Due to lack of awareness many problems are faced by the banks customers and the industry growth rate is declining. Banks should take steps to promote consumer banking in such a way that the awareness if consumer banking services could be increased and the industry could boost at a high rate. New services need to be introduced and services and banks charges & markup rates should be reduced.
In case economy is to sustain growth through consumer finance as one of the important factors of growth, then income inequalities should be bridged and income level be increased to develop paying capacity of large number of consumers.
Section 1.0 Introduction
1.1 Background
In Pakistan all banks & DFI’s works under the supervision of the State Bank of Pakistan, the four major sectors in which SBP has divided banks operations are Corporate, SME, Agriculture and Consumer. SBP provide regulations according to which all banks should work & continuously keep a track that banks are complying through the regulations or not.
1.2 Purpose
In recent years, Consumer Banking has made tremendous progress and has played a positive role in boosting the economy and in meeting the needs and requirements of the consumers. Whether large or small bank, multinational or local, each one of them is geared towards making its mark in an already competitive environment that is the outcome of consumer banking. The growing economy and further improvements in the level of household income have created many opportunities for consumer banking. In this research the past, present & future of consumer banking will be analyzed.
1.3 Objective
This report will give an overview of the problems in current system of consumer banking from the point of view of both borrowers & lenders and explore the upcoming opportunities in the area of consumer banking.
Main Objectives:
- Comparison of services by local & foreign banks
- Problems in current system of consumer banking
- Solution for problems faced by lenders & borrowers
- Exploration of opportunities in future
- Role of consumer banking in Economic Development
1.4 Scope & Limitation
Issues like, problems in consumer banking due to which some banks temporarily stop consumer financing, why some banks haven’t implemented full fledge consumer banking and what are the opportunities in consumer banking & its effect on economic development will be analyzed.
1.5 Assumptions
- Consumer Banking Industry has a lot of potential to grow
- Both borrowers and lenders are facing a lot of problems
- High Interest, wrong policies, lack of education, etc are the factors for decline of consumer banking industry
- Consumer Banking is still a highly profitable banking sector although its facing a lot of problems
1.6 Study Plan
Section – II of this report is totally based on secondary data consist of an overall view of Pakistan Banking Industry, consumer banking in Pakistan, comparison of consumer financing products of local & foreign banks and brief introduction of few banks which are included in this research.
Section – III of this report consist to research methodology, in which it is explained in detail the method for conducting research, sample, population and tools used for data analysis.
Section – IV of this report consist of Analysis & Findings from our primary and secondary data in included the major party of this section are consumer banking preference, opportunities, challenges, problems of borrowers & lenders in consumer banking industry has been covered.
Section-V of this report consists of recommendation and conclusion bases on our finding & analysis of this whole research.
2.0 Industry Overview from Secondary Data
2.1 Banking Industry of Pakistan
In Pakistan all banks & DFI’s works under the supervision of the State Bank of Pakistan, the four major sectors in which SBP has divided banks operations are Corporate, SME, Agriculture and Consumer. SBP provide regulations according to which all banks should work & continuously keep a track that banks are complying through the regulations or not.
Pakistan is the sixth most populous country of the world fourth in Asia and second in SAARC countries, with a population of more than 160 Million of which 100 Million is less than 25 years old and with a 30 Million strong middle class enjoying many benefits from consumer financing or donor’s agencies. (Alam, 2007)
Banking sector in Pakistan has undergone a significant transformation in the recent years and has also acted as a catalyst in the revival of the economy. Many privatization, acquisition and mergers took place during last 7 years which started from privatization of Muslim Commercial Bank and from time to time Allied Bank Limited, United Bank Limited, Habib Bank Limited were also privatized by the government. These years also witnessed acquisition of Union Bank by Standard Chartered Bank, Prime Bank by ABN Amro, etc also took place and recently Metropolitan Bank has been merged with Habib Bank AG Zurich. All these privatization, acquisition and mergers resulted in high foreign investment in Pakistan and improved performance of the banking industry while its has also helped banks to gain more market share in short time and to easily meet the high paid-up-capital requirement of SBP i.e. Rs. 6 Billion till 2009 which was Rs.0.5 to Rs. 1 Billion
in 2000.
The commercial banking sector in Pakistan can be segregated into three categories - (1) five large commercial banks with total branches in excess of 700 each. Four of these banks have been denationalized in recent years, (2) branches of foreign banks in Pakistan and (3) local private banks.
Table 2.1
(SBP, 2006)
The market has been dominated by five large commercial banks. Foreign banks have been in operation for a long time as well, but their business is concentrated with large multinational clients. Local private banks were allowed to be formed in 1991 and currently there are about 30 such banks, which tend to serve local small to medium-sized enterprises.
Pakistan has a highly developed financial sector consisting of 4 public 12 private 21 commercial banks, DFI, leasing companies, mutual funds, Islamic venture capital fund companies. The commercial banks have assets of over one trillion rupees of which about 80% is held by domestic banks. (Alam, 2007)
2.2 State Bank of Pakistan (Central Bank)
The State Bank of Pakistan (SBP) is the central bank of Pakistan. While its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalised, the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of Pakistan, Karachi with its second headquarters in the capital, Islamabad.
The Stat Bank of Pakistan looks into a lot of different ranges of banking to deal with the changes in economic climate and different purchasing and buying powers. Here are some of the banking areas that the state bank looks into;
- State Bank’s Shariah Board Approves Essentials and Model Agreements for Islamic Modes of Financing
- Procedure for Submitting Claims with SBP In Respect of Unclaimed Deposits Surrendered By Banks/DFI’s.
- Banking Sector Supervision in Pakistan
- Micro Finance
- Small Medium Enterprises (SMEs)
- Minimum Capital Requirements for Banks
- Remittance Facilities in Pakistan
- Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme.
- Handbook of Corporate Governance
- Guidelines on Risk Management
- Guidelines on Commercial Paper
- Guidelines on Securitization
- SBP Scheme for Agricultural Financing
The principal officer of the SBP is the Governor. During December 2005, the President of Pakistan appointed Dr. Shamshad Aktar as the new Governor of the State Bank for a three year term, to replace Dr. Ishrat Hussain, who retired on December 1, 2005.
2.2.1 Departments of SBP
- Agricultural Credit
- Audit
- Banking Inspection
- Banking Policy
- Banking Supervision
- Corporate Services
- Economic Policy
- Exchange and Debt Management
- Exchange Policy
- Human Resource
- Information System
- Islamic Banking
- Legal Services
- Payment System
- Research
- Statistics
- Real Time Gross Settlement System (RTGS System)
- Small and Medium Enterprises
2.3 Foreign & Local Banks
Table 2.2
2.4 Products / Services in Banking Sector
Some major services in banking industry of Pakistan;
SMS Alerts Term Accounts
Current Accounts Savings Accounts
Foreign Currency Accounts Cash Management Service
E-Statements Statements by Fax
Merchant Services Business Loans
Remittance Service Trade Finance
Investment Banking Lockers Facility
SWIFT Service International Banking
Current Accounts Debit Cards
ATM Traveler Cheque
Pay Order Telegraphic Transfer
Demand Draft Home Loans
Auto Loans
Personal Loans
Credit Cards
Business Loans
Running Finance
Balance Transfer Facility
Online Banking
Internet Banking
Mobile Banking
Telephone Banking
2.5 Consumer Banking in Pakistan
Consumer banking which is one of the fastest growing sectors of Pakistan Banking Industry is also now major interest point for the banks. Initially the consumer banking sector was only focused by the foreign banks but its efficiency & profitability attracted others to come towards this business but still the major share of consumer banking in Pakistan is in the hands of foreign banks.
