Financial Matters Monthly “Stimulating investment in Zimbabwe”
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Are these exciting times for fundamental investo
There is the old adage that says that “a rising tide lifts all ships” (a saying co-opted by trickl economists but, as the changes in the current global equity market would suggest, a saying th be equally applicable in the case of equity markets). Last year’s global equity market saw sig gains for investors. Global equity markets were up, regional equity markets were up a Zimbabwean equity market rose higher than both. It appeared as though the good times (at equities were concerned) were back. Equity markets seemed to be on the rise everywhere, markets where underlying economic fundamentals did not appear to justify such rises.
However, the comparatively poor start to 2014 (see Figures 1 and 2) has started raising ques whether the strong performance was built on improving fundamentals after the global crisi turn of the decade, or rather, snowballing market sentiment that was moving money t equities (primarily fuelled by the relatively cheap money offered by global quantitative measures). The start of the year has been sobering for many investors across the world unexpectedly weak job numbers in the US were added to concerns of risk in Emerging M weaker production in China, a reduction in cheap money, concerns over Eurozone pro numbers and, more recently, the unfolding problems in the Ukraine. One could be forgiven seeing a bleak global picture at the moment.
Are these exciting times for fundamental investors? THERE is the old adage that says that “a rising tide lifts all ships” (a saying coopted by trickle down economists but, as the changes in the current global equity market would suggest, a saying that may be equally applicable in the case of equity markets). Last year’s global equity market saw significant gains for investors. Global equity markets were up, regional equity markets were up and the Zimbabwean equity market rose higher than both. It appeared as though the good times (at least as equities were concerned) were back. Equity markets seemed to be on the rise everywhere, even in markets where underlying economic fundamentals did not appear to justify such rises. However, the comparatively poor start to 2014 (see Figures 1 and 2) has started raising questions of whether the strong performance was built on improving fundamentals after the global crisis at the turn of the decade, or rather, snowballing market sentiment that was moving money towards equities (primarily fuelled by the relatively
cheap money offered by global quantitative easing measures). The start of the year has been sobering for many investors across the world as the unexpectedly weak job numbers in the US were added to concerns of risk in Emerging Markets, weaker production in China, a reduction in cheap money, concerns over Eurozone production numbers and, more recently, the unfolding problems in the Ukraine. One could be forgiven for only seeing a bleak global picture at the moment. While Figure 1 shows that global and regional markets are still down for the year, Figure 2 shows that there still remain pockets of resistance in our region. Followers of this article will see that Egypt, Morocco, Mauritius, Kenya and South Africa are higher (YTD) than they were at the end of February. Quite notably since the end of January (when only Egypt was up YTD) the markets have slowly started to recover suggesting a potential improvement going To page E3
Figure 1
Zimbabwe in Context (YTD) (A) EFM AFRICA
WORLD
EFM AFRICA ex ZA
EMERGING MARKETS
25% 20% 15% 10% 5% 0% -5% -10% -15% Annualised Volatility Source: G3 Analytics, MSCI and ZSE
YTD Performance
ZIMBABWE
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FINANCIAL MATTERS FRIDAY MARCH 28, 2014
ZIMBABWE INDEPENDENT MONTHLY SUPPLEMENT
Technomag
Building Africa’s digital future We are Liquid Telecom and like you we dream big. We are building the largest fibre network throughout Africa, providing your business with voice and data communications and access to the world. www.liquidtelecom.com 08677 030 000
Liquid Telecom Pumps $32m into Zim fibre. Liquid Solus Ad Zim Herald.indd 1
03/02/2014 12:39
TECHNOMAG
Liquid Telecom Zimbabwe, has revealed that it has so far invested a staggering $32million in contactors responsible for the trenching and laying of their fibre optic cables project nationwide in the past 5 years. The managing director of Liquid Telecom Zimbabwe, Mr Wellington Makamure said “that in building and growing our fibre structure in Zimbabwe, we have engaged 50 contractors in building the infrastructure. These companies have employed over 5,000 workers downstream to assist with our network. Liquid Telecom is playing its part in employment creation. Liquid Telecom initially rolled out their fibre optic project in the Central Business District (CBD) connecting enterprises to their fast backbone cable boosting connectivity speeds with real broadband speeds. They have also registered a success in being the first company in Zimbabwe to connect homes to fibre optic cables through their Fibre to the Home (FTTH) project which has seen Liquid Telecom trench past many residential areas and making them ready for fibre. FTTH broadband connections already are a reality for more than 1 million consumers in the United States, while more than 6 million in Japan and 10 million worldwide enjoy its benefits, according to