SBP mandates banks to use estimation models to assess informal income

KARACHI: In order to facilitate low cost housing finance applicants with informal income, the State Bank of Pakistan (SBP) has asked banks to develop and deploy income estimation model for extension of low cost housing finance to such applicants. This measure is expected to ease difficulties being faced by general public in availing housing finance under Government’s Markup Subsidy Scheme (G-MSS), commonly known as Mera Pakistan Mera Ghar, says a Press release.
Recently, the Pakistan Banks’ Association (PBA), through a consultative process, has developed and circulated among banks a baseline income estimation model. The purpose of this model is to assess income and repayment capacity on the basis of routine expenditures like house rents, utility bills and educational expenses etc. of a potential borrower who earns from informal sources.
SBP has advised banks to use PBA’s baseline model, customize the same, or develop their own income estimation model. Banks are required to confirm within 4 weeks that they have made their informal income proxy models operational. The availability of
these models is expected to greatly enhance prospects of informal income applicants to secure housing finance from the banks. With this move, it is expected that financially excluded segment will be able to avail financing under G-MSS. On the other hand, this tool will enable banks to expand their outreach and cater to the financing needs of people having informal sources of income.

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