In a generic sense, institutional arrangements that provide consumers with financing support to enhance their consumption and as a result thereof, improve their standards of living should fall within the broad definition of consumer finance. For the past 50 years commercial banks in Pakistan had completely ignored consumer financing as an activity.
Consumer banking is a huge industry with great profits massive potential for improving economic conditions. But the banking sector has to care more for its subscribers rather than solely about itself. It needs to offer itself. It needs to offer better services at better terms and needs to inform the consumer completely and fully about the services.
According to an analysis, credit cards loans have increased from Rs33.538 billion during first of last calendar year to Rs42.822 billion during first half of current calendar year. Likewise, personal loans have increased from Rs120.517 billion in H1CY06 to Rs142.373 billion in H1 CY07. Growth in auto loans has not been less impressive. It registered an increase of approximately Rs8.0 billion from RS97.777 billion to Rs105.444 billion during the corresponding period of growth of credit cards and personal loans. Housing loans have also registered an increase of approximately Rs11.0 billion in H1 CY 07 from Rs43.205 billion in H1 CY06. (Sharif, 2007)
Exposure per borrower
(SBP, 2006)
Figure 2.1
Consumer Financing Share by Sector(SBP, 2006) Amount of Consumer Financing (SBP, 2006)
Figure 2.2
Figure 2.3
NPL Ratio of Consumer Financing (SBP, 2006)
2.5.1 Auto Loans
In Pakistan auto loans are purchase of brand new or used, imported or local cars for private use. Auto financing and auto leasing both facilities are offered by most of the banks. Salaried Persons/Self Employed Professionals / Business Persons who meet the terms and conditions to qualify for the finance are eligible for the loan. Some banks are also offering both variable rate & fixed rate options for auto loans. The average market rate for auto loans is 14-16%.
2.5.2 Home Loans
The loans taken for Buying, Building or Renovating of house/land are classified as home loans. For home loans both variable rate & fixed rate options are also available. The maximum duration offered by banks for home loans is generally twenty years that’s why banks conveniently give loans to permanent employees of any firm to ensure strong repayment ability.
2.5.3 Personal Loans
Personal Loans are generally unsecured type of loans but in certain cases when the amount of personal loans increases the normal limit its remaining portion must be secured. Personal loans include loans for the purpose of education, marriage, purchase of consumer durables, furnishing, traveling, etc. Generally the limit for personal loans is maximum Rs.500, 000/-
2.5.4 Credit-Debit Cards
Credit Cards mean cards which allow a customer to make payments on credit. Supplementary credit cards are considered part of the principal credit card. Initially only foreign banks are offering credit cards in Pakistan but now many local banks is also offering credit card facility. Credit Card is covered by three networks VISA, Master Card & American Express.
Debit cards are issued to account holders of any bank in Pakistan almost all the banks are offering debit card facility the amount used by the debit card holder is directly debited from the account of the card holder. Debit cards are accepted at all ORIX Network in Pakistan and it can also be used as ATM cards which are covered by 1-Link & MNET network in Pakistan.
2.5.5 Deposit Accounts
All the commercial banks are offering different kinds of deposit accounts these account ranges from customer to customer to fill the need of every type of customer. Few of the accounts provide high interest while some pay low interest & some don’t pay any interest. Some major categories of deposit accounts are;
- Current Accounts
- Saving Accounts
- Foreign Currency Accounts
- Business Accounts
- Term Deposits Accounts
2.5.6 Wealth Management
Wealth management is a new kind of service introduced in consumer banking sector now days. It covers all aspects of securing future of bank’s customers it includes insurance, tax advisory, financial consultancy, investments plans, etc. Yet wealth management service are mainly covered by few foreign banks only this is a new service are even bank’s customers don’t have any idea about Wealth Management Service. Almost all the banks are offering insurance services to some of their customers but the concept of wealth management is not behind it.
2.5.7 E-banking
To facilitate its customers all banks local & foreign are offering high technological e-banking services. These services let the banks customers to perform many banking activities easily without any restriction of time & place. Some of the major e-banking services provided by the banks are;
- Phone banking
- Internet banking
- Plastic Cards
- Online banking
- Mobile banking
- ATM
2.6 SBP Prudential Regulations for Consumer Financing
The improvement in the banking sector has been not only in terms of asset growth and profitability but also in terms of diversification of products and risk profile. Almost every commercial bank in Pakistan now offer consumer financing, so the effective regulation for the consumer banking by the State Bank of Pakistan was must. In 2003 State Bank of Pakistan issued the First Edition of Prudential Regulations for Consumer Financing.
The prudential regulations in force were mainly aimed at corporate and business financing. The SBP in consultation with the Pakistan Banking Association and other stakeholders has developed a new set of regulations which cater to the specific separate needs of corporate, consumer and SME financing. The prudential regulations will enable the banks to expand their scope of lending and customer outreach.
Consumer Financing means any financing allowed to individuals for meeting their personal, family or household needs .The State Bank of Pakistan has divided the consumer financing in its prudential regulations into four major areas which are;
- Credit Cards
- Auto Loans
- Home Loans
- Personal Loans
2.6.1 Auto Loans
- The vehicles to be utilized for commercial purposes shall not be covered under the Prudential Regulations for Consumer Financing.
- The maximum tenure of the auto loan finance shall not exceed seven years.
- While allowing auto loans, the banks / DFIs shall ensure that the minimum down payment does not fall below 10% of the value of vehicle.
- In addition to any other security arrangement on the discretion of the banks/ DFIs, the vehicles financed by the banks / DFIs shall be properly secured by way of hypothecation.
- The banks / DFIs shall ensure that the vehicle remains properly insured at all times during the tenure of the loan.
- The clause of repossession in case of default should be clearly stated in the loan agreement mentioning specific default period after which the repossession can be initiated. The repossession expenses charged to the borrower shall not be more than actual incurred by the bank / DFI.
- A detailed repayment schedule should be provided to the borrower at the outset. Where alterations become imminent because of late payments or prepayments and the installment amount or period changes significantly, the revised schedule should be provided to the borrower at the earliest convenience of the bank / DFI but not later than 15 days of the change.
- The banks / DFIs desirous of financing the purchase of used cars shall prepare uniform guidelines for determining the value of the used vehicles. However, in no case the bank / DFI shall finance the cars older than five years.
