HBFC: new vision new mission

With establishment of HBFC in 1952, the concept of institutionalised housing finance was introduced in Pakistan. During the next 50 years, the Corporation gradually and steadily developed to remain as the leading institution to provide financing facilities for the construction, reconstruction, repair and purchase of houses in Pakistan.
HBFC has a large network of 58 offices spanning across the country, managed through 11 zones with headquarters at Karachi. The credit facilities of the Corporation are available throughout Pakistan including Azad Kashmir and Northern Areas.
HBFC has financed around 427,000 houses to the tune of Rs 36 billion and has investment portfolio of Rs 20 billion. HBFC's annual disbursement is around Rs 1.5 billion and recoveries over Rs 2.5 billion. At present, it is handling over 132,000 operative accounts.
According to a 1998 official survey, Pakistan is facing a short fall of about 6 million housing units. This figure is estimated to be more than 7.5 million units at present.
In our country, the number of persons per housing unit is 6 and per room is 3 while room density is 1.1 in 100 countries average. For the present population of 149 million, we need 25 million units but have only 19 million to meet present demand, 7 lac housing units are required to be built per annum and to meet the backlog in 20 years 3 lac more units would be required ie about 1 to 1.1 million new housing units per annum have to be built in the next years. This does not include depletion of stock, more than, 50 years old, estimated at 2% per year.
HBFC has been a household name traditionally associated with housing finance. With the abolition of its monopolistic position in housing finance since late 1990s, HBFC had to reconsider its whole business philosophy. This was inevitable for its survival. With the take-over of new management in 2005, it emerged with a new image, strategic changes being made in all key areas of its operations.
Under the dynamic leadership of new chairman and chief executive Zaigham Mahmood Rizvi, HBFC is undergoing major reforms program. After taking over the charge early this year, his first and the foremost task was to look into the viability as well as purpose of the HBFC.
After analysing the entire situation, he believes that the HBFC has a place and a reason to operate even if there are as many as 19 commercial banks in the housing finance business. The simple reason, Mr Rizvi says is that these banks are not catering to the needs of common man and their target clients are high profile areas and people.
Presently nearly 85 percent of HBFC's clientele is low- income people where loan amount is less than Rs 100,000 whereas nearly 98 percent clients have per party loan below Rs 500,000. The poor sections of the society take HBFC as their partner in housing finance.
For HBFC, its social role is an inseparable part of its commercial stance. It has to cater to the needs of the people who have small means, striving hard to have at least a shelter of their own in their life time. They have no name lending or a label to support their social status.
The CEO, Ziagham Rizvi believes in focusing on 85 per cent of clientele who mostly seek housing loans below Rs100,000 and have monthly income between Rs3500 to Rs5000 and could only afford to pay an instalment of Rs1000 to Rs1200 per month in 15 to 20 years besides meeting their monthly expenditure of basic necessities.
HBFC not only strived for a new outlook but also a new ideology. Consequently, the HBFC changed its slogan to be "The Housing Bank for SMH Financing" and also adopted a new strategy for ensuring the success of its policy. Under the new vision, the HBFC would work as socially responsible and commercially sustainable housing finance institution.
Its business focus is SMH Finance which is a major policy shift whereby it would meet the housing finance needs of low income and middle income sections of population. It is gearing up to offer both retail and bulk housing solutions, so as to expand housing stock in the country through new constructions.
HBFC under its SMH finance has targeted three categories of clients: first, those who could afford to get loan up to Rs0.5 million, followed by those who were interested in getting loan between Rs0.5 million to Rs1.5 million and those between Rs1.5 to Rs2.5 million. All these categories belong to low and middle income groups of population.
Various initiatives have been taken with international financial agencies, investment advisors, provincial governments, house building societies and NGOs to offer sustainable solutions to the housing requirements on partnership basis by HBFC. Innovative solutions are being sought which will make HBFC a trend-setter in offering housing finance facilities. Some of the initiatives are as under:
HBFC IS PROMOTING MEGA HOUSING PROJECTS WITH VARIOUS INTERESTED GROUPS:
-- A plan has been initiated with Bahria Town (Pvt) Ltd. To provide two types of housing projects for low and middle income groups. Small Housing Project will be the first pilot project to build houses upto Rs 5.0 lac at Lahore to be followed by similar projects at Rawalpindi and Karachi. Medium Housing Project will be for medium income group with houses in the range of Rs 15-20 lacs at Lahore.
-- Similarly, Association of Builders and Developers (ABAD) has been approached to collaborate in building "High Rise Apartment Complexes" in Karachi.
-- An initiative has been undertaken with NWFP Government for development of Small & Medium Houses by N.L.C. in Peshawar Cantonment area.
In all above projects, the role of HBFC is to finance the borrowers interested in purchasing the houses.
A scheme has been launched for Overseas Pakistanis for which big and reputed builders would be invited to construct houses for them. People booking these houses/apartments from aboard will pay an amount of 30 percent and the rest 70 percent will be provided by HBFC. Overseas Pakistanis will be facilitated in distant loan processing through an interactive website. HBFC, through the services of its technical consultants like NESPAK, will initially review the housing scheme and its builder and declare the acceptable schemes as eligible for HBFC financing. Overseas Pakistanis will make their own choice of house/apartment from amongst schemes and will apply to HBFC for securing HBFC's finance. HBFC will also provide its services to Overseas Pakistanis in execution of documents and dealing with the builders.
HBFC is actively promoting the Housing Schemes for Poor People and rehabilitation of squatters.
The Korangi Township in Karachi was built under the supervision of General Azam Khan, which is globally acknowledged as among the best housing solutions to rehabilitate squatters/poor people. To replicate such an experience, Provincial Governments are being approached with a proposal to earmark a piece of land in suburbs of major cities starting with provincial capitals for building houses for low income group of population.
