Interesting. I was unaware of that and thought it was a bizarre approach unique to banks in this so-called developing country.

I think it’s needed when the collateral for the loan is something that doesn’t yet exist. If you were to put up something other than your yet to be constructed home as the collateral you could do without a draw schedule. The bank is rightfully concerned that you build your house to the level you described in the plans so that they can recoup their money if you some day default.