Iskan’s interest hike
Bank arrears to reach $60 million
The Central Bank (BDL) has asked banks not to increase interest rates on loans to clients of the Public Corporation for Housing (Iskan), as stipulated in contracts signed between the banks and this institution.
“Borrowers from Iskan are mainly low income individuals that cannot handle the burden of any hike in interest rates,” said Antoine Chamoun, General Manager of Bank of Beirut Invest. “The crisis of Iskan is temporary and related to money transfers that the Ministry of Finance needs to provide from the Treasury. Banks will surely receive their duties,” he said.
Iskan suffered from financial deficit, last summer, to continue its support of loans to low and middle income earners through payment of loan interest to banks on behalf of new home owners backed by the corporation. The Association of Banks in Lebanon (ABL) issued, therefore, a memorandum to banks asking them to momentarily hold issuing Iskan loans until funding was provided.
Iskan financing is subject to Law 719 (1998), which tasks the government with funding Iskan’s operation on a yearly basis and ensuring payments to banks. The Ministry of Finance approved transfers of 10 billion lira ($6.6 billion) to Iskan from Treasury in July. In August, the government approved 30 billion liras ($20 million) to Iskan from the Treasury, but Iskan has not yet receive the funds.
ABL estimates that Iskan will have 90 billion liras ($60 million) in arrears to banks on payment of loan interest on behalf of new home owners backed by the corporation. This amount is expected to exceed 124 billion lira ($82 million) annually, as of 2015.
Iskan has more than 50,000 borrowers, according to ABL estimates.
The maximum Iskan loan amount reaches 270 million lira ($180,000). Interest rates on Iskan’s loans provided through banks, range on average between five to 5.8 percent, while the loan period is up to 30 years.
Reported by Leila Rahbani
Date Posted: Dec 15, 2014