SBP to issue MPMG scheme with revised features by August end

KARACHI: The State Bank of Pakistan (SBP) on Friday said the Mera Pakistan Mera Ghar (MPMG) Scheme would be relaunched by end August with revise features in light of changed macroeconomic situation.

Samar Hasnain, executive director Development Finance Group at the SBP said the Finance Minister has constituted a committee with SBP and Finance Division to study the features of the scheme and “to see if there is a need to revise the features”. “The new features of the scheme after having cleared from the government are expected to be finalized and issued by August 31, 2022.”

Comparing mortgage financing in neighboring countries, Hasnain said it is 10 percent whereas 20 percent in other developing countries like Malaysia, Indonesia and more than 100 percent in developed countries.

However, he said, the mortgage financing to GDP ratio is less than 0.5 percent in Pakistan. Hasnain believed that MPMG also fulfills another important function of Financial Inclusion in the country. “The SBP has been working to improve the percentage of mortgage financing in the country and two basic hurdles which this sector faced earlier were removed now,” he added. “The absence of Foreclosure laws remained a big hurdle in Pakistan previously but as this issue has been resolved the pace of mortgage financing will further grow in the country.”

The second important factor is the availability of sufficient liquidity for the success of housing sector. Banks did not have long term deposits for ten to twenty years. Apart from these, there were some non-structural issues which have also been taken care of.

Explaining the factors that led to the suspension of the Scheme, Hasnain negated from the onset, the impression that the decision was taken due to the changed political scenario. “Change in some economic fundamentals led to the decision of temporarily halting the Scheme.”

When MPMG was launched, Karachi Inter Bank Offered Rate (KIBOR) was 8 percent and the margin for banks was 4 percent as banks received funds at KIBOR + 4 percent, banks received at 12 percent initially. The end user received financing at 5 percent and the subsidy paid by government was 7 percent.

In the last few months fundamentals began to change; policy rate began to change, exchange rate deteriorated and the KIBOR increased to 16 percent which compelled the government to revise the Scheme.

He revealed that at present the subsidy has gone up to 15 percent for the government to pay which was 7 percent initially; at the same time government is resuming the IMF program and had taken fiscal consolidation measures, and it became difficult for government to bear this huge subsidy.

He said the Government of Pakistan (GoP) temporarily paused the Scheme on June 30, 2022 to reconsider its features and make it more targeted so as to ensure that the benefits of the same reach at grassroots level to low and middle income households who cannot afford to purchase or construct a housing unit without availability of subsidized financing.

Talking about the disbursement made so far, Hasnain noted till January 2021, there was zero mortgage financing in Pakistan (excluding mortgages given in established and expensive housing societies) and upon completion of 1.5 years of this Scheme, on 30 June, 2022 the disbursement made under this Scheme reached Rs100 billion while applications worth Rs500 billion were already received and approvals had amounted to Rs236 billion.

Removing the misconception regarding the fate of those individuals who have given bayana (token money), Hasnain underlined that SBP has already notified that fresh disbursements should be stopped from 30 June, and those applicants whose partial disbursements remain, would be given the remaining disbursements; these individuals need not wait for August 31 as both SBP and GoP have decided that such individuals should be given disbursements under normal process. For this, SBP has issued a circular to all banks as well.