Broadband Properties Magazine. Many believe making FTTH technology the standard in connectivity will solve the forecasted Web traffic jam. Today they are rolling out their project connecting industries and businesses together, towns and cities stretching across the length and breadth of the nation as they cascade their high speed underground nationwide under fibre-to-the-premises (FTTP) According to the : Federal Communications Commission DSL or coaxial cable, for example, a single copper pair conductor can carry six phone calls while a single fibre pair can carry more than 2.5 million phone calls simultaneously making broadband virtually unlimited. Mr Makamure also revealed that they are now laying an average of 4km of fibre optic cable in Zimbabwe daily a 100% increase from last year`s average of 2km with a current national total of more 5,500 km laid so far. More than 50 renowned contractors are working together with Liquid Telecom to bring the fibre dream to Zimbabweans across the nation. This creates unique employment opportunities for the locals in various towns and cities in Zimbabwe. As the hype surrounding the trenching activity continues, documents availed by Liquid Telecom show that the number of employment opportunities created downstream are set to increase. More than 5,000 jobs have been created on this project to date. This has ultimately impacted the socio-economic growth, alleviation of poverty in Zimbabwe and increase in technological penetration within the population. Speaking during the recently held e-tech Africa conference, The Liquid Telecom managing director noted how important and imperative it is for all ICT players to continue working towards sustainable projects to stir the economy. “The Zimbabwe government has acknowledged the role of ICTs and developing infrastructure as fundamental to the economic growth. The Zim Asset clearly pronounces ICTs as a major player in developing this economy and as all players involved, we have a role to turn around our economy via ICTs” said Makamure. In his remarks, he also acknowledged the need for players to share infrastructure and said as Liquid their job is to facilitate communication within Zimbabwe and the rest of the world. “Let’s work together , let’s share the services, lets share the infrastructure where possible, that is what the government expects but that is also the best for all of us as players in the ICTs to drive the growth our economy” he said. TechnoMag , Is Zimbabwe`s Premier Technology Magazine, more on www. technomag.co.zw or join us on our facebook page www.facebookcom/technomagzw Email articles[at]technomag.co.zw tweet @TechnoMagZw
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FINANCIAL MATTERS FRIDAY MARCH 28, 2014
ZIMBABWE INDEPENDENT MONTHLY SUPPLEMENT
Telecoms Insight
Telecoms sponsored by
Sharing in order to accumulate
of losing an aspect of competitive advantage resulted in network operators being shy to than five years later, which is higher than One eye-catching development at the proactively seek out and engage in such ar- the market capitalisations of a number of the network operators who had signed up Mobile World Congress in Barcelona this rangements early on. The boom in mobile broadband demand to the network sharing MoU. year, was the announcement that a total of What the valuation of WhatsApp signifies eight network operator groups from across experienced across the region in recent the Middle East and Africa region had en- years, correlated to the rise in smartphone is that value in the telecom sector is shifttered into a memorandum of understanding and tablet penetration and the growing in- ing from network operators to social media, (MoU) to facilitate an initiative to proactive- fluence of over-the-top (OTT) players has messaging, and Internet players that are efly explore greater cooperation with respect represented both a profound threat and fectively forging stronger, more financially opportunity to network operators. As rev- rewarding relationships with communito infrastructure sharing. The signatories to the MoU – Zain Group, enues from traditional voice and SMS de- cation consumers, and thereby assuming Etisalat Group, Bharti Airtel, MTN Group, cline, the rise in mobile digital services is a larger proportion of incremental mobile Ooredoo Group, STC Group, Orange, and a much needed source of incremental rev- digital services revenues. Such a developWhilst Group every– other is on theenues, mobile device. office and while away ment flies from in the face of the massive upfront though theThese portion the of the windfall Vodafone accountsector for the majority in Zimbabwe’s economy hasregion, free to download applications locations. areoperators have had to incur costs network that is required to be sharedboth amongst third- Consumers of mobile subscribers across the and been shrinking, the telecomoften compete with tradi-is higher opting forwhat cheaper access and of spectrum and the capital in the purchase party content providers than the players have pledged to actively explore munications continues tional congested traffic by opting expenditure on state-of-the-art network network streams operators from ever hadless to contemplate commercially sector negotiated agreements on revenue to exhibit some of the highestand mobile providers, but for WiFi access. infrastructure. in the past. passive infrastructure sharing, where service growth ratesboth in the economy. these same service