- The banks / DFIs should ensure that a good number of authorized auto dealers are placed at their panel to eliminate the chances of collusion or other unethical practices.
2.6.2 Home Loans
- Banks / DFIs shall determine the housing finance limit, both in urban and rural areas, in accordance with their internal credit policy, credit worthiness and loan repayment capacity of the borrowers.
- Banks / DFIs shall ensure that the total monthly amortization payments of consumer loans, inclusive of housing loan, should not exceed 50% of the net disposable income of the prospective borrower.
- The lending bank / DFI will ensure that the loan amount is utilized strictly for the construction purpose and loan is disbursed in tranches as per construction schedule. Loans against the security of existing land / plot, or for the purchase of new piece of land / plot, for commercial and industrial purposes may be allowed.
- The housing finance facility shall be provided at a maximum debt-equity ratio of 85:15.
- Banks / DFIs are free to extend mortgage loans for housing, for a period not exceeding twenty years.
- The house financed by the bank / DFI shall be mortgaged in bank’s / DFI’s favour by way of equitable or registered mortgage.
- Banks / DFIs shall either engage professional expertise or arrange sufficient training for their concerned officials to evaluate the property, assess the genuineness and integrity of the title documents, etc.
- The bank’s / DFI’s management should put in place a mechanism to monitor conditions in the real estate market (or other product market) at least on quarterly basis to ensure that its policies are aligned to current market conditions.
- Banks / DFIs are encouraged to develop floating rate products for extending housing finance, thereby managing interest rate risk to avoid its adverse effects.
2.6.3 Personal Loans
- The clean limit per person for personal loans will generally not exceed Rs 500,000/-.
- Banks / DFIs may assign a clean limit beyond Rs 500,000 but not in excess of Rs 2 million to their prime customers who have extraordinary strong repayment capacity, moderate debt burden and a clean track record.
- In cases, where the loan has been extended to purchase some durable goods / items, including personal computers and accessories thereof, the same will be hypothecated with the bank / DFI besides other securities, which the bank / DFI may require on its own.
- The maximum tenure of the loan shall not exceed 5 years. However, this period may be extended to 7 years for loans / advances given for educational purposes, provided that disbursement of such loans shall directly be made by the bank / DFI to the educational institution and the borrower shall not be allowed to utilize / withdraw cash directly from the bank / DFI under this head for any other purpose.
- In case of Running Finance / Revolving Finance, it shall be ensured that at least 15% of the maximum utilization of the loan during the year is cleaned up by the borrower for a minimum period of one week.
2.6.4 Credit Cards
- The banks / DFIs should take reasonable steps to satisfy themselves that cardholders have received the cards, whether personally or by mail.
- Banks / DFIs shall provide to the credit card holders, the statement of account at monthly intervals
- Banks / DFIs shall be liable for all transactions not authorized by the credit card holders after they have been properly served with a notice that the card has been lost / stolen. However, the bank’s / DFI’s liability shall be limited to those amounts wrongly charged to the credit card holder’s account.
- In case the cardholders make partial payment, the banks / DFIs should take into account the partial payment before charging service fee / mark-up amount on the outstanding / billed amount so that the possibility of charging excess amount of mark-up could be avoided.
- Due date for payment must be specifically mentioned on the accounts statement.
- Maximum unsecured limit under credit card to a borrower (supplementary cards shall be considered part of the principal borrower) shall generally not exceed Rs 500,000/.
- Banks / DFIs may, however, assign a clean limit beyond Rs 500,000 but not in excess of Rs 2 million to their prime customers who have extraordinary strong repayment capacity, moderate debt burden and a clean track record.
- Banks / DFIs may also allow financing under the credit card scheme in excess of Rs 500,000/- (up to Rs 2 million) to other customers as well, provided the excess amount is appropriately secured
2.7 Credit Information Bureau
2.7.1 Introduction:
The bureau is a repository of credit information of borrowers. The member lending institutions provide credit data (personal and loan information) of their borrowers to the bureau which consolidates, updates, and stores the same and provides this information to its members Financial Institution in the form of credit worthiness reports (CWR).
2.7.2 History of CIB:
The Credit Information Bureau (CIB) is a public sector credit bureau of Pakistan. It was established in 1992 by the State Bank of Pakistan (SBP) under Section 25(A) of Banking Companies Ordinance-1962. The CIB is a part of Banking Surveillance Department of the State Bank of Pakistan.
2.7.3 Role of CIB:
The CIB plays an important role in promoting financial discipline, better credit risk management and making prudent lending decisions. It is globally recognized that a well developed financial sector must have effective credit risk detection and management system to allocate credit efficiently. The CIB helps financial institutions in managing credit risk and assessing true credit worthiness of existing as well as prospective borrowers.
The Credit Information Bureau also aid financial institutions to make well informed credit decisions in timely manners minimizing the credit risk. All fund and non-fund base credit facilities irrespective of any outstanding amount are being reported to the CIB. Reporting to the CIB is mandatory for all member financial institutions (FIs).
Two types of reports can be generated from eCIB system:
1. Consumer Credit Information Report
2. Corporate Credit Information Reports
2.7.4 Electronic Credit Information Bureau (eCIB):
The very purpose of establishing a CIB at SBP was to promote sound credit culture, prudence and professionalism among financial institution. The scope and administration of CIB database was further enhanced in April, 2006 when a new look VPN based e-CIB system with enhanced features started its operations. The key features of new eCIB system included the followings;
- Separate Consumer/Corporate reports and data input formats
- Provisions for consumer credit and default history
- Provisions for online amendments and Interim updates
- Record of credit inquiries made by the financial institutions
- Web based Help Desk for online queries and complaints
- Online technical support to the financial institutions
2.8 Contribution Consumer Banking in Economic Development
2.8.1 Overview:
In Pakistan, consumer finance despite rapid growth during initial period of 2-3 years has started declining. During past few years the domestic consumer finance emerged as one of the key factors to boost economic growth despite its comparatively low share of 14 per cent in the total private sector credit compared to its share in other countries like India and Indonesia where it stands at 24 per cent and 30 per cent respectively.
Regional and global markets and economic players have become highly competitive and banking sector is more concerned to safeguard its capital and enrich itself with higher returns on loans than government’s concern about boosting economic growth.
2.8.2 Consumer Financing & Economic Growth:
Lending through credit cards, personal loans, auto loans, loans for durables and housing finance emerged main streams of consumer finance. They shaped domestic demand and lending strategy by the banking sector in quite subtle ways. Consumer finance has also brought social change through higher circular of money and relaxation of income constraints for borrowing particularly among those middle class segments that were eager to become part of growing economy and keen to benefit from economic growth. Without consumer finance being in the driving seat of the banking sector, a large number of people would not have benefited.
