Consumer finance is an organized financial product across the globe, particularly in mature economies, where it constitutes a significant portion of banks’ lending portfolis. Economists focus that consumer financing has considerably contributed to the economic turnaround of Pakistan by stimulating investment and consumption patterns. They also mentioned that there has been a phenomenal rise in private consumptions because of easy availability of credit from banks to the customers. However, this particular financing has given increase to consumerism in the country. It also has contributed to the low level of national savings and even fueled inflation. They also mentioned that consumer financing has led to the rise in speculative activities in asset markets.
|PAYMENT SYSTEMS INFRASTRUCTURE (31st March,2018 )|
|Number of Banks (Branches)||45 (14,850)|
|Commercial/ Specialized Banks (Branches)||13,789|
|Overseas Banks Branches||117|
|Number of banks having ATM machines||32|
|Number of banks having POS machines||9|
|Number of banks providing Internet Banking services||26|
|Number of Banks providing Mobile Phone Banking services||20|
|Number of Banks providing Call Center Banking services||25|
|Total Number of PRISM System Participants||43|
|Total number of ATMs Interoperable Switches||2|
|Total number of Cash Deposits Machines (CDMs)||52|
We know that in the Pakistani banking sector, however, the evolution of the consumer financing portfolio is a more present phenomenon, as banks have traditionally focused on lending to the corporate sector and public sector entities. No doubt, the bankers focus on personals loans have become a part of life for millions of citizens and even playing vital role in their daily life. Typically they pursue loans for personal requirements like renovation and/or purchase of house, education of their children, marriage of their daughters and meeting urgent medical expenses. In the early period when we didn’t know the banking concept, Pakistani people, particularly in rural regions utilized to borrow money from the unlicensed lenders on partial terms and at a compound interest of very high rate. Farmers had to borrow money from landlords to meet their urgent needs, which were mainly driven by the interest of lenders. Hardly they could repay the loan during their lifetime because of high percentage of compound interest.
However, over the present decades, a large number of foreign bank branches operating in this country have been providing a variety of financial products; with the expansion and growth of banking sector in the country, which triggered an openness to personal loan, have inducted the consumer financing‘ market.
Present statistics published by the State Bank of Pakistan revealed that during 3rd quarter-FY2018 (January-March, 2018), Pakistan Real Time Interbank Settlement Mechanism (PRISM) processed 446.5 thousands transactions of worth Rs. 90.1 trillion. These transactions explained a quarterly growth of 6.7 percent in volume of transactions, however, showed a slight fall of 3.8 percent in value of transactions as against to the previous quarter. In addition to Inter-participants funds transfer, PRISM facilitates customers through customers’ transfers facility as well, which has the largest share of 80.4 percent in the total volume of PRISM transactions whereas the government securities transfers’ has the largest share of 69.6 percent in value of transactions. Statistics also showed that the customers’ transfer transactions includes 145.3 thousands transactions of worth Rs. 87.3 billion of home remittances delivered by PRISM system across beneficiaries accounts.
Different studies also revealed that over the previous 10 years, Pakistan‘s banking sector has substantially promoted the consumer financing through unleashing a wide range of products like; credit cards, auto loans, personal loans and many more. In the banking sector of Pakistan, however, the evolution of the consumer loan portfolio is more of a recent phenomenon, as banks have traditionally focused on lending to the corporate sector and public sector entities. During the quarter under review, SBP mentioned that eBanking channels i.e. Real Time Online Branches (RTOBs), ATM, POS, mobile phone, internet and call centers banking also e-commerce altogether processed 196.2 million transactions of value Rs. 11.9 trillion. These transactions explained a quarterly growth of 5.0 percent and 2.2 percent in volume and value respectively as against to the last quarter. In the total eBanking transactions RTOBs has the highest share i.e. 83.5 percent in value of transactions whereas, the highest share with respect to the volume i.e. 62.0 percent goes to transactions processed by ATMs.
Statistics also showed that commercial banks deployed 426 more ATMs by the end of the quarter standing the total number of ATMs in Pakistan to 13,835. This recorded a quarterly rise of 3.2 percent in the number of ATM. During the quarter, ATMs processed 121.6 million transactions valuing Rs.1.4 trillion. These transactions explained a quarterly growth of 5.5 percent and 7.0 percent in volume and value of transactions respectively as against to the last quarter. It is also mentioned in a statement that in total ATMs transactions, cash withdrawals from ATMs has the highest share of 94.8 percent in volume with 87.2 percent share as value. The average ticket size of ATMs transaction is 11,906.
In Pakistan, 26 banks are offering Internet Banking Service and there are 2.9 internet banking users registered with banks. During the quarter under review, 8.4 million transactions of value Rs. 332.8 billion were processed through Internet Banking. These transactions showed a growth of 13.4percent and 13.7percent both in volume and value of transactions respectively. In total, 19 banks are offering mobile phone banking facility to their customers’ with the number of register mobile phone banking users 3.1 million. These users processed 5.9 million transactions of value Rs. 112.8 billion using mobile phone banking apps. These transactions showed a quarterly growth of 12.2 percent and 23.0 percent both in volume and value of transactions respectively.
In last, I would like to mention here as a consumer perspective, the financing has been no doubt useful in improving the quality of life of people who have the capacity of servicing the loans. However, this capacity is now deteriorating because of high interest rate spread and variable interest rates on loans. Unluckily the volume of consumer complaints is consistently growing because of processing delays, service inefficiencies, hidden charges and poor disclosure practices.