, which has been a breeding ground for land barons and housing scams.

This has affected negatively the number of mortgages extended by building societies which have been on a downward spiral.

According to the latest MPS only 5.72 percent of loans are mortgages, whilst the biggest chunk of loans and advances is going towards the agriculture industry (22,94 percent), Financials (12,71 percent) and Manufacturing (9,42 percent).

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