Lending through credit cards, personal loans, auto loans, loans for durables and housing finance emerged main streams of consumer finance. They shaped domestic demand and lending strategy by the banking sector in quite subtle ways. Consumer finance has also brought social change through higher circular of money and relaxation of income constraints for borrowing particularly among those middle class segments that were eager to become part of growing economy and keen to benefit from economic growth.
2.8.3 Role of SBP:
Consumer finance was backed by the SBP to give boost to economic growth through demand-pull pressure. The banking sector went out of its way to make it attractive for the consumers through easy lending and providing loans for those consumer items that consumers envied the most. They were mostly electrical appliances, autos and housing. Consequently, share of consumer finance in over all loans increased from 9.4 per cent in 2004to 13.5 per cent, Rs72.4 billion in 2006.
2.8.4 Implication for economy:
Consumption is the key to economic growth for one simple reason that it sets pace for production of commodities and manufacturing of goods of different sorts. The dilemma of managers of national economy over the years was to execute a well defined strategy of economic growth along with taking measures to bring structural changes in economy through prudent administrative, fiscal and monetary policies.
Developed economies register growth because of domestic consumption and exports. These twin factors guarantee their economic survival in this highly competitive world. China and India are the two best examples in this context. What options are available to Pakistan for economic growth? Right now, exports are going slow and consumption is fuelled by financially strong segments of society who totally depend upon remittances sent by their relatives working abroad, profits earned through speculative investment and as beneficiaries of expansionary fiscal policy pursued by the government.
2.8.5 Conclusion:
The real beneficiaries of consumer finance are the people who did not have capacity to purchase expensive household items in a single go but could afford them because of consumer finance, the commercial banks that have been earning large interest and huge returns on their investment in consumer finance and the economy that got impetus for growth. The point of concern is that consumer finance is helpful only for those who are to some extent affluent to opt for it.
In case economy is to sustain growth through consumer finance as one of the important factors of growth, then income inequalities should be bridged and income level be increased to develop paying capacity of large number of consumers. Inflation should be contained and a strong broad based middle class be built. Unless these imperatives were met, it is doubtful if consumer finance based on weak middle class supported by remittances can really play the same role that it is played by strong and affluent middle class both in developed economies and to some extent in emerging economies.
2.9 Brief overview of some local & foreign banks
2.9.1 National Bank of Pakistan
National Bank of Pakistan maintains its position as Pakistan's premier bank determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies, technologically oriented products and services offered through its large network of branches locally, internationally and representative offices.
Profit after Tax : 19 Billion According to annual report 2007
Total Assets : 762 Billion
No. of Branches : 1243
2.9.2 Muslim Commercial Bank
MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 280 billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives. In 1974, MCB was nationalized along with all other private sector banks. This led to deterioration in the quality of the Bank’s loan portfolio and service quality. Eventually, MCB was privatized in 1991. During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base and managing its non-performing loans via improved risk management processes.
Profit after Tax : 16 Billion According to annual report 2007
Total Assets : 412 Billion
No. of Branches : 1020
2.9.3 United Bank Limited
UBL has assets of over Rs. 300 billion and a solid track record of forty six years - in addition to the convenience of over 1000 branches serving you throughout the country and also at several overseas locations. It was established in 1959. The Bank's long term rating is AA +, which denotes good credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.
Profit after Tax : 12 Billion According to annual report 2007
Total Assets : 530 Billion
No. of Branches : 1078
2.9.4 Soneri Bank Limited
Opened doors for operations in Lahore on April 16,1992 followed by Karachi branch on May 09, 1992. The bank now operates with 89 Branches spread all over Pakistan including the Northern Areas of the country where no other private bank has ventured so far. Expansion of branches is based on a policy of maintaining a balance between the urban and rural areas with a view to offering services even in the remote areas of Pakistan. Pleasant and sophisticated atmosphere has been provided in the branches which are all fully air-conditioned and computerized.
Profit after Tax : 1000 Million According to annual report 2007
Total Assets : 77.73 Billion
No. of Branches : 89
2.9.5 Habib Metropolitan Bank Limited
Habib Metropolitan Bank was incorporated in Pakistan as a Public Listed Company in 1992 under the name, Metropolitan Bank Limited. The Bank commenced, duly licensed, full scheduled commercial-banking operations in October 1992.
On October 26, 2006 Habib Bank A G Zurich’s Pakistan Operations merged into Metropolitan Bank Limited and the merged entity was named Habib Metropolitan Bank Limited (HMB). Demonstrating a strong commitment to Pakistan economy, HBZ is the principal shareholder of HMB. HMB operates in all major cities of the country. The Bank ranks within Top 10 in Pakistan with a strong vision to be the most respected Financial Institution.
Profit after Tax : 2797 Million According to annual report 2007
Total Assets : 172 Billion
No. of Branches : 100
2.9.6 Faysal Bank Limited
Faysal Bank started operations in Pakistan in 1987, first as a branch set-up of Faysal Islamic Bank of Bahrain and then in 1995 as a locally incorporated Pakistani bank under the present name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited, another group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger, stronger and much more versatile institution. In fact it has the highest share capital amongst private banks in Pakistan and is amongst the largest in terms of equity. Faysal Bank Limited is a full service banking institution offering consumer, corporate and investment banking facilities to its customers. The Bank’s widespread and growing network of branches in the four provinces of the country and Azad Kashmir, together with its corporate offices in major cities, provides efficient services in an effective manner
Profit after Tax : 2,272 Million According to annual report 2007
Total Assets : 141 Billion
No. of Branches : 105
2.9.7 Standard Chartered Bank:
Standard Chartered is the largest international Bank in Pakistan. The Bank has been operating in Pakistan for over 140 years when it first established its operations in 1863 in Karachi. After the acquisition of Union Bank in September 2006, the new entity Standard Chartered Bank (Pakistan) Limited was incorporated in Pakistan on 30 December 2006 as a subsidiary of Standard Chartered PLC.
Profit after Tax : 3,914 Million According to annual report 2007
Total Assets : 261 Billion
No. of Branches : 144
2.9.8 Citibank N.A.:
Citibank Pakistan has demonstrated its ability to identify market needs and develop products which are unique in concept and fulfill customer requirements. The aptitude to develop lifelong relationships while maintaining quality measures and technological efficiencies has assisted Citibank in becoming a true market leader.
Corporate and investment banking clients include corporations at every stage of development. Catering to the changing needs of corporations and leveraging on long term relationships, we execute transactions of almost any size, of every level of complexity, and back them with a wide distribution network.
- First foreign bank to launch MasterCard in Pakistan.
- In 1990 Consumer Bank was established.
- In 1996 Citibank, N.A. launches its Intranet System in April.
- In 1996 it was first bank to launch a Photo Credit Card.
- Citibank, N.A. is the first Financial Institution to launch Personal Loans in Pakistan in 1999.