providers Growth in operating systemsoperators have begun to apSo network What the sharing MoU signifi es is a move feasible from technical and regulatory The first phase of infrastructure the indus- sharing. also want drive data usage, like and associthat they need to rely more on byto network operators to shore upiOS, theirAndroid own preciate perspectives, active try’s was fuelled by the thus leaving in a changing ated apps promote cloud usage their peers and forge their own counter positions in them the rapidly telecom Thisgrowth agreement represents a huge stepoften demand for voice which was quandary on how to position by encouraging data syncing in the attitude of network operators to one sector of today, and appreciate that by ral- measures to the new entrants to the teledelivered via first generation themselves. across devices, frequent upanother, as well as in respect to their per- lying together, they stand a better chance of com ecosystem. The Middle East and Africa GSM networks which later on A leading driver of data us- dates and online data storage. spective to the changing paradigms of the remaining relevant participants in the value region is a phenomenal market in which evolved into the 3G networks age is video applications. You- Dropbox is one example of an industry in which they remain the central chain rather than relics overtaken by social to explore and expand this new paradigm we have today. The industry is Tube is clearly the leader is everyday cloud application. that the mobile subscriber penetramedia and messaging suchrecently as given reported figure. Forchanging now. Historically, network however of late with thisopsphere with over 6 billioncompanies Dropbox tion rate WhatsApp and Viber. It may also prove to erators have preferred to directly control as a new growth phase based on hours of video watched every signing up 25 million across usersthis combined region stands at just of 40%, which remains lower than the be1the first credible thethe direction much of theirfor businesses possible, and by the demand data. As as more month billion unique step us- in in last 6ofmonths 2013. global average services based competition, and away from this has also extended to their infrastrucdata communication appli- ers, and 100 hours of content Whilst not country specific, of 47%, and far below the hyper-saturation infrastructure structures. ture. However, in the past decade is or so, cations are being developed uploaded every based minute. it does indicate that the glob- found in many developed markets. Th e announcement of the acquisition of this viewpoint has been modifi ed in the reand cheaper data-enabled 60% of this content is watched al community of data users The more rampant WhatsApp by Facebook sucked gion through uptake of outsourcing devices are the being produced, onand non-mobile devices. Video effectively is moving more and to appetite for mobile broadband access and content in the emerging the air out of the room at Mobile World managed services arrangements. the demand for data in Zim- on demand and IPTV services the cloud, and as the number markets of the Congress 2014data as this became overridNetwork is a concept babwe has sharing grown beyond ex- that willhasfurther drive deof the cloud adopters goes up, so Middle East and Africa are set to drive growth in telecom services for ing topic the event. And pertinent existed in the Recent industry for some timemand. now, Netflix pectations. statistics isofrumoured to what doesa their data requirements. many years to come, and the network sharwas – how a company only founded gaining momentum through the introducby POTRAZ state that Zimbamake itstopic firstitlaunch in Africa Pyramid Research predicts ing agreement in 2009 and employing fewer than 60 peotion of the fi rst 3G networks at the end of bwe has reached 40% Internet in 2014. that in 2014, one in four peopleamongst the region’s largest network operators could be valueddeat US$19 the 1990s andcompared early 2000s, though theAnother fear ple factor penetration to 0.4% driving will billion have aless personal cloud ac- should be applauded not TAWANDA CHIHOTA
Zimbabwe’s Demand for Data Grows
Drivers leading to growth in demand for data in Zimbabwe
Main
Article
just for its recognition that network operators need to view themselves and their environments differently, but also for the efficiencies that such arrangements are likely to bring. In Zimbabwe, infrastructure sharing has met with mixed success to date. Most network operators share some towers on a bilateral basis, that is a like for like swap. However despite the regulator, POTRAZ, seeking to establish infrastructure sharing regulations in 2011 and 2012, no regulation has yet been established, and more importantly, in light of the new regional MoU that excludes any Zimbabwean company, the lack of co-operation among network operators is also cited as a key reason for lack of further infrastructure sharing in Zimbabwe. Imagine if only a portion of the level of investment in multiple fibres in the same streets of Harare had been extended to shared infrastructure in other cities? Total cost of ownership in the telecom space continues to fall and in order to be successful into the future, network operators need to make bold moves in the current environment to ensure they remain relevant in this dynamic and rapidly altering landscape–Tawanda Chihota is the Executive director of Pursuit Mode Initiatives FZE.