An NGO SAIBAN is collaborating with HBFC to work on a pilot project on modified improved pattern of "Khuda-ki-Basti"-Karachi. This project will be launched in Lahore. Government is to provide the land and basic amenities on socio-economic considerations and cost range is from Rs 150,000 to Rs 250,000.
Sindh Government is learnt to be allocating 100 acres of land for such a project by HBFC.
HBFC is fully conscious of the fact that due to property price escalation during the last three years, even low cost housing has gone beyond the affordability of low income people. Therefore, to support these people and to enhance their mortgage affordability, a program of "Sponsor a Poor for Seeking Shelter" is being launched where the poor borrower will be required to make a part of the mortgage payment whereas the balance will be through contribution of Zakat and/or Donations.
It has been checked with the religious scholars that such a support program is perfectly eligible for Zakat. Initial response from various corporates, philanthropists and overseas Pakistanis to make their Zakat donations for the purpose is encouraging.
The Zakat contributions, as per the choice of the contributor, could be borrower specific or general in the pool. Through this program HBFC will be able to play a major role in meeting its social responsibilities, with the public participation, and without any financial obligation on part of the Government.
Once SMH finance program is operational and functional, Micro Housing Program will be reviewed for its institutional setup, delivery and monitoring mechanism. The institutional setup would be operated through NGOs. This scheme will include cheaper finance in costal areas to fishermen and shelter finance in villages with maximum limit of Rs 100,000.
Another scheme to be introduced is a housing project on 100 acres where families will be given license to live, on one rupee rent per month. They can live there up to 4 to 10 years, until their children are grown up, in this way they cannot sell these houses. Funding may be taken from foreign donors.
New management has started a three fold reforms program to make HBFC financially viable and commercially vibrant organisation. Ultimate aim is to enhance public image, quality and speed of service delivery, internal operations and business expansion with diversification to transform it into market oriented organisation.
The first part was to set direction for the organisation. Its mission redefined as "To be the prime housing finance institution of the country, providing affordable housing solutions to low and middle income groups of population by encouraging new constructions in small and medium housing sector". Its new vision is to be a socially responsible and commercially sustainable housing finance institution.
The next stage has been started with an Internal Reforms Package. Following measures have been taken:
-- The first challenge was to removing qualifications standing since Balance sheet has been cleaned by removing audit qualifications. To streamline accounting policies, systems and procedures, the services of a consultant have been hired. Standardised accounting practices are being adopted so that the balance sheet truly reflects the health of the loan portfolio.
-- To enhance its Corporate Governance level, HBFC has started its program for securing ISO Certification, possibly within 2005. Work has already been started for preparing updated services rules, procurement, audit, operations (credit) and other manuals.
-- The services of a software firm have been engaged for computerisation of all areas of HBFC's functions like loaning, accounts, billing, recoveries, reconciliation and follow up. Once this is accomplished, HBFC will become a customer friendly institution facilitating customers to get their accounts status information any time. Mr Rizvi believes that it will minimise manual office work and direct contact between staff and borrowers to reduce the chances of corruption and malpractices.
-- To support computerisation of functions, a gradual process has been started to have a networking system to support LAN and WAN environment. The website is being restructured to facilitate the borrowers as well as potential customers. The borrowers will be able to see the details of their accounts online and the potential clients will be able to submit their preliminary loan applications online.
-- Up-gradation and refurbishment of branches and offices is under way and customer-friendly and market-oriented working environments are being introduced.
-- The aim is to bring about a positive cultural change.
-- An HRD Program to enhance human asset value has been initiated which covers fresh hiring of professionals and experts and training of staff. HBFC is working in association with IBP for a three tier training program (level 1, 2, & 3) for entry level, mid career and senior management professionals. Management Trainee Program is a part of fresh hiring. The distinctive feature is that preference has been given to local candidates in various districts.
-- As a part of customer facilitation program a telemonitoring program is to be started for borrowers at distant and far-off locations. Each borrower will be provided mobile phones with connections in collaboration with a telecom company at very concessional rates. Computerised SMS messages will be used for due payments, payments made and any update of policies.
-- To increase its physical outreach to remote areas, 50 small cities and towns have been selected for locating HBFC's representative/ franchise offices during 2005. Enterprising youngsters originating from the same areas will be selected as services agents. They will be provided training in collaboration with Institute of Bankers and will get commission based remuneration for the loans originated and recoveries made. These offices will be provided with IT facilities on lease. This program will not only enable HBFC to expand its outreach at nominal cost, it will also create employment opportunities and entrepreneurship among unemployed people.
-- A disaster recovery program has been started for digitally archiving all precious documents so that their retrieval for processing becomes easy. This program will eventually be transformed into "continuity of operations"-cop program, which SBP essentially requires from all financial institutions to maintain.
The prime concern of management is to explore new market based sources of funds to maintain and enhance HBFC business portfolio. Management has taken very innovative approach towards this issue by pursuing financial engineering solutions.
It is currently working to develop and float various liability instruments of finance like securitization of its performing portfolio, raising funding through REIT and real estate mutual funds in association with credit rating agencies and investment banks. International agencies have shown sound interest in these developments to offer their technical and financial backing.
Present credit level to housing is less than 10% of the potential need of the population.
It presents a mega challenge not only to financial sector but also to construction material industries (CMI), the labour force and to the town planners/municipal corporations/private and public sector agencies. HBFC is there with its financial assistance and social commitment. Others are invited to join hands on this mega issue as frequently quoted by Mr Zaigham Rizvi, "Mega Problems need Mega Solutions".