Losses drop to Rs 28.36 million in 2009 as compared to Rs 385.55 million in 2008
By Razi Syed - Daily Times 17 December 2010
KARACHI: The House Building Finance Corporation (HBFC) is back on its feet due to a three-pronged strategy - prudent lending, expenditure control and robust recovery.
This was stated by HBFC Chief Executive Officer and Managing Director Azhar A Jaffri while talking to Daily Times on Thursday.
He said during this year Rs 3.5 billion recovery was made, which helped improve the financial health of the HBFC. The HBFC losses have dropped to Rs 28.36 million in 2009 as compared to Rs 385.55 million in 2008.
"When I took over HBFC in January 2009, its financial health was very fragile as there was just Rs 2.6 billion cash available with it and out of it Rs 1.5 billion was borrowed money," he added. He said reduction in loss by Rs 357.197 million during the said period was a major achievement of the new management.
This loss figure could have been much less had we not provided for all pending expenses or financial costs which were previously not booked.
He said this extraordinary turnaround had been possible by adopting a three-pronged strategy keeping in view short, medium and long-term objectives. He said HBFC's non-performing loans were 41 percent of the total portfolio, as compared to an average of 2-3 percent of other banks.
The foremost cause of such a high default rate was that while lending to the borrowers in the past their repayment capacity was not given due weightage. Weak recovery of loans can be attributed to ineffective foreclosure laws and in some cases the genuine problem of the borrowers owing to the high inflation in the country.
He said to improve the financial heath and improve the liquidity to ensure the cycle of lending continues a robust recovery drive was launched in 2009. It was big success as against a target of Rs 3.32 billion. A total of Rs 3.5 billion had been collected in 2009 as compared to Rs 3.2 billion in 2008.
An improvement of about 10 percent had been made despite poor law and order situation, adverse economic conditions and increase of 46 percent consumer price index inflation, which badly affected affordability of customers. He said that in line with the company's strategy, all efforts were made to control and rationalise expenses in all areas of operation. As a result, the company had been able to make a saving of around 10 percent in the budget expenses of 2009 despite booking various expenses of 2008 and adverse inflationary pressure.
He said HBFC's management took some other initiatives to revive the institution including preparation of long-term restructuring plan, reactivation of board of directors, compliance of State Bank's inspection report, timely finalisation of annual accounts and gearing up efforts to get Rs 2 billion by the Ministry of Finance, which were pending since 2007.
He said the company's management had a very well defined and focused policy for its future plans and for the first time the board of directors had already approved the budget for 2010 in December 2009.
It is the only institution in Pakistan, which meets the housing needs of low and medium income groups. What really makes it a challenging job is that you have to work under a lot of external and internal pressure because demand for housing units is enormous but resources to meet this demand are far less and to cope with this situation, you must be creative and must have the ability to think out of the box, he added.
He said we should see the progress of Housing Development Finance Corporation Limited (HDFC) India, which was established in 1977.
He said HDFC provides financing for home ownership and insurance products throughout India. The company's home loans are sold at about 50 Home Loan Services India offices and about 100 third-party locations. HDFC also offers process outsourcing, credit and risk assessment, and related banking services through its subsidiaries and affiliate companies. HDFC has supplemental operations in the UK and the Middle East.
Differentiating banks and HBFC, he said the requirements of commercial banks are stringent and their target market is a high-end consumer.
HBFC targets the small and medium income groups with average size of loans between Rs 500,000 and Rs 600,000 with lenient requirements and conditions.
Posts
