If media headlines are any guideline, the Mera Pakistan Mera Ghar (MPMG) scheme of the SBP—a mark-up scheme that subsidizes housing finance to a wide range of first-time homebuyers—is doing incredibly well. Starting in Dec-20, banks have approved Rs100 billion worth of home loans, of which Rs28 billion have been disbursed thus far (Nov-21). The approval rate has gone up from 17 percent to 41 percent. An upward moving graph indicates growth, but what is this data really saying? Short answer: Not a lot!
Let’s reminisce a little. Back in 2009, the SBP started to publish these delightful and detailed quarterly reports on credit data. Specifically, there were three different reviews that were published: infrastructure finance, SME finance, and housing finance that made a mountain of data available to readers/analysts. In addition, a separate report called the development finance review would combine the performance of the aforementioned segments together with information on agriculture, microfinance etc. One could map out a comprehensive picture of how credits across different segments were performing every quarter.
To illustrate: the housing finance reviews contained information on housing loans and disbursements based on loan size, gender, income; based on type of institutions making these loans (such as public banks, private banks, Islamic banks etc.); including NPLs across different demographics and the number of borrowers. During some quarters, the reports would show the purpose of financing. For instance, in 2016, Islamic banks and private banks were predominantly lending to borrowers for “outright purchase” while HBFC was lending mainly for construction purposes as well as for renovations. The same report provided data on institution wise weighted average mark-up, LTVs, average loans size, maturity periods.
The journey from mountain to a molehill abruptly ended in 2016 when all these reported were discontinued in December of that year. The SBP continued to publish some basic statistics for housing finance until end of 2019 while the same for SME finance is still being published on the SBP’s data portal which gives some key insights into credit to SMEs, but not nearly in the same depth as before. Other credit information is available on the SBP data portal but the depth of information there too is absent.
This brings us back to Mera Pakistan Mera Ghar. Safe for the requested amount, approved amount and disbursed amount, the SBP is bafflingly silent on other important information such as the size of loans and the number of borrowers, let alone, more granular and material statistics such as loans based on demographics, loans by purpose, loans by institutions etc. The rupee value of loan disbursements and approvals leaves one hankering for more information to evaluate the scheme, and how well it is performing.
One clear trend that can be seen from the disbursed amount so far and comparing it to the total housing finance that is given out by banks is that MPMG is taking up more and more of the share in credit to the housing segment (see graphs). This means, new loans given out by banks—given that they have to meet mandatory targets for housing and construction finance imposed by the SBP with recently imposed penalties on non-compliance—are increasingly under MPMG. Makes sense. But banks can provide loans under MPMG for up to Rs10 million (see table). While NAPHDA-run projects have a maximum property value of Rs3.5 million—which brings them close to the “low-cost” category, non-NAPHDA projects do not have a cap on property value which means as long as the financing amount is under Rs10 million, home buyers—across income groups—can buy pretty much any property anywhere if they can afford it. The financing amount is limited by the size of the property which to a great extent would limit the property value, but it no where means that these loans are moving toward affordable or low-cost housing.
However, the SBP has also provided targets on the number of housing units to be financed which does limit banks just doling out credit to a handful of borrowers with the largest loan amount possible and be done with it. Since the targets given to banks on the number of units to be financed are not disclosed by the SBP—another key information that is missing—one can only make assumptions, but poor ones.
Optimistically, if one-third of the total approved amount is going into each of the three tiers (where max loan amount for each tier is—tier 1: Rs2.7m, tier 2: Rs 6m, tier 3: Rs10m), the total number of borrowers with approved home loans come to approximately 21,000. In 11 months since the scheme, perhaps, that is not a bad number after all. But without adequate data, this is just conjecture.
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