Profit after Tax : 3,564 Million According to annual report 2007
Total Assets : 102 Billion
No. of Branches : 23
2.9.9 ABN Amro Bank:
Committed to Pakistan since 1948, ABN AMRO Pakistan has a strong commercial banking presence as well as an established retail franchise which offers a complete product suite including credit cards, consumer loans and deposit accounts. The bank is a leader in product innovation in the local market and is represented in key financial and government policy forums in the country. Its acquisition of Prime Bank in April this year further strengthens its position in Pakistan. With assets of PKR 124 billion, about 5,000 employees and over 80 branches in 24 cities, the combined entity is the second largest foreign bank and one of Pakistan’s top 10 banks in a rapidly growing market.
Profit after Tax : 3,845 Million According to annual report 2007
Total Assets : 124 Billion
No. of Branches : 80
2.10 Comparison of Consumer Financing Products by some Local & Foreign Banks
2.10.1 Auto Loans by Local Banks
Table 2.3
2.10.2 Auto Loans by Foreign Banks
Table 2.4
2.10.3 Home Loans by Local Banks
Table 2.5
2.10.4 Home Loans by Foreign Banks
Table 2.6
2.10.5 Personal Loans by Local Banks
Table 2.7
2.10.6 Personal Loans by Foreign Banks
Table 2.8
2.10.7 Credit Cards by Local Banks
Table 2.9
2.10.8 Credit Cards by Foreign Banks
Table 2.10
Section 3.0 Research Methodology
3.1 Strategy for Data Collection
Two survey forms have been designed one for the bank’s staff and one for bank’s customers to identify the problems and solutions faced by borrowers & lenders in the area of Consumer Banking. Five interviews have been conducted at different banks of Karachi.
The selected foreign banks are the key market players of consumer banking in Pakistan while the selected local banks are three big banks, two middle size banks and one small size bank.
3.2 Primary Data collection
3.2.1 Surveys
Survey Form – I (for bank’s staff) was filled by only those bank’s employees which are working in the area of sales, credit, operations, branch management or any other area which is relevant to consumer banking. All these bank’s staffs were directly or indirectly dealing in consumer banking so they have a clear idea on consumer banking sector.
Survey Form – II (for bank’s customer) was filled by the customers of nine selected local & foreign banks in Pakistan. There were only two conditions to be eligible to fill out the form that the bank’s that person must have a bank account in any local or foreign bank and have some idea of consumer banking.
3.2.2 Interviews
Five interviews have been conducted by the branch/relationship managers of two foreign and three local banks
3.3 Secondary Data collection
Secondary data has been collected from different magazines, websites, news papers and journals. For secondary data collection the main focus was on local materials while some information on consumer banking in different countries has been collected to see the trends and new opportunities.
3.4 Population & Sample
3.4.1 Population
This survey is conducted in different banks of Karachi from people of different ages including both males and females. Altogether one hundred & fifty samples are selected from customer survey out of two hundred forms and fifty samples were selected out of seventy in banks survey.
3.4.2 Sample
For Surveys
Six local and three foreign banks have been selected, all the survey forms have been filled by staff of those banks and customers of those banks
Foreign Banks
- Citibank N.A.
- ABN Amro Bank
- Standard Chartered Bank of Pakistan
Local Banks
- Muslim Commercial Bank (MCB)
- Soneri Bank Limited (SBL)
- United Bank Limited (UBL)
- Faysal Bank Limited (FBL)
- Habib Metropolitan Bank Limited (HMB)
- National Bank of Pakistan (NBP)
For Interviews
Interviews have been conducted by the relationship managers of two foreign banks and branch managers of three local banks which are;
- Citibank N.A.
- Standard Chartered Bank
- Habib Metropolitan Bank Limited
- Soneri Bank Limited
- National Bank Limited
3.5 Statistical tools and Software to be used for data analysis
The statistical tools that are used for analyzing the result of these surveys are mean, descriptive statistics and standard deviation and for data representation tables and graphs have been used. Several other factors are taken to analyze the survey. The major softwares that are being used for these surveys analysis are MS Word, MS Excel and SPSS.
Section 4.0 Analysis and Findings
4.1 Opportunities
The most preferred category for issuing consumer loans is salaried individuals one of the most important reasons behind this is that they are more reliable and they have regular source of income or incase of any problem them employers can also be approached for any query. The two other categories which are businessman & self-employed people are considered after organizational employees, these two categories also have can also give a great business to consumer banking industry but suitable conditions & polices must be prepared to disburse more loans to them.
One of new concept introduced in the area of consumer banking is Wealth Management Service. The service is classified as an advanced type of financial planning that provides high net worth individuals and families with private banking, estate planning, asset management, legal resources, and investment management, with the goal of sustaining and growing long-term wealth.
During our survey more than 48% respondents said that they don’t have any idea of wealth management service. Although 40% of the respondents said that their bank is providing WMS because insurance is also a part of WMS and many banks are providing insurance service to their saving accounts holders but there is no concept of WMS behind this.
Table 4.1
Figure 4.1
To increase the consumer banking business through WMS banks should create more awareness about WMS and its benefits should be highlighted so that consumer banking industry could grow promptly.
The consumer banking industry still has a lot of potential to introduce new products & services during our survey we asked the banks customers that which new service would they like to be introduced most of the respondents marked that they want ‘Money at door step’ service to be introduced.
Figure 4.2
Table 4.2
After which the most preferred new service to be introduced is ‘Online Interbank Transfer Facility’. The aim of consumer banking is to provide high convenience to their customers. Services like Money at door step & Online Interbank Transfer Facility should be introduced soon because they will provide high comfort to banks customers.
The economic survey 2005-06 claims that the national economy is undergoing structural shifts marked by rapid changes in consumer spending pattern. The real private consumption expenditure had more than doubled from 8.2 to 16.8% suggesting the emergence of a small middle class with buying powers. (Butt, 2005)
4.2 Challenges
Banks rely more on existing customers for issuing any type of consumer loans, giving loan to a new customer is more risk for a bank because the bank don’t have their track records of incomes and expenditure while with the help of CIB any bank can check any person credit records but those maintaining account with the bank or involved in any type of dealing are focused more for issuing consumer loans.
Although during last five years the tenure of different consumer loans have been increased but the bank’s customers are not highly satisfied by the tenure according to our survey 48.6% of respondents are not satisfied by the tenure of consumer loans the survey result can be seen in the table 4.3 & figure 4.3;
Satisfaction by tenure of Consumer Loans Table 4.3
Satisfaction by tenure of Consumer Loans Figure 4.3
After analyzing the survey results conducted at different banks in Karachi it has been seen that most of the bankers i.e. 92% said that they frequently update their customer records but still when any customer defaults sometimes its get difficult for the banks to trace that person it may be due to the false information provided by the customers or by leniency of banks staff its becomes difficult to catch the defaulter.
Issuing consumer loans to the right person sometimes becomes difficult because in the case of self-employed the problems are complicated further because many potential consumers do not keep credible records of the streams of earning from their vocations or business to permit financing banks a reliable assessment of their future re-payment capacity.
