KARACHI: Banks have shown strong progress in approving and disbursing financing under the ‘Mera Pakistan Mera Ghar’ (MPMG) scheme against the huge number of applications lodged by potential borrowers to avail housing finance.
As of April 11 (2022), banks received applications for housing finance amounting to Rs409 billion, which was merely Rs57 billion a year ago, reflecting an increase of more than seven times, according to a statement issued by the central bank on Thursday.
Of these, banks have approved applications amounting to Rs180 billion and disbursed Rs66 billion.
“This shows an increase in approvals of more than 11 times,” the statement said, adding that banks had approved applications amounting to only Rs16 billion in April 2021.
Similar trends could also be observed in the overall financing to the housing and construction sector by banks, it said.
Banks almost doubled their housing and construction finance portfolio to Rs404 billion as of March 31, 2022 from Rs204 billion a year ago.
Banks have also achieved almost 100% of the housing and construction finance target of Rs405 billion for the first quarter of 2022.
“To improve the provision of financing for the housing and construction sector to increase adequate housing in the country and boost construction sector activities, the State Bank of Pakistan (SBP) with the support of the government has taken several measures since July 2020,” the statement said.
In October 2020, the government augmented these efforts by introducing a markup subsidy scheme – commonly known as ‘Mera Pakistan Mera Ghar’, it added.
Available in both conventional and Islamic modes, this scheme enabled banks to provide financing for the construction and purchase of houses at very low financing rates for the low to middle-income segments of the population.
“Key initiatives taken under the scheme included allowing acceptance of third-party guarantees during the construction period, waiver of debt burden ratio (DBR) in case of informal income and the introduction of standard facility offer-letter by banks.”
The SBP also advised banks to develop and deploy income estimation models for borrowers with informal sources of income.
In order to gauge the readiness, knowledge and appropriateness of behaviour of banking staff towards customers, regular “mystery shopping” of banking branches was also conducted by the central bank across the country.
“The current progress is also attributed to banks’ improved preparedness for handling housing finance that includes alignment of banks’ strategic focus, continued improvements in their systems/ procedures, training and capacity building of staff, extensive marketing and leverage of technology to reach out to customers,” the statement said.