Martin Kadzere Senior Business Reporter
THE insurance and pension industry is seeking to raise US$6 million through private placement bonds to mobilise funds for on lending to banks to finance low cost housing development.
The bond is the first tranche of the US$45 million to be mobilised under the Insurance and Pensions Housing Fund, information obtained by Herald Business shows.
It will be issued by the Insurance and Pension Housing Company, which oversees the Insurance and Pension Housing Fund, while Old Mutual Property will administer the fund raising.
The bond, to be sold to only local insurance companies, insurance brokers, pension funds, pensions administrators and other entities in the insurance and pensions industry will be sold at a fixed interest rate of 8 percent per annum from issue date.
It will be issued in two series. The first for about US$3,14 million to be issued on January 2, 2014 and the second for US$2,85 million to be issued on January 31 next year.
According to documents gleaned by this newspaper, the bond will have a one year tenor. It will be guaranteed by Government while the accrued interests will be exempted from taxation.
The principal amounts of the bonds and interest payment will be amortised over a period 12 months and will be paid bi-annually commencing 24 months after the issue date.
In 2011, Ministry of Finance, the Insurance and Pensions Commission, the Zimbabwe Association of Pensions Funds and the Zimbabwe Association of Funeral Assurers signed a Memorandum of Understanding to set up the Insurance Pension Housing Fund.
Under the MOU, each signatory assumed certain obligations to fulfil.
The Finance Ministry has since fulfilled its obligation of granting the prescribed asset status to the fund.
In terms of the Memorandum of Understanding, IPEC’s obligation includes mobilising insurance and pensions industry players to contribute to the housing fund.
“As this project has been stalled for a considerable period of time, all signatories to the MOU are urged to play their part expeditiously so as to ensure that the construction of housing units under the fund becomes a reality,” said Mrs Mernat Mpofu, Commissioner of Insurance, Pension and Provident Funds, in a note to industry players.
Currently, Zimbabwe is faced with a significant housing challenge. The current housing shortage is estimated at 1,25 million housing units which translate to a national backlog of five million citizens or more than 40 percent of total population. These housing problems resulting from constrained formal housing finance and public capital funding streams.
Housing finance schemes which are currently available have little incremental effect on the national housing stock as these are either exclusively packaged for a few targeted groups or are priced beyond the reach of the poor.