4.3 Problems faced by borrowers
The major problems faced by customers in getting a consumer loan are improper guidance, slow processing and bank statement. In our survey 56% of respondents said that they are facing problems in getting consumer loans.
Problems in getting consumer loans Table 4.4
Problems in getting consumer loans Figure 4.4
Problems in getting consumer loans Table 4.5
Whether a person is applying for auto loan, personal loan, home loan or a credit card it must have a bank account and a good bank statement this makes easy for a customer to get a consumer loan and also helps banks to asses its customers better but most of the time people who apply for a consumer loan even don’t have bank account or they are not actively using that account which makes difficult for them to get a loan.
The most actively used consumer financing product is Credit Card and one of the major problems faced by bank’s customer on credit cards is its high interest rate, its very easy for anyone to get a credit card now days because it don’t require any collateral, the only major thing that is required by the bank to issue a credit card is a is a bank account with a good balance. Although its easy to get a credit card but due to its high interest rate it becomes difficult for borrowers to pay back the amount spend through credit card and delays in their payment increases their debt burden day by day due to high penalties on late payments and high interest. In many cases when the card holders delay the payment for a long period it even increases the amount i.e. interest & miscellaneous charges more than the principal amount.
Very few borrowers know that the rate of interest being charged on consumer finance by the financial institutions is too high as compared to prime interest.
Bank service charges have increased by more than 500% in certain cases and have gone by 100-150% in most cases in last seven years. No wonder bank’s non-interest income also went up by 29% or Rs.43 Billion in 2006. (Ghausi, 2007)
Despite of many changes in bank policies and strict regulations by SBP still bank’s customers are facing hidden charges problem. In our survey more than 66% of respondents said that they are facing hidden charges problem. Banks don’t clearly mention their miscellaneous charges at the time of issuing loans or opening account due to which this problem took place.
Eventually, unsustainable burden of debt-servicing forced business to crash and households ended up with negative equities. Maintaining the critical balance between savings, investments and borrowers debt-servicing ability is only possible if input prices remain stable affording business to sustain their profitability and interest rates too remain stable affording business to sustain their profitability and interest rates too remain stable to ensure that in the medium term, debt servicing burden remains affordable for both consumers and manufacturers.
4.4 Problems faced by lenders
According to our survey at different banks in Karachi most of the respondents i.e. 84% said middle class is the target market for issuing consumer loans the reason behind this is that the middle class have a better capacity of payback the loans as compare to lower class whose source of income is mostly very low and not regular which increases that chance of default and the upper class don’t have as such needs of getting a consumer loans.
The most preferred consumer financing products by banks are personal loans and credit cards due to high interest rate and easy terms to issue the highest no of loans issued are in the category of personal loans and credit cards.
Preferred category for issuing consumer loans Table 4.6
Preferred category for issuing consumer loans Figure 4.5
Table 4.7
Although it’s easy for banks to issue a credit card and personal loans sometimes they became a major source of problem for banks because they don’t have any collateral behind credit cards & personal loans in case of defaults the chance to get back the loan amount are less.
According to an analysis 1.5 million credit cards issued and the number of borrowers reveals that an average a borrower against the credit card has more than one credit card. During 2006 the quality of consumer portfolio witnessed deterioration because non-performing loans of this sector increased to Rs. 7 billion in 2007 from about Rs. 3 million in 2005. At an average a person carries two to five credit cards and also prefers to rollover the credit by making minimum payment. The result is persistent increase in the liability and ultimate default. (Kazmi, 2007)
The biggest category in term of loan amount is of auto and home loans but banks are focusing more on its customer’s current repayment ability and less on long term ability. Customer profile measured by banks according to our survey can be seen in the table 4.8 & figure 4.6.
Method of measuring customer profile Table 4.8
Method of measuring customer profile Figure 4.6
Due to which in case of defaults on auto and home loans 100% recovery becomes difficult. Factors like repayment ability, Liquidity, willingness to pay are also important but if banks focus more on the customer’s long-term ability it can be assured that most of the loan amount could be recovered.
Auto loans have become very trouble-some for the private banks. The rate of defaults has increased at phenomenal rates. The cars are auctioned at lower prices which do not recover the entire amount invested by bank.
Most of the respondents in our survey of bank’s staff said that the major reasons for defaults on consumer loans is improper assessment and consumer willingness, due to improper assessments by bank’s staff the default occurs it may be true that the customers don’t provide the correct information which resulted in improper assessment.
Major reason for default on consumer loans Table 4.9
Major reason for default on consumer loans Figure 4.7
Major reason for default on consumer loans Table 4.10
If a customer’s income is good, he/she is capable of paying loan but if the customer is not willing to pay the loans the default can not be stopped.
4.5 Customer’s preference for Consumer Banking
According to sample of our survey most of the customers who have accounts in local banks rate local banks schedule of charges at moderate level. There is no doubt that in Pakistan service charges of local banks are less than 50% as compare to foreign banks that’s why for general banking services people prefer local banks more.
Figure 4.8
When in a survey we asked people that in which
bank do they operate their account. Most of the
respondents said local bank.
Table 4.11
Figure 4.9
When the same respondents asked to rate their
bank schedule of charges the results were……
But the most preferred type of banks for consumer banking is foreign banks some of the major reason behind this is that foreign banks provide better customer service as compare to local banks and they have a large variety of consumer banking products.
Although now days there is no major difference between interest rate on consumer financing products offered by local and foreign banks but still the major share of consumer financing is still captured by foreign banks in Pakistan.
When asked by the bank’s customers that which bank they prefer for consumer banking the result showed that 44% of respondents don’t bother that the bank in local or foreign but 37% of the respondents prefer foreign banks for consumer banking figure 4.10 table 4.12 of the customer survey reflects the customers preference;
Table 4.12
Figure 4.10
4.6 Future prospects of Consumer Banking in Pakistan
Banks are focusing more on consumer finance and their strategy is fully complemented by the companies marketing consumer durable. Now an individual can acquire from a mobile phone to an expensive automobile on monthly installments if he/she can convince the lender about regular income and repayment ability.
It is a two-way traffic and both the lender and borrower have realized their rights and obligations. Financial institutions are in the business of lending and cannot afford delinquent loans. Similarly people desirous of improving their lifestyle wish to continue accumulating new assets. Therefore the best practice to follow is ‘you keep me happy I will keep you happy’. (Kazmi, 2007)
Consumer financing has started slow down now. The growth was 29% or 72.4 Billion in the first half of 2006 to mare to the total consumer portfolio equal to Rs.325 or 13.5% of the overall loans of the banking sector. The growth has shrunk to 9% in first half of 2007. The reason for this is not the precautionary measures taken by bank but higher rates due to which consumer are shying away from consumer financing. The diversion of the Government borrowing from central bank to the Government is also creating a crowding out impact thus leaving a little room to the banks to remain aggressive in the area of consumer financing. (Sharif, 2007)
Maintaining the critical balance between savings, investment and borrowers debt-servicing ability is possible if input prices remain stable affording business to sustain their profitability and interest rates too remain stable to ensure that in the medium term, debt servicing burden remains affordable for both consumers and manufacturers. (Shahid, 2003)
4.7 Experts Views
According to a banker ”Our society suffers from an obsession, people displays their affluence by spending cash. One of the motives behind spending cash is to avoid documentation. Therefore it may not be wrong to say that only the salaried class in interested in acquiring consumer durables on deferred payment. It also suits the financial institutions because acquiring profile of a salary person posses no problem – the details can always be obtained from the employer. The employees are more than willing to pass on the burden of extending loans” (Fahad, 2008)
With pricing consumer loans unrealistically high banks have been marking a serious mistake as they cannot charge high enough loan rare that could compensate for the loss arising out of an irrecoverable loan. More importantly if consumer finance has to pick-up as a truly helpful mechanism for spurring, domestic demand, it must be ensured that is remains that it remains within the consumers’ capacity to repay their loans on time and they feel confident about taking loans again and again.
