Islamic Banking & Finance Page 19th October 2018

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Housing Project under Qarz e Hasna

Housing Project under Qarz e Hasna-The government of PTI has decided to provide houses to the people on easy installments. It will build 2.5 million houses in the first phase, and another 2.5 million in the second phase.

It is the government’s top priority to provide low-cost houses to the people; these schemes will also create job opportunities for the people, a land bank would also be established, which will only cater to loans and financial dealings of properties. Meanwhile the government has decided to launch Qarz-I-Hasna scheme to provide loans ranging from Rs 100,000 to Rs 20 lakh as part of PM’s Program schemes from Sept 2018. As many as 50,000 people will be provided loans to the extent of Rs 5 million under house financing scheme.

On the other hand, though Islamic Banks in Pakistan exist but Qarz or Qarz e Hasna data stood at 0.00 PKR mn in Mar-June 2018. This stayed constant from the previous number of 0.00 PKR mn for Dec 2017. The data reached an all-time high of 20.00 PKR mn in Sep 2010 and a record low of 0.00 PKR mn in Mar-June 2018. It is the government and SBP that can give life to Qaraza e Hassna through their support.

Likewise in Iran, Mehr project was designed in 2007, aimed to cover a part of house shortage through building of around 2 million housing units within 5 year. As of January 2011, the banking sector, particularly Bank Maskan had given loans up to 102 trillion rials ($10.2 billion) to applicants of Mehr housing project. Under this scheme real estate developers were offered free lands in return for building cheap residential units for first-time buyers on 99-year lease contracts. The government then commissioned, agent banks to offer loans to the real estate developers to prepare the lands and begin construction projects in an attempt to increase production and create equilibrium in the demand curve (2008). Close to 400,000 units have been built and permits have been issued for another 12,000. Mehr Housing project is expected to provide 600,000 residential units in its first phase. About 3.7 million people have so far registered for Mehr Housing Plan. About 10 million rials is to be paid by applicants for preparing the land and another 10 million to be given by the government in the form of banking facilities. Applicants have to pay about 20 percent of the construction costs. In addition, about 140 million rials worth of housing loans are granted to them (10,000 rials=1 USD in 2008)While most Iranians have difficulties obtaining small home loans, 90 persons have managed to secure collective facilities totaling $8 billion from banks. Problems regarding lack of utilities have been reported for the project, including lack of access to water, power, gas, and sewerage lines. Starting in 2014, the Mehr housing scheme has taken off the balance sheet of the Central Bank of Iran. The government of President Rouhani has announced that by 2017-18 the Mehr housing project will be replaced with cheap loans (Qarzae Hassna) to needy families. Iran after experience is now shifting towards cheap loans but in Pakistan we can start the projected housing scheme with cheap loans and for this government, SBP, Islamic Banks, and other banks can sit together to formulate the steps and roadmap.

Construction is one of the most important sectors in Iran accounting for 20–50% of the total private investment. In Tehran real estate prices increased by about 1,500–2,000% over the last 10 years, though resulting in a highly overvalued currency and damaging Iran’s competitiveness but giving relief to the people.

News

  • ISLAMIC banking has continued its upward march in Pakistan, with the industry’s assets growing 21.9 pc (YOY) and crossing the Rs 2.5 TR-mark by June 2018. Similarly, the sector’s deposit-base went up by 18.2 pc (YOY) to Rs 2.03 TR. During the period under review, branch network of Islamic banking industry increased by 96 branches. This addition was mainly due to demerger of 90 branches of MCB Bank Limited and their merger into MCB Islamic Bank Limited taking the total number of Islamic banking branches in Pakistan to 2,685.
  • During the meeting of Chief Executive Officers of Islamic Banking Institutions with Federal Minister for Finance, Revenue and Economic Affairs, Asad Umar, President Meezan Bank Irfan Siddique gave a detailed presentation on Islamic Banking sector in Pakistan. He said that the industry which was set up in Pakistan in 2005 had witnessed a robust growth of 35 percent. Finance Minister said the government is committed to promote Islamic Banking sector in the country and would help in resolving the issues faced by the industry. He also asked the Islamic Banking to come up with innovative products through which they could participate in sectors which were facing liquidity problems.
  • CIMB Group Holdings Bhd (Malaysia) and its collaborators aim to capture 5% to 10% in trade financing from the China halal market, which is forecast to be worth US$2 trillion by 2021.
  • World Islamic finance assets are projected to grow to $3.2 trillion by 2020, with Islamic banking reaching $2.6 trillion, said the organizers of the upcoming World Islamic Banking Conference (WIBC) in Bahrain.
  • According to Pakistan Hilal Assembly –2018, Pakistan’s share in the global Halal trade is merely 0.25 per cent which could be increased with the up gradation of Halal certification and provision of Halal storage facilities.
  • Tan Sri Zeti Akhtar Aziz former Governor of Bank Negara Malaysia has been honored with the Royal Award for Islamic Finance 2018 for her achievements and leadership in expanding the frontiers of Islamic finance in the domestic and global financial arena.

The United Nations Development Programme (UNDP), Securities Commission Malaysia (SC) and the Islamic Development Bank (IsDB) have partnered to advance the use of Islamic financing tools to fund the ambitious 2030 Agenda for Sustainable Development.

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