- Â Economic, technological, regulatory and social factors are worthy of backing
- Entrepreneurship, employment and support to the economy making an upturn
Interview with Mr. Saad Hassan — Wing Head Management Audit, National Bank of Pakistan
PAGE: Tell me something about yourself, please:
Saad Hassan:Â I work at NBP as Wing Head, Management Audit. I have gotten working experience in the areas of Regulatory Compliance, Service Quality, Training & Development and Audit & Inspection.
I am an MBA from IBA coupled with a Master in Economics and a Master in Islamic Banking & Finance, besides an Associate of Institute of Bankers, Pakistan (IBP).
PAGE: In the Pakistani banking sector, the evolution of the consumer financing portfolio is a more recent phenomenon, as banks have traditionally focused on lending to the corporate sector and public sector entities. What is your take on it?
Saad Hassan:Â It is true that in the Pakistani banking sector, there has been a historical focus on lending to the corporate and public sector entities, and the evolution of the consumer financing portfolio is a more recent trend. This trend is not unique to Pakistan, as many other emerging economies have seen a similar shift in the banking sector. The reason behind this shift is the changing economic landscape, where the rising middle class and increased purchasing power of individuals have created a demand for consumer financing. Banks have recognized this demand and are now offering a range of consumer financing products, such as personal loans, credit cards, and auto loans, to cater to this growing market. The expansion of the consumer financing portfolio has not only benefited the banking sector but also the overall economy. It has helped increase consumer spending and has fueled the growth of various industries such as automotive, real estate, and retail.Â
However, it is worth noting that with the increase in consumer financing, there is also an increase in the risk associated with it. Banks must carefully manage this risk through proper credit risk management practices to ensure the sustainability of their lending activities. Overall, the evolution of the consumer financing portfolio in the Pakistani banking sector is a positive development that has helped fuel economic growth and provided individuals with greater access to financing.
PAGE: Which factors are responsible for the widespread popularity of consumer finance in Pakistan?
Saad Hassan:Â Firstly, Pakistan has seen significant growth in the middle class over the past few decades, which has led to an increase in consumer spending. This has created a demand for financing options that allow consumers to purchase high-ticket items such as homes, cars, and electronic devices.Â
Secondly, the availability of consumer finance products has increased significantly over the past few years, with many banks and financial institutions offering a range of loan and credit products. This has made it easier for consumers to access financing and has led to increased competition among lenders, resulting in more attractive interest rates and flexible repayment options.Â
Thirdly, the growth of e-commerce and online marketplaces has made it easier for consumers to shop and compare prices for products and services. This has led to increased awareness of financing options and has made it more convenient for consumers to apply for and receive financing. Fourthly, the government of Pakistan has taken steps to promote financial inclusion, including the launch of the National Financial Inclusion Strategy and the establishment of a credit information bureau. This has helped to improve access to credit for individuals and small businesses, which has contributed to the growth of consumer finance in Pakistan.
Finally, changing attitudes towards borrowing and increased financial literacy have also contributed to the popularity of consumer finance in Pakistan. As people become more familiar with financial products and services, they are more likely to take advantage of them to meet their financial goals and improve their standard of living.
Overall, the widespread popularity of consumer finance in Pakistan can be attributed to a combination of economic, technological, regulatory, and social factors, all of which have contributed to the growth of the consumer finance industry in Pakistan.
PAGE: Your perspective on various categories of consumer finance?
Saad Hassan:Â Let me provide you with an overview of various categories of consumer finance:
Personal loans:Â Personal loans are unsecured loans that can be used for a variety of purposes, such as debt consolidation, home renovation, or financing a wedding. They are typically offered at fixed interest rates and with flexible repayment terms. Personal loans are a popular choice for consumers who need access to funds quickly and do not have collateral to offer.
Credit cards:Â Credit cards are a form of revolving credit that allows consumers to borrow funds up to a certain limit. They are a popular choice for making purchases and paying bills, as they offer convenience and rewards programs. However, credit cards can also lead to high levels of debt if not managed properly.
Auto loans:Â Auto loans are secured loans used to finance the purchase of a vehicle. They are offered at fixed interest rates and with varying repayment terms. Auto loans are a popular choice for consumers who want to own a vehicle but cannot afford to pay for it outright.
Home loans:Â Home loans, also known as mortgages, are long-term loans used to finance the purchase of a home. They are typically offered at fixed or variable interest rates and with various repayment terms. Home loans are a significant investment for consumers and require careful consideration.
Overall, the various categories of consumer finance offer different benefits and risks. It is essential for consumers to understand their financial needs and goals and to choose the most appropriate type of consumer finance based on their circumstances. Financial institutions also have a responsibility to ensure that consumers are well-informed and protected from risks associated with borrowing.
PAGE: Do you presume access to and growth in, consumer finance carries both social and economic significance for society?
Saad Hassan:Â Yes, access to and growth in consumer finance carries both social and economic significance for society. From a social perspective, consumer finance can promote financial inclusion, especially for low-income individuals who may not have access to traditional financing options. Access to consumer finance can help individuals meet their basic needs, such as healthcare, education, and housing. This, in turn, can improve their standard of living and contribute to reducing poverty and inequality.
Consumer finance can also have economic significance. It provides a source of funding for businesses, which can help promote entrepreneurship, create employment opportunities, and support economic growth. Consumer finance also allows individuals to make purchases that they may not have been able to afford otherwise, which can help stimulate demand for goods and services, leading to increased economic activity. However, it is essential to note that the growth of consumer finance must be balanced with responsible lending practices and adequate risk management frameworks. Unchecked growth in consumer finance can lead to increased levels of debt and over-indebtedness, which can have adverse social and economic consequences.
In short, access to and growth in consumer finance can carry both social and economic significance for society. However, it is important to ensure that such growth is balanced with responsible lending practices and adequate risk management to prevent any negative consequences.