So far, the segment of short-term consumer financing
was the exclusive domain of the leasing companies, hence other financial
institutions like commercial banks were not allowed to operate in this
activity which, constitute a large clientele representing the middle
classes of the society.
Traditionally speaking, for the general public the
banks are the place where they can deposit their money alone while the
access to the bank advances, loan etc. were availed only by the strong
groups of the people whether in trade and industry or having political
The trading circles are of the opinion that such
facilities are available to the general consumer all over the developed
world and gives a strong base as a result of this new policy the demand
for consumer items will certainly increase and help generating economic
activity in the country.
The idea behind the decision of the SBP to allow the
banks to provide financing for the consumer goods to boost the
industrial and trading activity in Pakistan.
The circular issued by SBP in this regard removed the
restrictions of submitting income tax and wealth tax statements on
borrowers of up to Rs100,000. The SBP has been endeavouring to promote
consumer financing in Pakistan, which has strong linkage effects with
the growth of industrial and trading activities in the country.
According to circular, it has been decided to allow
banks to provide financing facilities to general public (individuals)
for purchase of consumer durable. Advances for financing goods,
including production machinery, commercial vehicles and consumer durable
on hire purchase or installments plan has been allowed.
In order to further facilitate consumer financing, it
has been decided to do away with the requirement of submission of the
copy of income tax and wealth tax statement by the borrower availing
above facilities from the bank provided their consolidated borrowing for
the purpose from the banks do not exceed Rs100, 000.
Banks are encouraged to have properly formulated
lending policies in this regard with adequate delegations of powers of
their branches, for quick disposal of requests from the interested
The television industry is also anticipating
tremendous growth in the coming years as a result of permission to the
banks to resume loans for consumer and durable goods purchase to the
The decision would certainly boost the industrial and
trading activity in the country helping the economic managers to achieve
the economic growth target set by the government. The television
industry in particularly would record a growth of nearly 20 to 25 per
cent in the current year. Last year production of television sets was
estimated to 450,000 units.
The local producers are Samsung, Philips, LG, Nobel,
Singer, Luminar, Crown, Viva and PEL- Daewo.
The industry is also considering to negotiate with
the banks and other financial institutions that they should disburse
loans only to those consumers who are willing to buy locally produced
items so that the interest of the local industry could be protected.
If the banks will entertain consumers who are buying
imported goods it would deny the efforts of the State Bank to boost
local industrial activity.
Last year leasing companies opened avenues and
introduced car-financing scheme, which boosted the sale volume of auto
makers. Sales volume of locally assembled cars was around 42,000 units
up from 32,000 units last year.
The prices of locally manufactured television sets
have registered a drop of 10 per cent as compared to last year on
different brands. The main reason for this decline was strengthening of
rupee against the dollar. Another reason for price reduction was the
increase in volume of production.
As a result of the new policy, growth in sale is
expected which would not only boost the trading activity but more
production would mean more revenue to the government.
Last year, the companies paid Rs778 million in terms
of revenue and other taxes. Growth this year would push the revenue
collection of this source.
Current, the electronic market is flooded by foreign
electronics items especially the mobile phones certainly beyond the
volume of officially imported mobile phones. This indicates how the
volume illegal trades in this sector. In order to discourage the
smuggling trend, the government would have to bring down the duty
structure on these items.