in 2000 whilst in the same mand for data is the wide count and that such accounts period the country’s mobile spread availability of cheaper will become strategic for cuspenetration rate has grown data-enabled devices as op- tomer ownership. from 2.5% to 103.5%. Whilst posed to pricing of smartwho subscribe to an investors’ line my economics professor loved to say; “woe is me, the markets industry commentators have phones, tablets and other InLastly, consumers’ expoare down…………………………………..good thing we are buying”. focused on the rapid take-up ternet-devices five years ago. sure to the developed world in Figure 3 From page E1the growth in data changing ofThis some of the region’s new demand will drive net. The time is now for serin voice, This hasFigure in2 part been aided terms of data apps, pricingfortunes and Returns vs. Beta Risk (YTD) equity markets that are slowly reversing vice providers to build Interhas often been ignored. How- by the parallel grey import speed is changing local user service provider strategies to Sectorial Zimbabwe in Context (YTD) (B) initial negative start. stocks regionevery as well.service provider meet thisKenyan demand for data in- net packages which are relever market. expectations on their data services. SOUTH cluding need to invest evant, affordable and reach – mobile, and negative other – is Internet- AFRICA TheZIMBABWE Internet of Everything were tainted by the capitalthe flight that fol- in inThe fact fixed that the trends With that the cheapest EGYPT MOROCCO MAURITIUS KENYA NIGERIA 30% data capacity the remaining 60% so that the focusing onyear data for new revenabled now retailing (IoE) is an emerging in creased lowedtheme the concerns over Emerging Markets on their opened the are starting to change may phone 25% networks, providing growth trend is maintained for enue growth. So whatthe areviews the ofatMark $50, this lowers the bar- the developed but world where to are beginning rally as investors startnetwork be starting to vindicate 20% security and the good of the industry and of major drivers leading thispointed rier to of entry of affordability literally everything is conto identify bargainsredundancy, in the marketdata as otherMobius and Warren Buffet who 15% 10% privacy systems themas consumers the country. As documented change? implications to having an Internet-enabled nected to the Internet includwise sound stocks are now revealing the cyclicalWhat nature of the equity market and 5% Beta Bank, for every does have device. and Indian ing your television, fridge, car want and are demanding more by the World selves to be under-priced. their this belief thatfor theservice market proalways off ered Chinese 0% -5% affordable, 10% increase in broadband viders? manufacturers are seeking to and any other household deLast year’s globalreliable, bull market in equitiesfast and good valueWhat to thoseopportunities who invested according -10% connections with 100% penetration, the underlying might arise from this? lower further to sub-$50 vice such as your toothbrush may have allowedsecure markets to record unto the fundamentals of the company’s they this -15% uptime. Zimbabwean GDP could grow as much as Techzim in July temperain 2014. Access to the Internet (yes, really!) you can image. -20% Figure 4 expectedly high levels of return but simply service bought ratherreported than the changing providers mustthe now 2.5% now that’s good news for 2013 that were 1.1 milremains Annualised relatively The emergence of Smart TVsthat is bull Volatility YTD Performance contrasting market with cur-meet theSectorial ment of thethere market’s collective mind.however GlobReturns vs. Annualised Volatility (YTD) expectation. all Zimbabweans. lion Zimbabweans on down expensive for access via mo- the first in this new of conrentera slide in local new equitiescustomer may lead to an al andactive regional markets may be but Source: G3in Analytics, MSCI and ZSE Not that every service Facebook and this are number devices Zimbabwe de- nected household devices that erroneous conclusion all local equi-provider not all equity markets down. Asbile many will havethe the financial Article by Ngonidzashe had increased bychanging 62% four spite competitive wars hasare still already seen increased While Figure 1 shows that global and regional markets down for the year, Figure 2are showson the slide ties or that slide in the