A case for THE entry OF COMMERCIAL BANKS

IN PROMOTING HOUSING MICROFINANCE IN PAKISTAN

September 6th- 2012

Housing financeUnder Housing finance, following purposes are generally fulfilled:

Housing unitsImprovement in existing housing unitsEquity release.

Social Services / Rehabilitation (PPRF, MHF loans)

Product diversification under low income groups would not cover the housing unit purposes, thus the real housing requirement is very minutely addressed.

OPPRTUNITIES

Housing Microfinance will be an entirely new, and uncharted territory for Commercial Banks in Pakistan.

With commercial Banks moving out of consumer home financing, the opportunity lies in this segment for expansion.

Banking the unbanked is becoming the new focus through Branchless Banking – this certainly is an opportunity under same vision.

Diversifying risk on smaller ticket size exposures has its own benefits thus may be a good product.

Large Branch Network in diversified locations is an existing tool to work on this product.

CHALLENGES

Mind set – How to change into micro service provider.

Non Financial services and their commercial viability.

Opportunity cost of funds involved in micro financing.

Pricing of products.

CHANGE REQUIRED

It is worth mentioning also that just as the Commercial Banks took a lot of time in entering Branchless Banking arena, there will a long gestation period involved for their entry into Housing Microfinance as well. This is primarily due to the fact that Commercial Banks consider Microfinancing to be outside their domain till now.

However, the entry of UBL, through the acquisition of Khushali Microfinance Bank, is bound to change the landscape rather quickly, and interesting developments should be anticipated, once the initial results of UBL’s foray into this area become available.

SUGGESTIONS;

Consolidate PRs related to Hosing / Residential Mortgage.

Public sector institution need to be incorporated / activated on the designs of National Housing Bank (India) to provide infrastructure and related support.

Consistency in Govt policy / housing related announcements.

Thank You