The Second Supplemental Trust Deed for low-income housing was approved by the Economic Coordination Committee (ECC) of the Federal Cabinet on Tuesday. The World Bank will fund the Credit Guarantee Trust Fund with $85 million (Mera Pakistan Mera Ghar).
The Finance Division asked the meeting, presided over by Finance Minister Ishaq Dar, to approve the new Fund to give financing institutions (FIs) protection against risk related to their financing in the housing sector.
As a joint effort between the Pakistani government and commercial banks/development finance institutions (DFIs), Pakistan Mortgage Refinance Company Limited (PMRC) was established to provide medium- and long-term funding to primary mortgage lenders by raising money from the capital debt market at more affordable rates.
Under the First Supplemental Trust Deed, PMRC, acting as trustee, introduced the Credit Guarantee Trust Scheme.
As a trustee of the Fund under the new plan, the Pakistan Mortgage Refinance Company Limited (PMRC) will receive 0.25 of the premiums that financial institutions pay for the coverage of their portfolios.
According to the Oversight Committee’s recommendations, the Pakistani government will initially provide a backdrop arrangement of Rs. 7 billion, with the promise to increase it to Rs. 30 billion if necessary.
Relevantly, a committee may be established to oversee the Credit Guarantee Trust Fund’s operations with the goal of ensuring that it achieves its developmental goal and that the Government’s contingent liability does not exceed the set cap.