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n will look at the various housing finance tools and instruments currently prevailed in Asia Pacific.

Globalization also drives the process of financial liberalization in Asia Pacific. Asia Pacific financial markets are becoming more open. The inflow of foreign financial intermediaries and reforms and deregulation of financial markets increases the efficiency of financial markets and promotes the inflows of capital and development.

This has been the experience of Asian emerging markets in particular. [4] The increased efficiency will be transformed into high returns for savings and investments, and cheaper costs of funds for borrowers, which will facilitate the growth of the financial markets and reduce the interest rates of mortgage finance to increase affordability and accessibility. For example, the interest rate of mortgage loans for a 20 year period is currently about 5 to 6 percent in China, compared to about 15 to 20 percent in some African countries. [5]

2.1.2. Major Housing Finance Instruments in Asia Pacific

2.1.2.1. Commercial Banks

Commercial banks are the most common institutions which provide housing finance, particularly mortgage loans in most Asia Pacific countries such as China, India, Japan and Indonesia. They raise capital mainly by means of deposits, sometimes by issuing bonds and by securitizing loans. Commercial banks pool large amounts of deposits and act as intermediaries to manage the mismatches between mostly short-term deposits and often long-term housing loans.

2.1.2.2. Housing Banks

Housing banks play different roles in Asia Pacific. In some Asia Pacific countries, housing banks play a regulatory role or supplementary role in housing finance. India’s National Housing Bank is mainly a regulatory role. [6] In China, housing banks played an experimental role in housing finance and exited to exist when commercial banks assumed mortgage finance. In some Asia Pacific countries, specialized housing banks are developed as a main instrument for housing finance. In such housing banks, the government often plays an important role.

Housing Bank (including its National Housing Fund) accounted for 80% of the country’s total housing loans in 1997. Housing bank has been one of the most commonly used instruments by governments. The Thailand Government Housing Bank introduced housing loans which are financed through bonds to avoid the mismatch of long-term finance and short-term deposits and also reduce costs to make loans more affordable. [7]

2.1.2.3. Mortgage Institutions

Specialized mortgage institutions are another type of housing finance instruments. Countries and Regions such as Bangladesh, Pakistan, Mongolia, Hong Kong and Malaysia developed specialized mortgage finance institutions. However, most of mortgage finance loans in Asia Pacific were provided by non-specialized mortgage institutions. China, Japan and Hong Kong are respectively the largest mortgage finance markets, where the non-specialized mortgage institutions dominate the mortgage finance market.

2.1.2.4. Mortgage Insurance

Hong Kong has been actively promoting the mortgage insurance programmed through Hong Kong Mortgage Corporation. The Thailand Government Housing Bank started to promote mortgage insurance in 2005. The introduction of mortgage finance can make mortgage finance mo