Interview with Oscar Mgaya CEO of Tanzania Mortgage Refinance Company

TanzaniaInvest.com: What are the origins of Tanzania Mortgage Refinance Company Limited, and why is there a need for refinancing?

Oscar Mgaya: Up until recently, commercial banks in Tanzania failed to offer mortgage products due to a number of reasons including unfriendly laws and lack of long term funding. 

It is an open secret that the majority of working class Tanzanians lacked access to housing finance due to the absence of mortgages in the market. 

One of the main reasons commercial banks did not offer mortgage loans was because of lack of long-term funds, which are necessary in mortgage lending, to avoid assets and liabilities maturity mismatch risk.

TMRC was born out of an initiative between the Government of Tanzania and the World Bank. 

In 2010, the Government of Tanzania through Bank of Tanzania also began the implementation of the Housing Finance Project (HFP). 

HFP is a Government of Tanzania and World Bank initiative which aims at creating and developing a sustainable, market-based mortgage market through the provision of medium and long-term liquidity to mortgage lenders.

The formation of TMRC is one of the three components of the HFP, which is geared towards developing a mortgage market in Tanzania. 

The other two components are development of housing microfinance and expansion of affordable housing supply.{xtypo_quote_right}TMRC is one of the three components of the Housing Finance Project, which is geared towards developing a mortgage market in Tanzania.{/xtypo_quote_right}

TI: How does TMRC operate?

OM: TMRC is a Mortgage Liquidity Facility (MLF) established by commercial banks with support from the Government of Tanzania and World Bank.

The aim is to support member banks to extend long-term mortgage loans to the public through provision of long-term funds.

TMRC is a specialized financial Institution that provides long-term funding to financial institutions for the purposes of mortgage lending. 

TMRC is a private sector institution owned by banks. TMRC has the objective of supporting financial institutions to do mortgage lending by refinancing Primary Mortgage Lenders’ (PMLs’) mortgage portfolios. 

This type of lending is also known as wholesale or secondary market lending- we do not take deposits or lend directly to individuals. 

TMRC refinances mortgage loan portfolios rather than individuals mortgage loans, and caters to banks rather than individual borrowers.{xtypo_quote_left}TMRC is a specialized financial Institution that provides long-term funding to financial institutions for the purposes of mortgage lending.{/xtypo_quote_left}

TMRC is currently utilizing a World Bank loan to refinance primary mortgage lenders and we access these funds through a line of credit from the Bank of Tanzania.

TMRC plans to issue corporate bonds that raise funds to lend to primary mortgage lenders on an ongoing basis.

MLF have proved to be instrumental in financial development of other countries.

TMRC is expected to play a similar role as Cagamas (Malaysian MLF) did in Malaysia and Egyptian Mortgage Refinance Company (EMRC) is playing in Egypt.

TI: What are the benefits for participating institutions?

OM: With a minimum shareholding investment of TZS 500 million, the participating institution can access long-term funds from TMRC for up to a maximum of 20 times their investment in TMRC. 

To date, TMRC has eleven (11) member banks. 

These member banks are also TMRC shareholders and to-date they have contributed a total TZS 12.24 billion. 

As of 31^st July 2013, TMRC had already issued loans to its’ member banks totalling TZS 11.95 billion.

TI: Who are the participating institutions?

OM: 

1. CRDB Bank
2. National Microfinance Bank
3. Exim Bank
4. Dar-es-salaam Community Bank
5. Tanzania Investment Bank
6. BancABC
7. Azania Bank
8. National Bank of Commerce
9. Bank of Africa
10. NIC Bank
11. People’s Bank of Zanzibar

TI: Are there current investment opportunities available in bonds issued by TMRC?

OM: Currently, the only opportunity to invest in TMRC is through equity investment. 

This opportunity used to be only available to banks and financial institutions. 

Recently, we have opened up the opportunity to invest in TMRC to non-borrowing investors.  We also have plans for bond issuance sometime next year.

TI: Where do you see the most interesting investment opportunities in housing in Tanzania?

OM: The biggest investment opportunity in housing in Tanzania is in housing supply side especially in affordable housing. 

There is a huge demand for housing and very few private housing developers in Tanzania. 

Another area of interesting investment opportunity is in specialized mortgage finance companies.  Recently, the Bank of Tanzania issued regulations for mortgage finance companies. 

Interested parties can now launch license applications for mortgage finance companies with Bank of Tanzania.{xtypo_quote_right}The biggest investment opportunity in housing in Tanzania is in housing supply side especially in affordable housing.  There is a huge demand for housing and very few private housing developers in Tanzania.{/xtypo_quote_right}

TI: How would you describe what is going on in Tanzania overall?

OM: Tanzania is blessed with many natural resources including gold, diamond, uranium, gas and oil to name a few. 

Much of the country is undeveloped and therefore the opportunities for growth are vast. 

The housing sector will surely benefit from the development of other areas of the economy. 

The urban population also continues to increase and thus increasing pressure on the housing market.

This provides a huge potential for the future development of mortgages in Tanzania.  Those who will join the housing sector among other growing sectors stand to benefit.{xtypo_quote_left}Tanzania is blessed with many natural resources including gold, diamond, uranium, gas and oil to name a few.{/xtypo_quote_left}

TI: What is your personal message to investors?

OM: I would like to urge more banks and financial institutions to consider an investment in TMRC and also take up mortgage finance as a product. 

The mortgage market is still very new in Tanzania with significant potential in the foreseeable future.