In Pakistan, Consumer Banking Industry has a lot of potential to grow, but due to lack of knowledge of borrowers and lenders problems are being faced by both. So, if we want to improve the scope of consumer banking we must ensure that we have educated and trained staff from bottom to the top level because this will not only solve the problem of lenders but borrowers too. (Tirmizi, 2008)
According to a banker my advice to every individual is that assume only that much liability you can afford to settle without causing problem for you or lender. Don’t hurry and accumulate assets slowly and gradually. If you face any problem discuss it with the lender to facilitate not to create problem. (Khan, 2008)
Consumer Banking Industry is highly competitive in Pakistan to improve market share every bank has to provide better customer service, friendly policies and low markup on loans. Few years back it was very easy for any person to get consumer loans but now the scenario has changed financing is not very easy but this doesn’t mean that financing has been stopped but for genuine customers there is no problem to get as much credit as they want. (Hussain, 2008)
Section 5.0 Recommendations and conclusions
5.1 Conclusion
The consumer banking industry has many opportunities to grow, customer wants convenience mode of banking for which new products & services should be introduced on the other hand it is giving huge profits to bank while the level to risk is less in consumer financing as compare to others. Wealth Management Service which is a new service in Pakistan Consumer Banking industry its awareness should be increased as in our survey it reveals that most of the respondent even don’t have any idea of consumer financing. Bank’s customers want new services to be introduced in which Interbank Transfer Facility & Money at door step are the most demanding services.
In recent years the regulation for tenure and amount of consumer financing has been changed many times but still the bank’s customers are not totally satisfied by the tenure of consumer financing.
Improper guidance, slow processing and bank statement are the major problems faced by bank’s customers in getting consumer loans. The reason for these problems is that people applying for consumer loans don’t have proper information about the requirements by the banks and due to high number of applications & lengthy procedure by banks the loan processing is slow.
Very few borrowers know that the rate of interest being charges on consumer finance by the financial institutions is too high as compared to prime interest. Incase of credit cards the respondents in our survey marked High Markup Rate as the major problem they are facing in Credit Cards.
Despite of many changes in bank policies and strict regulations by SBP still bank’s customers are facing hidden charges problem. Due to unclear policies and term & condition of banks, customers are not able to know about different charges of banks and the problem of hidden charges occurs.
Although CIB provide complete and accurate information about the bank’s customer credit records but still loans default occur in consumer financing the problem is not with only due false customer records but also due to wrong policies and improper assessment by bank which cause defaults on consumer loans.
The target market for issuing consumer loans for banks in the middle class because they have the strong ability to pay off their loans, banks should make adequate polices to provide loans to lower class on easy terms and low markup rate. Upper class is generally not focused for consumer financing because they have enough resources & purchasing power to buy any asset.
Due to high markup personal loans and credit cards are among the most preferred category of consumer financing by the banks. While in terms of loans amount the biggest category of consumer loans are auto & mortgage loans and they are preferred by banks because they have collateral which provide security in case of any default. According to bank’s staff the major reason for defaults on consumer loans is improper assessment and consumer willingness to pay the loan.
Auto loans have become very trouble-some for the private banks. The rate of defaults has increased at phenomenal rates. The cars are auctioned at lower prices which do not recover the entire amount invested by bank. House and car financing are safe modes of financing from the banker’s point of view as the every rising real-estate and car prices coupled with safety margin in the shape of down payment allow the bankers to enjoy a sound night sleep.
Most of the bank’s customers prefer local banks for general banking activities this is mainly due to large branch network, wide range of services and low service charges provided by the local banks. But for consumer banking, customers prefer foreign banks in Pakistan this is due to high range of consumer banking services provided by them. Foreign banks are the introducer of CB in Pakistan still retains the major share of consumer financing in Pakistan.
During the last five years consumer banking had witnessed a high growth in Pakistan but its growth rate is declining now which is due to the high markup rate charged by banks and high increase in NPL with low recovery rate. Maintaining the critical balance between savings, investment and borrowers debt-servicing ability is possible if input prices remain stable affording business to sustain their profitability and interest rate should remain stable.
There is no denying to the fact that consumer credit within prudent and sustainable limits is desirable for economic growth, smoothing consumption and improving credit risk diversification. At the same time unsustainable consumer growth in weak macroeconomic environment, ineffective prudential and regulatory framework, weak risk management system and legal infrastructure can create systemic vulnerabilities. The consumer finance is money lending affairs to a needy perform for improvement of his well beings and ultimately his living standard in the society. It is financing facilities that generally and wholesomely support consumption and as a result improves the overall living standards of house holds.
Credit card is a risky mode of finance as no collateral is available to cover risk. Perhaps this is the reason that this segment of bank finance has been allowed to operate o the terms of the bankers without any worthwhile monitoring by SBP. The growth in our economy has led to increasing consumption trends, resulting in the widening demand and supply gap. However as the people of the country become more educated they have realized the benefits and conveniences of using plastic money as a mode of payment. At the moment less than 1% population of the country is using plastic money in Pakistan; therefore one can put complete blame of inflation and price hike on it. Inflation in basic food items which is 11% is not directly linked to plastic money or consumer financing. Developed countries facing rampant consumerism find plastic money most efficient and acceptable mode of payment.
The total NPL of commercial banks in Pakistan have touched level of Rs.154 Billion which is covered by 66% provisions in 2007. The local private banks have loan loss coverage of 63% as on June 30, 2007. And for public banks and foreign banks this ratio stood at 74% & 86% respectively. Foreign banks in Pakistan have loan loss coverage of 86% and they have provided more than the required provisions against NPL. (Sharif, 2007)
Besides average borrowing of an individual is small but a lot of time and effort have to be spent on documentation, etc. Therefore there is valid reason for charging high interest rates from individuals borrowers.
5.2 Recommendations
- As the number of complaints of misuse cards increased PIN-based credit cards should be issued that would provided additional security.
- Financing to negative area residents should be made available and term & policies should be designed accordingly to reduce the chances of defaults.
