KARACHI, Dec 2: State-run National Bank of Pakistan may launch term finance certificates in the first half of 2003 to raise long-term funds against mortgage loans.

NBP President Syed Ali Raza said here on Monday that the size of the TFCs would be somewhere between Rs1-2 billion adding that the rate and other specifics would be finalized later on. “It is like a shelf product for us. We can launch it any time but I guess our TFCs would be in the market in the first half of next year,” he said while talking to Dawn at an Iftar dinner hosted by NBP.

Ali Raza said raising long-term funds had become necessary for his bank (and for other banks as well) as the banks foresee some business scope in mortgage loans. Naturally the banks offering long-term loans would need to have long-term funds for cash flow management. He said his bank would be pricing the mortgage loans in accordance with the dictates of the market. Most analysts say these loans would not be workable below 12 per cent. Raza was also of the view that for the mortgage loans 12-15 per cent markup was workable but he did not specifically say how much his bank would charge.

Advisor to Prime Minister on Finance Shaukat Aziz told senior bankers here the other day that they should explore business avenues in four areas including housing and construction loans or mortgage finance. The other three areas he identified were (i) consumer finance (ii) agricultural finance and (iii) small and medium enterprises.

Raza who is keen to see people liquefying their fixed assets including real estate and houses to make Pakistan a cash-rich country said banks can play an important role in developing cash-rich culture for economic growth. That is where mortgage loans come into focus — and banks cannot make liberal mortgage financing without first raising long-term deposits for cashflow management.

This seems all the more necessary as most banks in Pakistan including those in the public sector have a very small base of long-term deposits. For example the share of one-year and longer deposits is only five per cent in the total deposits of the NBP.

Banks now find it necessary to make aggressive consumer and mortgage financing to remain afloat amidst low industrial growth that has dampened the demand for private sector credit. To add insult to injury the yield on treasury bills and other government papers are also falling thus leaving banks with no option but to explore some new and profitable business areas.

This seems better than waiting for the conventional corporate sector to come up with a higher demand for credit the possibility of which is bleak for various reasons or to keep investing surplus money T-bills and other securities.

So far consumer financing is concerned both National Bank and Habib Bank have already launched their respective schemes to lure people to buy consumer durables including TVs/ACs and bikes out of the consumer loans they are advancing at a fairly high rate.

But much to the chagrin of the farming community the banks are not showing the same zeal in increasing their profile of farm loaning. Senior bankers say disbursement and recovery of farm loans needs specialized skills that they are trying to develop at the retail levels. National Bank is one of those five big banks that are actively involved in agricultural loan disbursement and its top management says they are ready to enhance farm loaning.