Housing Finance Institutions and Instruments
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enjoy privileged terms and funding. Generally, these banks have been inefficient in terms of operating costs and delays. They have failed to reach the lower-income groups or people who are informally employed. Afghanistan experimented unsuccessfully with a state housing bank prior to 2002, but its operating performance and loan portfolio were so weak that it failed to obtain a provisional license in 2003 under the new Banking Law. A new specialized institution is being planned, under a publicprivate partnership, with management control in the private sector. The proposed institution will have a business focus on the middle- and high-income end of the population. The BHBFC, the state housing bank, remains a dominant market player, despite its modest size (about 1,100 loans disbursed annually to a total of Tk 1.2 billion, with an overall 45,000 loans in stock and 550 employees). The institution is beset by a poor governance structure, misaligned operational incentives, high nonperforming loans, and ill-targeted government subsidies. The bank takes months to approve a loan, suffers prohibitive operating costs per loan, and offers a limited product range. In spite of these shortcomings, it is the only institution serving the low- and middleincome housing segment and a wider geographic area beyond Dhaka and a few larger cities. India’s National Housing Bank is a second-tier housing finance institution that refinances primary lenders, including HFCs and banks. It also lends directly to projects undertaken by public housing agencies for housing construction and development of housing-related infrastructure. This is the only second-tier institution in the South Asia region’s housing finance market (box 4.2). Compared with the commercial banking sector, Pakistan’s HBFC is remarkably focused on lower-income groups. The average loan size is PRs 1.08 million, compared with an average of PRs 2.29 million in the case of private sector banks,
Box 4.2
Securitization in India
There have been more than 500 issuances of asset-backed securities in India, amounting to Rs 900 billion as of mid-2009. Although asset-backed securitization has grown on the back of the retail boom, mortgage-backed securitization remained rare because regulations and liquidity issues make direct assignment preferable. There is no secondary market for these securities as yet, and cross-border issuances are not currently allowed. The residential mortgage-backed securities issues were based on conforming mortgages with standardized pool selection criteria. The requirements included a seasoning rule and consistent performance, high collection efficiencies, consistent payments to investors, servicer audit, special-purpose vehicle audit, and surveillance by rating agencies. The 14 deals made by the National Housing Bank were predominantly direct assignment deals, asset-backed securities transactions with simple structures, single tranche, and credit enhancement (primarily cash collateral). For more information, see the “National Housing Bank” and “Securitization” sections of appendix C.
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