means investors curse the tide, some in-recent or Th capability to start do sotowhich in Katsamba months prior that. positive The rapid data bundles. data demands onmarket prothat theremarket still remain pockets in our region. Followers of thisstill article will seeservice that Egypt,will tive andof resistance its sectorial indices persist. e negative vestors are stillto seeing gains on showMorocco, Kenyahas Southalso Africa are higher (YTD) than they were at the end of February. turn could lead to consolidaDandemutande Marketing adoption in social and a Mauritius, trend viders. technoloYTD (seeandFigures 3 and 4).wasTh eWearable ma- the year may yet prove to be an opportuing that while not allmedia boats are on the Globally rise, down Quite in notably since the end of January (when only Egypt emerged up YTD) the markets have slowlyannual tion inwho the market. Ngonidzashe.Katsamba@ community messaging inemerged tablet usage gies from the sector remains the most volatile nity for shrewd investors subscribe to but some, as Figure 2 shows, are quite de- terials started to recover suggesting a potential improvement going forward for not only the markets that At only 40% penetration, dandemutande.co.zw cluding FaceBook, WhatsApp, wherebywhile only 20% of all data Consumer Electronics Show in consumer staples is the most stable. an investors’ line my economics professor cidedly so. are now up for the year, but potentially others in the region as well. Annualised volatility still has Tel: 791675-8 Skype, andfront, others has usage tablets isdespite on cellular Las Vegas this January as the the poorthestart tostarting thetoyear loved to say; “woeZimbabwe is me, the markets are an unOn theViber domestic Zimbabwean eq- onHowever, The fact that the negative trends that opened year are change may be starting to tapped potential driven first-time Internet us-the collecnetworks, which indicates that be technology trend to watch out thing there may a lesson learntpointed fromto the we are buying”. market of uities are still on the slide with the views be of Mark Mobius andto Warren Buffet the cyclicaldown……………good nature of the 60% of its 13m population yet age in many markets as well 80% of vindicate tablet users are optfor who in 2014. equity market and their belief that the market always offered good value to those who invested to be connected to the Interas in Zimbabwe, and often this ing for WiFi access at home, incompany’s they bought rather than the changing according to the fundamentals of the
Implications Are these exciting times for fundamental investors? and opportunities 1.00
-9%0.80
1.20
YTD performance
-11%
G3 Consumer Discretionay Index
-13% -15% -17%
1.40 G3 Financials Index
1.60
G3 Consumer Staples Index
G3 Industrials Index
G3 Materials Index
-19% -21%
Source: G3 Analytics, MSCI and ZSE
0%
0%
YTD Performance
-5%
20%
40% G3 Consumer Staples Index
-15%
-30%
Source: G3 Analytics, MSCI and ZSE
On the domestic front, Zimbabwean equities are still on the slide with the collective market and its sectorial indices still down YTD (see Figures 3 and 4). The materials sector remains the most volatile while consumer staples is the most stable. However, despite the poor start to the year there may be a lesson to be learnt from the changing fortunes of some of the region’s equity markets that are slowly reversing their initial negative start. Kenyan stocks were tainted by the capital flight that followed the concerns over Emerging Markets but are beginning to rally as investors start to identify bargains in the market as otherwise sound stocks are now revealing themselves to be under-priced. Last year’s global bull market in equities may have allowed markets to record unexpectedly high levels of return but simply contrasting that bull market with the current slide in local equities may lead to an erroneous conclusion that all local equities are on the slide or that the slide in the market will persist. The negative start to the year may yet prove to be an opportunity for shrewd investors
80%
100%
120%
G3 Industrials Index
-20% -25%
temperament of the market’s collective mind. Global and regional markets may be down but not all equity markets are down. As many investors curse the changing tide, some investors are still seeing positive gains showing that while not all boats are on the rise, but some, as Figure 2 shows, are quite decidedly so.
