The World Bank Group’s Strategic Approach in South Asia’s Emerging Markets

The situation is even more dire for 40-year-old Abid Jan from neighboring Pakistan. Pakistan is one of the most difficult countries in the world to find a home loan. Jan faced significant challenges after purchasing an empty piece of land in Peshawar. He was unable to find a bank that would lend him the money to construct a home and was eventually forced to sell the land at a loss.

“I checked with a few local banks for a loan but some of them denied me while others had complex conditions and very high interest rates,” says Jan.

Addressing Challenges and Expanding Opportunities in Mortgage Financing

Despite significant demand for home financing and the large share of the financial sector that housing finance represents in developed markets, many banks in developing markets limit mortgage lending. This reluctance stems from various factors, including the perceived risk, legal intricacies of mortgage finance, the absence of affordable long-term local currency funding, and limited institutional capacity.

The World Bank Group has been working to strategically broaden the scope of housing finance markets by integrating upstream engagement, investments, and consultative services. The International Finance Corporation (IFC), along with instruments like the International Development Association’s Private Sector Window (IDA PSW), play a pivotal role in the establishment and fortification of mortgage refinancing firms within emerging economies.

Catalyzing Affordable Homeownership in Pakistan

In Pakistan, the government is working to develop an affordable housing market. They are addressing the critical gap in affordable housing and are easing some regulations governing mortgages, making it easier for low-income families to secure home loans.

IFC, with support from the IDA PSW, is bolstering these efforts. An investment in the Pakistan Mortgage Refinance Company Limited (PMRC) is helping to increase the overall availability of mortgage financing for homeowners and spurring the development of low-cost houses across the country. The investment is also allowing primary mortgage lenders to offer new mortgages in frontier and traditionally underserved areas, such as Baluchistan, Khyber Pakhtunkhwa, and Federally Administered Tribal Areas (FATA). By spurring private sector participation in mortgage finance, IFC and the IDA PSW are effectively creating a new market and model to promote competitiveness, growth, and inclusion in the country.