The affordable housing policy by the Government in partnership with the Bank South Pacific (BSP) is mistargeted, a report on the ‘Bank Interest Rate Margins’ has revealed.
The report, conducted by Professor Satish Chand from the University of New South Wales, Australia and a long-time associate researcher at the National Research Institute, found that the affordable housing policy was unaffordable.
“How will you say affordable when you expect ordinary people to have 10 percent as their equity in order to get a loan from the bank?
“And one of the requirements was to have a (piece of) land that is owner occupied, you must be employed, and you must have land that has a State lease.
“This is not what we call affordable,” says Prof Chand.
“Only 3 percent of the land is owned by the State while the majority is customary owned.”
He said ordinary Papua New Guineans did not have K20,000 capital in order to get such loans as stated in one of the conditions to be eligible for a K200,000 loan.
“We must work together with the stakeholders and reduce the high interest rate margins in PNG which is causing the inflation and other factors.”
Prof Chand said the high interest rate margins were detrimental to investments/business growth and welfare in the country and stakeholders must be engaged in reducing interest rate margins – banks, industry, media, and public.
He said the Central Bank must also look into the efficacy of monetary policy and investigate means to increase the quantum of bankable projects – real estate, leases for collateral, and the need to eliminate ‘bullshit titles’ (DLPP).
The report also calls for a review into the lending and deposit rates of commercial banks and other financial institutions; examine the differences in the rates and explain why; assess the implications on the economy; and inform the public and generate public debate on bank lending and deposit rates.
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