60%
G3 Financials Index
-10%
G3 Consumer Discretionary Index
G3 Materials Index
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FINANCIAL MATTERS FRIDAY MARCH 28, 2014
ZIMBABWE INDEPENDENT MONTHLY SUPPLEMENT
Property Investments
Spare a thought for the mortgage market Jealous Chishamba
ACCORDING to the National Housing Policy 2012 report, the housing backlog is pegged at more than one million driven by an exodus of people from rural to urban areas in search of employment and other opportunities. It is estimated that about 40% of the Zimbabwean population lives in the urban areas. Sadly, despite the country sitting on vast tracts of land, the majority is still renting while others, limited by low incomes, have resorted to living in shanty settlements. Government has not been able to close this gap due to limited resources. This has left the home seeker’s plight pinned squarely on the private mortgage market. A mortgage is a loan secured by immovable property or buildings. The building can be used either for residential or commercial purposes. In Zimbabwe, the mortgage market was primarily confined to building societies before the
growth of universal banking. This lifted regulatory barriers and opened the floor to commercial banks. The move was meant to proffer a private solution to a national housing crisis among other reasons. This market can be further divided into primary and secondary. On the one hand the primary market relates to the acquisition of land for construction. On the other, the secondary market is more to do with trading mortgage-based financial instruments. The local financial landscape has largely been dominated by the primary market with the major participants being CABS, FBC, CBZ, and ZB. Challenges in the primary mortgage market are diverse. In the recent past, lending has slowed down owing to liquidity constraints and the transitory nature of deposits which make it difficult to fund long term assets. The most active institutions have relied on credit lines from PTA and Shelter Afrique earmarked for mortgage development. Insurance and
pension funds have also participated in this market in pursuit of higher yields. from a cost point of view, while the pricing of the mortgages has been reasonable relative to prevailing local market rates, it remains high as compared to global rates. The prices of underlying assets have also tended to be overvalued. In addition, in order to secure a mortgage, the minimum deposit amount required has tended to be steep. This has crowded out most home seekers whose incomes are low. As a result, people have resorted to building the traditional way, one stage at a time, using limited personal resources. Further, the economy is highly informal. Without a credit bureau it is difficult to quantify credit risk. According to the 2012 Finscope survey about 40% of all Zimbabweans aged 18 years and above are financially excluded or not using either formal or informal financial products. This leaves only the few formally employed, estimated to be between 10-30%, with
access to these loans subject to meeting the shortlisting criteria.The market has also been affected by a wave of corrupt and greedy players. Every year there are numerous cases of botched housing deals where developers disappear or fail to complete projects. This stifles confidence in the primary market. Activity on the secondary market is short of stagnant. This is despite the fact that the secondary market creates liquidity by allowing primary market players to package and sell loans to raise cash. This cash can be used to originate new mortgages in the primary market. An active market also has extended products like home equity, remortgaging and home improvement loans which enables owners to raise additional cash. The inactivity can be linked the retardation in the country’s secondary markets over the years. For instance the money and capital markets are not functioning. However the authorities are making commendable efforts to resuscitate trading beginning with overnight lending for banks. It is imperative to note that housing finance is also an industry which needs financial support just like any other industry. The current situation presents opportunities for developers, suppliers of construction material and services, financial institutions and investors. As banks fight for deposits, savers also need incentives like provision of housing. With respect to financial institutions, the structure of the Zimbabwe mortgage market presents an opportunity to develop tradable market instruments. One way of doing this is through mortgage-backed securities. A mortgage backed security (MBS) is a bond backed by mortgage loans. Creation of these securities is simple. The mortgage lender extends a loan to homeowner or real estate. Subsequently, that mortgage lender sells the loan to another bank, private entity or government agency. The loans are then bundled together and sold as securities in the open market. Bondholders receive the interest based on the principal and interest payments from the borrowers. This creates further liquidity to extend more loans to homeowners or seekers. The Ministry of Finance, Securities and Exchange Commission (SEC) and the RBZ need to create incentives to improve this market. It is commendable that the RBZ acknowledged the need for the secondary mortgage market in its 2014 monetary policy statement. However, this faces implementation risk if banks do not take it up in their corporate boardrooms. While there is tight liquidity in the market, incentives to resuscitate the secondary market can be created through regulatory support. For instance, regulators can give prescribed asset status and tax exemption for government agency-backed mortgage instruments. Guarantees can also be sought from reputable private institutions to enhance credibility. The current scenario of increased non-performing loans also underscores the need for a shakeup in the legal system to ensure swift and timely repayments through foreclosures or threats of the same. One could point to the subprime crisis in developed markets and the role these securities played in the fiasco. The MBS market constitutes the largest sector of the bond market in the world with more than US$5.3 trillion in circulation. The income tax exemption on accruals on mortgage finance announced in the 2014 budget is a good starting point. There is also a need to create think tanks that will act as stimulants and catalysts to the development of the market. Taking a cue from the US, government could create a mortgage agency in the mould a Ginnie Mae, Fannie Mae or Freddie Mac type of institutions. Instead of being limited to fixed deposits and indirectly assuming risk in unknown sectors, investors can buy these securities for a given return. There is clearly merit in enhancing this market. However for it to work effectively, a prior ingredient is to set up a robust legal and regulatory framework to combat abuse of the market which may destabilize the financial system in the long run.