'Pension Funds Should Offer Housing Loans'

A call has been made for Tanzanian pension funds to provide soft housing loans to their members.

An experienced estate developer, Mohamed Khalfan, says being state organisations, social security funds like the Parastatal Pensions Fund (PPF) and the National Social Security Fund (NSSF) should help their members to acquire private houses.

Said he: "They should not be tempted to make their investments solely for maximum commercial gains like high rise offices projects...they should also have a policy of focussing on the social dimension."

Khalfan was speaking in an exclusive interview with Business Times in Dar es Salaam recently.

He argues that, with the inclusion of housing loans for their members, Pension Funds' investments get the dual purpose of generating profit in terms of interest while helping members to own houses.

According to him, the importance of soft loans can be illustrated by the past experience in Tanzania when workers accessed housing loans through the collapsed Tanzania Housing Bank (THB).

At one time, when loans were easily accessible, people could afford building houses amid shortages of building materials like cement, electrical and roofing materials.

"Such was the thirst for owning houses... now materials are available but the crucial input is missing, the financing part" says Khalfan, once a banker and chief executive officer of an estate development company.

Now rumor has it that some workers, raring to own houses before they retire, opt to quit their jobs to qualify for a lump-sum pension to have their dreams of owning a house come true.

"It is very shocking that in the absence of the badly needed soft loans, an employee would go to such length in order to acquire a house and get him/herself free from keeping on paying rent as high as Tsh 10,000 per room per month," he added.

Critics say the decision to concentrate on investment in high rise buildings is partly because of the low level of members' representation in the decision hierarchy such as the board of directors.

"It is an unfair structure to see that members (workers) are inadequately represented in the board," they argue. Board members are (by law) appointed by the minister of Finance.

According to them, to have a collective interest of workers in particular and the society in general, workers should form the majority in the board.

For example, says Khalfan "any diminishing influence of expertise in the board can always be made up by paying (hiring) for consultancy. It (the board) should not be a board of experts."

Reached for comment, Michael Mjinja, the director of commercial services at the Parastatal Pensions Fund (PPF), said looking at the whole issue from the legal point of view, there is no room to allow it now.

For example, he says, at the moment there is no guarantee from which "we could extend soft loans to our members, because we talk of contributions which would be at any time of a contingency.

"We do not know when a misfortune will face our members. What if a member faces one while you have given him a loan... but we are looking at it," he adds.

Recently, the public has increasingly become concerned with the preference of pension funds to invest in highrise buildings and expensive estates beyond the reach of the common man.

Other investment areas include Treasury bills/ bonds and shares at the Dar es Salaam Stock Exchange. However, a recent move by NSSF to construct 104 houses at Kinyerezi area is considered as a breakthrough for the common man. If successful, the program will cover the whole country.

Recent reports have it that the NSSF plans to invest in neighbouring countries of Kenya and Uganda. According to our sister paper, Majira, NSSF is conducting studies on the possibility of venturing into tourism and mining.

By Bakari Machumu