21st Century Real Estate

State Bank announces Islamic financing for low-cost housing

State Bank announces Islamic financing for low-cost housing

Published in Dawn, March 13th, 2019

KARACHI: The State Bank of Pakistan (SBP) in a circular issued to all banks

and Development Finance Institutions (DFIs) on Tuesday announced Islamic

financing for low-cost housing in the country.

“The SBP is introducing a Mudarabah-based “Islamic Financing Facility for Low

Cost Housing for Special Segments” for Islamic Banking Institutions (IBIs)

and Islamic DFIs; collectively referred as Partici­pating Islamic Financial

Institutions (PIFIs),” read the circular.

All banks and DFIs would be participants in the Islamic financing scheme.

The SBP said the target amount for Islamic financing has been set at Rs2.7

billion while widows, children of martyrs, special persons, transgender and

persons in areas severely affected by terrorism can take advantage from this


Moreover, the tenure of financing has been set at 12 and half years.

Traditionally, the banks have been reluctant to extend loans for housing

mainly due to their inability of using funds for long-term periods. Most of

the deposits of banks are meant for no more than two years while a small

segment of deposits are available for long-term period.

“Under this facility, Mudarabah investment of SBP will be available for up to

100 per cent of the amount financed to eligible customers. SBP will make

Mudarabah investment in general pool of the PIFI,” said the SBP.

The PIFIs may submit their requests for allocation and assignment of limits

under this facility to be evaluated by the SBP as per its internal criteria,

said the central bank adding that yearly limits will be allocated to

individual PIFIs under the scheme.

Sanction limit applications for each fiscal year will be sent by the

interested PIFIs to the Infrastructure, Housing and SME Finance Department at

the SBP latest by 15 May each year.

“For the current year, the request for sanction of limits may be submitted

within 30 days from the date of issuance of this circular,” said the SBP.

The Mudarabah investment under the scheme will be available for financing

sanctioned from the date of issuance of this circular and up to Dec 31, 2023.

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