Think of a time when home ownership was as simple a decision and then walking into a grocery store to buy a loaf of bread.
The innovative way of financing home ownership introduced into the market by a local construction company called One Man Journy has the merits of changing the property finance game and if financial institutions sleep on the job, it could become the local market’s new industry standard.
Both a house and bread are necessities, but owning a house in Botswana has traditionally been fraught with a myriad of challenges the root cause of most generally being access to finance.
The youthful man behind One Man Journy (OMJ), 22-year-old Botho Mokopotsa, sat across the table in an interview with Sunday Standard fielding questions with a quixotic confidence as if to make it clear that he was revolutionising home ownership, which has come to be likened to a mirage.
According to Mokopotsa, home ownership has been made unattainable by the way in which financial institutions have been offering finance and seeing the opportunity in the market to fill the gap.
He founded what he describes as a one-stop shop construction company that addresses the wide needs of prospective home owners based on what they have and can afford as opposed to daunting them with a set of strict demands that they have to meet so as to own a house.
“As we expand a lot of Batswana will not go into banks to seek financing,” he said.
With a two-year record in business Mokopotsa and his team of 60 professionals across the construction and financing field have built to completion about 25 houses. Through the company’s product and the credit building scheme, customers are assisted with building their homes on credit.
Customers do not gain direct access to the financing but rather the funds are distributed to every stage of the building process from foundation to roofing by using in-house technical services and third party suppliers such as contractors and hardware shops.
It also offers credit for the completion of already running structures. OMJ has its own brick production plant which allows it to make cost savings in the building process.
The arrangement with third parties could soon cease as Mokopotsa is working to establish own supplier shops. “If all goes well we’ll open a hardware shop. Without third parties we’ll control the market,” he said.
OMJ approves financing to customers through its own assessment using funds that it initially sourced through crowd-funding. The bulk of the funding, said Mokopotsa, comes from international investors based in Canada which came through the connection of his business partner who studied Economics and Statistics in Canada.
The construction company charges a competitive interest rate of 7.5 percent which by comparison to industry is lower than what the local financial institutions charge.
Mokopotsa explained that as a new entrant in the market they decided to gain a competitive edge with interest rate pricing. The pricing, he said, could change depending on the dynamics of the market.
He also said that the lower interest rate was informed by the fact that the company, unlike financial institutions, does not primarily depend on interest income to gain profit but also derives and retains revenue by providing in-house construction related services from start to finish.
The loan term is up to 25 years with the benefit of a 15-year warranty covering foundation, super structure and roofing.
OMJ offers 75 percent financing and the remaining 25 percent is expected to be funded by the customers. The 75 percent financing, said Mokopotsa, is offered countrywide but he, however, expressed the intention to offer 100 percent financing in the near future.
By mid-year Mokopotsa expects to have opened three more branches in Francistown, Ghanzi and Maun in addition to the current one in Gaborone with each backed up by a brick production plant.
This innovative concept is not without challenges as was indicated by Mokopotsa. One of the things he cited is that the loan repayments are not deducted from source which presents a challenge in securing a consistent repayment pattern from customers.
To address this challenge, he said, OMJ is currently in talks with unions so as to put in place agreements to deduct from source. He cited the successful conclusion of talks to date with the Botswana Meat Commission union.
This new form of credit financing currently does not have specific regulation to oversee its operations. This is demonstrated by the absence of a clause within the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) to guide the service offered to the public. It presents, as a result, the opportunity for the assessment of the credit financing environment in Botswana with the expectation that further innovation will take place within it.
This is the future Nobel Laureate Professor Muhammad Yunus, founder of Grameen Bank, known as the bank for the poor, envisioned when he said “in the future the question will not be: are people credit-worthy”, but rather, “are banks people-worthy?
With plans to list in the Botswana Stock Exchange in three years’ time, Mokopotsa declared that there was no stopping OMJ.