This research investigates the role of efficiency in attracting long-term finance to the
mortgage sector. Within the framework of the traditional economic theory, the new
institutional theory and the theory of mortgage collateral, the study investigates the
efficiency of primary mortgage banks and the perceived efficiency of the larger system
within which they operate using quantitative and qualitative techniques.
Quantitative data were extracted from the financials of 27 mortgage banks in Nigeria, which
constitute about 90% of the size of the entire industry in Nigeria, as measured by banks’
total assets. These were analyzed using data envelopment analysis (DEA) and stochastic
cost frontier (SCF) analysis to determine the efficiency of mortgage banks in Nigeria.
In-depth interviews and focus group discussions were conducted among 40 CEOs of
mortgage banks in Nigeria to investigate the perceived efficiency of both the banks and the
entire mortgage sector. This sample constitutes about 54.2% of the CEOs in the industry
and represents all geopolitical zones and ethnic groups where mortgage banks exist in the
country. A review of housing finance policies, systems and sources of funds in thriving
emerging economies was also conducted with the aim of drawing lessons from them that
are applicable to improving the efficiency of the Nigerian mortgage sector. The findings
from the review formed the basis of a mixed method questionnaire survey to investigate the
existing and potential sources of funds for housing finance, to assess the acceptability and
suitability of lessons drawn from other countries in Nigeria and to make policy
recommendations for improving the efficiency of the Nigerian mortgage sector.
The findings reveal that on average, mortgage banks in Nigeria are 33% - 49% efficient
compared to best practice firms within the sector. Ownership structure and bank size
influence the efficiency of these banks. Banks owned by private organizations and
commercial banks are more efficient than those owned by the government or religious
organizations. Banks with average total assets in excess of ₦5 Billion are more technically
efficient than those with total asset less than ₦5 Billion.
Practitioners perceive the mortgage banks and the larger system within which they operate
as only about 10% efficient. This perceived efficiency is much lower than the technical
efficiency measured in the quantitative assessment. Through the lens of institutional theory,
this low rating is attributed to the negative perception of the institutional structures of the
mortgage sector by mortgage finance practitioners. The findings also reveal that two
categories – external and internal factors – impair the efficiency of the sector. The
regulative constraints account for 55% of challenges to efficiency, normative constraints
account for 24%, while cultural cognitive constraints account for 21%. The study identified
accumulated deposits in pension funds, unclaimed dividends, funds in dormant accounts of
commercial banks and other financial institutions, and funds from insurance companies, as
possible sources of long-term funds for housing finance, while a concerted effort is being
made to set up a secondary mortgage facility. The findings also reveal that effective
government policies, regulation and amendment of existing laws would help improve the
efficiency of the mortgage banking sector and attract investors to this sector.
| Identifer | oai:union.ndltd.org:CRANFIELD1/oai:dspace.lib.cranfield.ac.uk:1826/8418 |
| Date | 03 1900 |
| Creators | Johnson, Paul Femi |
| Contributors | Figueira, Catarina, Nellis, Joe, Manos, Ronny |
| Publisher | Cranfield University |
| Source Sets | CRANFIELD1 |
| Language | English |
| Detected Language | English |
| Type | Thesis or dissertation, Doctoral, DBA |
| Rights | © Cranfield University 2014. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright owner. |
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