Banks to resume MPMG financing

Will disburse funds against approved applications on or before June 30, 2022

KARACHI:

The government has partly resumed the subsidised housing finance scheme, called Mera Pakistan Mera Ghar (MPMG), as it directed banks to disburse funds against approved applications and cases that were at advanced stages of acquiring banks’ approval on or before June 30, 2022.

Besides, the government has cut interest rate by 150 basis points on financing falling under tier-2 and tier-3 of the MPMG scheme.

Earlier, the banks approved applications worth Rs212 billion against demand for Rs474 billion under the scheme before the PML-N led coalition government temporarily suspended the scheme on July 1, 2022 for a period of two months (till August 31, 2022) in light of the recent developments on the economic front.

The government on July 1, however, directed banks to disburse the subsidised financing to only those successful applicants to whom they had already made partial disbursement till June 30, 2022.

So far, banks have disbursed Rs85 billion under the MPMG scheme.

Last week, Finance Minister Miftah Ismail announced that the government would continue to provide loans under the MPMG housing scheme.

In a tweet on Friday, he said the housing loan scheme would continue for all those whose loan applications had been approved and who had paid advances (bayana), according to Radio Pakistan.

He added that the government would also ask the banks to reduce the interest rate they were charging.

“The government is still in the process of reshaping the scheme to make it cheaper and more widespread, and a revised scheme would be rolled out soon.”

The PTI government introduced the scheme in 2020 with the objective of reviving economic activities and enabling the daily-wage earners to win bread and butter amid the first wave of Covid-19 pandemic in the country.

The State Bank of Pakistan (SBP) said in a notification on Monday “the government of Pakistan has decided to allow banks, development finance institutions (DFIs) and microfinance banks (MFBs) to disburse financing as per existing terms of MPMG in respect of cases approved...on or before June 30, 2022.”

Besides, the government has cut the interest rate under the scheme. “The government has decided that the spread of banks and DFIs on the disbursement against cases falling under tiers 2 and 3 of MPMG will be maximum of 250 bps over and above Kibor (instead of maximum allowed spread of 400 bps currently).”

The notification read that banks should extend financing to the approved cases (purchase and/ or construction), which were pending due to any legal formality.

Banks are also directed to provide financing in those cases where all pre-disbursement formalities have been done and banks have communicated the same (being in advanced stages; customers have completed almost all pre-disbursement formalities, paid token money and incurred all incidental expenses (legal & processing fee, etc)).

Banks would extend MPMG financing to the approved cases where customers have entered into agreements, paid token money, and obtained property documents from sellers, or in case of construction loans, PTM / Fard for a loan has already been issued. “These cases are just short of ‘approved cases pending for disbursement’…, as in such cases, a few internal procedures of banks may still be required to be completed but the borrowers have incurred all major costs/expenses based on approvals from banks),” according to the central bank notification.

Banks are also advised to disburse the financing to Peri-urban and Naya Pakistan Housing and Development Authority (NAPHDA) project(s) cases “where down payment has been received from the customer.”

The banks/DFIs/MFBs are advised to ensure that markup subsidy claims in respect of disbursements against tier 2 and tier 3 customers are invariably accompanied by certificates of their respective internal audit departments verifying meticulous compliance with conditions in place and other features of MPMG. “State Bank of Pakistan will also conduct inspection of these cases during regular/special inspection of the bank/DFI/MFB.”

It is reiterated that the Government of Pakistan is in process of reviewing/revising features of the subject Scheme. Therefore, all other cases will be considered as and when revised features are announced by the Government, the notification reads.

Published in The Express Tribune, July 27^th, 2022.

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