- Markup charged on consumer financing should be reduced to a substantial level so the spread between bank loans and deposit could be reduced and customer could easily pay off the loans
- Better returns should be provided on deposit accounts
- To facilitate the customers new products and services should be introduced continuously
- SBP should continuously update its regulations according to need of people and economic situations of the country
- Increase consumer awareness, give clear instructions and guidance
- Make customer friendly policies but it should also cover the risk factor
- Markup charge on loans & interest given on deposits should be regularly monitored and guided by SBP
References
Alam, Dr.S.M (2007), Emerging Middle Class Enjoying Consumer Financing Facility. Pakistan & Gulf Economist , XXVI (44), pp. 24-25, Islamabad.
Butt, K. (2005), Consumer Financing a risky ball game, Pakistan & Gulf Economist , XXIV (44), pp. 13-16, Lahore.
Ghausi, S (2007), “The Debt-Trapped Consumers”, Dawn News Paper, viewed 18 February 2008, http://www.dawn.com/2007/04/16/ebr1.htm
Kazmi, S. H. (2007). The Growing Market of Consumer Finance. Pakistan & Gulf Economist , XXVI (44), pp. 12-13, Karachi.
Naeem, U (2007), “Consumer Banking”, Net Express Online, viewed 19 February 2008, http://netxpress.com.pk/2007/03/07/consumer-banking/
Shahid, A.B. (2003), “Consumer Finance: What are its chance of Success”, Pak & Gulf Economist, viewed 27 February 2008, http://www.pakistaneconomist.com/database2/cover/c2003-14.asp\
Sharif, M (2007), “Trends in Consumer Finance”, Jang News Paper, viewed 26 February 2008, 03-12-2007/p6.htm
Bibliography
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Appendix
Survey Form – I (For Bank’s Staff)
National University of Computer & Emerging Sciences – FAST
Karachi Campus
SURVEY for research based project on
‘Need & Scope of Consumer Banking in Pakistan’
Name: ________________________ Gender: □ Male □ Female
Designation: ___________________ Qualification: □ Intermediate □ Bachelors □ Masters □ Doctoral
Experience: □ 1-5 years □ 6-10 years □ More than 10 years
Note : To be filled by bank’s staff only
Which category of individuals do you prefer most for consumer financing?
□ Self Employed □ Businessman □ Organizational Employee/Salaried Person
What is your target market for issuing consumer loans?
□ Lowers Class □ Middle Class □ Upper Class
Which type of financing is emphasized more by your bank? (Tick one or more)
□ Personal Loan □ Credit Card □ Auto Loan □ Home Loan
Which type of customer do you prefer most for consumer financing?
□ Previous Customers □ New Customers □ Existing Customers
Is your Credit Information Bureau reliable?
□ Yes □ No
Do you frequently update your customer records?
□ Yes □ No
How do you measure customer profile?
□ Repayment Ability □ Liquidity □ Solvency □ Willingness to pay
Do you think that variation in interest rate offered by different banks effect your performance?
□ Yes □ Yes to some extent □ No
What are the major reasons for defaults on consumer loans? (Tick one or more)
□ SBP Prudential Regulation □ Internal Policies □ Market Scenario
□ Consumer Willingness □ Improper Assessment
In case of increasing NPL, what is your reaction towards consumer financing?
□ No effect □ Increase Financing □ Decrease Financing □ Change Policies / Criteria
Any specific problem do you face in the area of Consumer Banking?
Any suggestion for improvement in the area of Consumer Banking?
Bank’s Staff Survey Results
Demographic Data:
Gender
Males 92%
Females 08%
Qualification:
Intermediate/Diploma 06%
Bachelors 50%
Masters 44%
Experience:
1-5 Years 42%
Above 5 years 30%
Above 10 years 28%
Which category of individuals do you prefer most for consumer financing?
What is your target market for issuing consumer loans?
Which type of financing is emphasized more by your bank?
Which type of customer do you prefer most for consumer financing?
Is your Credit Information Bureau reliable?
Do you frequently update your customer records?
How do you measure customer profile?
Do you think that variation in interest rate offered by different banks effect your performance?
What are the major reasons for defaults on consumer loans?
In case of increasing NPL, what is your reaction towards consumer financing?
Survey Form – II (For Bank’s Customers)
National University of Computer & Emerging Sciences – FAST
Karachi Campus
SURVEY for research based project on
‘Need & Scope of Consumer Banking in Pakistan’
Name: ___________________________Gender: □ Male □ Female
Profession: _______________________Qualification: □ Intermediate □ Bachelors □ Masters □ Doctoral
In which bank you operate your account?
□ Local □ Foreign
How will you rate your bank schedule of charges?
□ Very High □ High □ Average □ Low
Which type of bank do you prefer for consumer banking?
□ Local □ Foreign □ Any
Have you ever used any consumer financing product? (Tick one or more)
□ No □ Yes (If yes then tick appropriately below)
□ Credit Card □ Auto Loan □ Home Loan □ Personal Loan
Are you facing any difficulty in getting consumer loans? (Tick one or more)
□ No □ Yes (If yes then tick appropriately below)
□ Irrelevant Information □ Improper Guidance
□ Slow Processing □ Bank Statement □ Other _____________
Are you satisfied by the tenure for consumer loans?
□ Yes □ Yes up to some extent □ No
What is the major problem in Credit Cards?
□ Low Limit □ Repayment Schedule □ High Interest Rate □ Other _______
Which of the following e-banking services are provided by your bank? (Tick one or more)
□ Online Banking □ Debit Card - ATM □ Mobile Banking □ Telephone Banking
□ Internet Banking □ Online Bill Payment □ Credit Card □ Other __________
Is your bank providing any wealth management services? (Tick one or more)
□ Yes (If yes then tick appropriately below) □ No □ No Idea
□ Insurance Services □ Investment Services
□ Financial Advisory □ Other ___________
Which of the following new service would you want to be introduced by your bank?
□ Internet banking □ Money at door step
□ Online Interbank Transfer Facility □ Other ___________
Are you facing any hidden charges problem?
□ Yes □ No
Do you think SBP should review its policies from time to time?
□ Yes □ No
Any specific problem do you face in the area of Consumer Banking?
Any suggestion for improvement in the area of Consumer Banking?
Bank’s Customer Survey Results
Demographic Data:
Gender
Males 78.6%
Females 21.4%
Qualification:
Intermediate/Diploma 09.30%
Bachelors 52.66%
Masters 34.00%
Doctoral 00.60%
In which bank you operate your account?
How will you rate your bank schedule of charges?
Which type of bank do you prefer for consumer banking?
Have you ever used any consumer financing product?
Are you facing any difficulty in getting consumer loans?
Are you satisfied by the tenure for consumer loans?
What is the major problem in Credit Cards?
Which of the following e-banking services are provided by your bank?
Is your bank providing any wealth management services?
Which of the following new service would you want to be introduced by your bank?
Are you facing any hidden charges problem?
Do you think SBP should review its policies from time to time?
