KARACHI: Pakistan Mortgage Refinance Corporation (PMRC) on Monday signed a Master Guarantee Agreement with six leading Islamic and conventional banks: Meezan Bank, Habib Bank, BankIslami, Faysal Bank, JS Bank and Soneri Bank.
This is a major step the government's Naya Pakistan Housing Program has taken in making affordable housing possible for all.
A Credit Guarantee Trust, with the Pakistan Mortgage Refinance Corporation (PMRC) as the trustee, has been set up by the Government of Pakistan with the support of the State Bank of Pakistan (SBP) and funding by the World Bank.
In line with the government's vision to promote affordable housing, especially for the low-income segments, the Credit Guarantee Trust will provide risk coverage of up to 40 percent to primary mortgage financiers on first loss basis.
The guarantee will partially alleviate the credit risk of primary mortgage financiers and provide an environment conducive for banks to finance housing for the low-income segment.
Keeping in view the dynamics of the mortgage market and to facilitate market growth, the scheme has been designed for both conventional and Islamic banks.
Speaking at the signing ceremony, SBP deputy governor Jameel Ahmed said that the risk coverage of mortgage portfolio under the government markup subsidy facility provided due comfort to the banks in extending housing finance to the low-income segment for purchase or construction of new houses.
He urged the banking industry to benefit from this "unprecedented facilitative environment" and extend loans to their maximum potential.
He also urged the PMRC to focus on developing a secondary mortgage market through issuance of mortgage-backed securities in the capital market.
The SBP deputy governor said that all the stakeholders needed to make concerted efforts to achieve the goal of providing housing to the common people.
He also lauded the efforts made by the financial institutions over the last few months under the umbrella of the steering committee on housing and construction finance established by the State Bank of Pakistan.
He further said that the housing and mortgage industry was considered to be one of the most profitable sectors in any country.
Jameel Ahmed said that the SBP established this liquidity facilitation entity with the collaboration of the World Bank to create efficient avenues for the growth of low-cost housing finance in the country.
Mudassir H. Khan, MD and CEO of PMRC, said that this Credit Guarantee Scheme would pave the way for the banking industry to extend housing finance to the low-income group, a market segment which had remained negligible for long.
He said that the PMRC had a role of a catalyst in mortgage market development in the country and for growth of affordable housing in the country.
He also thanked the SBP deputy governor for his leadership and support for this sector, and the Ministry of Finance, the World Bank and NAPHDA for making the government's and the PM's vision of affordable housing a reality.
On the occasion, Irfan Siddiqui President and CEO Meezan Bank, Afaq Khan head of Islami Banking Habib Bank, Basir Shamsie President and CEO JS Bank, Muhtashim Ahmed Ashai President and CEO Soneri Bank, Syed Amir Ali President and CEO BankIslami, Tahir Yaqoob Bhatti Head of Retail Banking Faysal Bank signed the Master Guarantee Agreement.
Copyright Business Recorder, 2020