PMRC to soon issue TFCs for boosting housing finance

KARACHI: Pakistan Mortgage Refinance Company (PMRC) is in the final stages of issuing a number of fixed rate Term Finance Certificates (TFCs) to different banks and expects to close it in the coming days, the company’s official told The News on Tuesday.

This decision comes as the government is aggressively promoting the construction and the housing sectors in Pakistan, particularly boosting the availability of affordable homes for low- and middle-income population groups.

“To continue the development of fixed rate mortgage market, PMRC is consistently issuing various fixed rate Term Finance Certificates and sukuks,” Farrukh Zaheer, the Head of Treasury, Capital Markets and Financial Institution at PMRC said via phone.

“After the issuance of Rs3.1 billion sukuk, which included six participants, Pak Kuwait Investment Company as lead arranger, Bank of Punjab as joint lead arranger, Habib Bank, Askari Bank, Karandaaz, and Bank Islami as investors in March 2021, PMRC based on significant demand issued another privately placed sukuk worth Rs1 billion to HBL in April 2021 respectively. PMRC is now in the final stages of issuing several other TFC’s to various banks,” Zaheer said.

PMRC envisions making housing accessible and affordable by increasing financial inclusion of low and middle-income segments viz-a-viz providing investment opportunities to capital market participants by offering new products.

The company continues to introduce new products, both Shariah-compliant as well as conventional, to deepen and widen the local capital markets. The latest sukuk issued to HBL was based on the Shahriah structure designed by Ehsan Shariah Advisors and Consultants (ESAAC) with overwhelming support from State Bank of Pakistan (SBP) and collaboration from PMRC’s Shariah advisor. All the funds being generated through issuing bonds/sukuk by PMRC is for the promotion of the housing sector.

PMRC successfully issued its first privately placed fixed rate two-year bond of Rs1 billion in the last fiscal year. The potential for sukuk and TFC market, especially of longer maturities and fixed rate, is massive.

There are barely any issues of fixed rate TFCs or sukuks by private issuers in the market. Subsequently, most of the consumer or business loans in Pakistan’s economy are based on floating rates, floating rates deter people and even institutions from taking longer tenure loans because of the uncertainty involved, Zaheer said.

“Given the growing population and the shortages in the housing market, the issuance of the sukuks and TFC’s by PMRC shall promote fixed rate capital market instruments and simultaneously fixed rate lending to end-borrowers. PMRC is confident that it will promote low-cost housing even more,” he added.

Financing to the construction and housing sector has picked up significantly since the introduction of mandatory targets and incentives for banks announced in July last year.

The SBP gives mandatory targets to banks to make housing and construction finance to be at least five percent of private sector advances by end December 2021 and has started a process of issuing other ongoing regulatory measures to promote housing and construction finance.

In October 2020, the government introduced the Markup Subsidy Scheme, now commonly known as Mera Pakistan Mera Ghar Housing Finance Scheme. This scheme enables banks to provide financing for the construction and purchase of houses at very low markup rates.

The banks’ housing and construction finance portfolio has increased from Rs148 billion by the end of June 2020 to Rs202 billion in March 2021, according to the latest figures from the SBP.

This shows a growth of Rs54 billion or 36 percent in three quarters of this fiscal year, compared with a stagnant position in earlier quarters.

These loans stood at Rs192 billion in the previous quarter ended December 31, 2021.

The banks approved financing of Rs15 billion to the applicants as of April 20, 2021 under Mera Pakistan Mera Ghar Schemes.

Mudassir H Khan, CEO, PMRC said in a statement to The News that despite the Covid-19 situation, PMRC successfully disbursed Rs8.75 billion in FY2020, which was one of the highest disbursements in a single year by any development finance institution in its core business.

The company’s advances portfolio increased to Rs14.9 billion in 2020 from Rs7.7 billion a year ago.

Total assets of the PMRC crossed Rs28 billion during last year, compared with Rs19.57 billion in 2019. Investment portfolio recorded a 16 percent growth from Rs8.8 billion to close at Rs10.2 billion, Khan remarked.

In line with the government’s initiative for the promotion of low-cost housing, PMRC with support from government has created a risk sharing facility (RSF) for low-cost housing with setup of a trust by the government.

This was done to motivate banks for mortgage financing in this segment. Islamic Shariah structure for RSF has also been approved by leading Islamic banks and banks with Islamic windows.

This is the first Shariah-compliant credit guarantee scheme for low-cost housing in the region, Khan added.