MICROCAPITAL BRIEF: UBL of Pakistan to Offer Shariah-compliant Housing Loans to Akhuwat Customers

Pakistan-based organizations United Bank Limited (UBL) and Akhuwat recently signed an agreement under Mera Pakistan Mera Ghar, a government-backed housing program, whereby Akhuwat will recommend certain of its low-income customers to UBL for access to “low-cost” housing loans. Based on the number of square meters of the housing unit, UBL is offering loans of PKR 3.5 million (USD 22,600) to PKR 10 million (USD 64,700), with terms ranging from five years to 20 years. Applicants must be between 25 and 60 years of age and can name up to three additional co-applicants. The financing is Shariah-compliant – conforming with Islamic law – as it uses diminishing mushrakah, a mechanism through which the borrower shares homeownership with the bank. As each payment is made, the bank’s share is drawn down and the borrower’s share increases until the asset is fully transferred to the borrower.

UBL President Shazad Dada said, “With the extensive hands-on expertise of Akhuwat on our side, UBL will be further able to provide streamlined and more focused low-cost housing finance solutions to deserving candidates across the country.”

Established in 2001, Akhuwat is an NGO with 800 branches in 400 cities, providing Islamic microloans, healthcare, clothing and education. As of 2019, Akhuwat reported total assets of PKR 15 billion (USD 96.9 million).

Headquartered in Karachi, UBL is a commercial bank owned by UK-based Bestway Group. UBL provides deposits, loans, credit cards and an incoming international money-transfer service. For the first quarter of 2020, UBL reported gross revenue of PKR 22 billion (USD 142 million) and net profit of PKR 5.1 billion (USD 32.9 million). In 2019, UBL reported GBP 9.9 billion (USD 13.9 billion) in total assets. Bestway has been UBL’s majority shareholder since 2002, when it invested USD 210 million in the firm. In 2018, Bestway financed the launch of UBL Digital, a mobile banking app which had 700,000 active users in Pakistan by 2019. Bestway’s portfolio also includes Pakistan’s Bestway Cement and UK-based retailers Well Pharmacy and Bestway Wholesale.

By Sophie Fiala, Research Associate

Sources and Additional Resources

Daily Times article
https://dailytimes.com.pk/762214/ubl-akhuwat-islamic-microfinance-to-offer-exclusive-low-cost-housing-finance-solutions/

Akhuwat homepage
https://akhuwat.org.pk/

UBL homepage
https://ubldigital.com/

UBL 2020 annual report
https://www.ubldirect.com/corporate/portals/0/Unconsolidated%20financial%20statements%20with%20directors%20report%20-%20Mar%202020.pdf

UBL housing loan information
https://www.ubldigital.com/Banking/UBL-Ameen/UBL-Ameen-Network/Consumer-Banking/Mera-Pakistan-Mera-Ghar

Bank AL Habib profile on Mera Pakistan Mera Ghar
https://www.bankalhabib.com/mera-pakistan-mera-ghar

Bestway Group homepage
https://www.bestwaygroup.co.uk/

Bestway Group 2019 annual report
https://www.bestwaygroup.co.uk/files/Bestway-Group-Annual-Report-2019.pdf

Akhuwat 2019 annual report
https://akhuwat.org.pk/wp-content/uploads/2020/01/report-2019.pdf

Previous MicroCapital article on Islamic banking
https://www.microcapital.org/microcapital-brief-bankislami-tpl-life-offering-shariah-compliant-hospitalization-funeral-coverage-for-covid-19-in-pakistan/