Project assistance completion report : shelter resource mobilization program (391-0507)

The project was implemented by the Ministry of Finance. The project accomplished its purpose. Private housing lenders are now operating, and the GOP is supporting lower-income housing programs. In the policy component, the project established a legal framework and a licensing process for private housing finance companies, developed a capacity at the State Bank to regulate housing finance institutions, and drafted a rational housing finance policy. The GOP has promised to stop funding the technically bankrupt and ineptly managed Housing Building Finance Corporation, the traditional purveyor of low-interest housing loans, as of 6/94. Under the institutional development component, three private firms were licensed as housing finance lenders and went into operation; housing finance companies prepared business plans and automated management information systems for loan administration; and housing finance managerial capabilities were enhanced through training of senior staff, primarily from the private sector. Under the system development component, the State Bank of Pakistan was established as the apex public housing finance institution, including a housing loan refinance facility; and a constituency for market-oriented housing finance was created through promotional activities and establishment of a trade association. The training component included seminars and courses for about 100 public and private participants, more than 90% of whom returned to and remained in positions directly related to housing finance or other shelter programs. While the above achievements augur well for sustainability, the environment for housing finance is not friendly. Some issues, such as Pakistan's inadequate land tenure and transfer systems and its inadequate urban development policies and practices are exceedingly complex. Others, such as the high cost of land transfers and mortgage registration, and inadequate foreclosure and debt recovery practices, generally restrict housing finance to middle and upper income families. Public distrust of financial institutions in the wake of recent financial scandals and high interest rates further constrain lending. The following lessons were learned. (1) Projects need a clear implementation strategy; this project lacked focus in its early periods, due to uncertainty as to whether it was a shelter project or a finance project. (2) Once you have momentum, don't "drop the ball." This project "dropped the ball" twice -- at the outset, when GOP enthusiasm for the project was high, by failing to provide strong leadership, and at the conclusion, when momentum had been regained, by cutting funding for activities aimed at ensuring sustainability. (3) Don't say it's impossible. The project, perhaps inaccurately, identified foreclosure as a constraint that virtually prohibited housing finance development in Pakistan (even though the foreclosure situation is virtually the same in India, where housing finance is thriving). Staff spent a great deal of time overcoming the initial notion on this issue, and even at the end of the project GOP officials identified foreclosure as the single greatest obstacle facing housing finance. (4) The nature of the project should determine the implementation vehicle. The project was implemented using two Personal Services Contractors rather than an institutional contractor, which would have ensured a more orderly and consistent implementation. (5) USAID's lack of a clear implementation strategy and a consequent late start jeopardized the project's success, with focused activity occurring in only 3 of the project's 5 years. When a project combines resources from internal entities as diverse as USAID/W (in this case, the Office of Housing), a Mission, and a RHUDO, the authorization process should clearly define the roles of each and establish a plan of action so that the project starts promptly. (6) Considerable effort and time were spent trying to get GOP approval for TA. USAID should prepare flexible funding documents to be signed by counterparts at the same time as the Project Agreement.