THE House Building Finance Corporation, a government entity, was originally established in 1952 under an act of parliament called HBFC Act 1952 to provide housing finance to the public.

Till 2002, the HBFC enjoyed monopoly in the field of housing finance and its annual disbursement/origination was about 1.5 billion according to the statistics of the State Bank of Pakistan.

In 1994 the government decided that the HBFC should operate as a market-oriented financial institution and in that year the SBP stopped lending to the HBFC. Since then, the HBFC has been relying on repayment of its loan portfolio.

In a review on the housing finance sector, conducted by the World Bank in 2002, the HBFC was characterised as a failed institution with a ‘flawed’ charter, poor governance, high levels of non-performing loans, inadequate risk management and high administrative cost.

This review summarised that the HBFC appeared to be ‘in a state of latent bankruptcy’ and that its ‘insolvency status appeared to be grossly underestimated’.

In 2003, it was decided by the federal government that the HBFC should be a corporate body, instead of a statutory body, with full autonomy to its board of directors to enable the HBFC to improve its efficiency. A roadmap was given to corporatise the entity.

Till 2005 no significant progress could be shown in corportisation of the HBFC. The new management was in place in 2005 which took initiative but instead of converting the HBFC into a company, a new company with the name of House Building Finance Corporation Limited was incorporated and registered with SECP in June 2006 under Companies Ordinance, 1984.

On July 25, 2007, the ministry of finance issued an SRO through which the HBFC was wound up by transferring and vesting in the House Building Finance Corporation Limited (Company) all assets, contracts, liabilities, proceedings, business and undertakings of the HBFC.

This government action was taken without any legislation, though the HBFC was established under an act called the HBFC Act, which has not yet been repealed. Moreover, no legislation was made for the corportisation of the HBFC whose assets and liabilities could only be transferred through a conversion act to be passed by parliament.

Thus the finance ministry should revisit its action taken through an SRO, dated July 25, 2007, because in the absence of legislation the legal authority of the SRO is questionable and the process of the HBFC’s corportisation is not completed.

M. AKRAM TARIQ Retired General Manager HBFC Karachi