Banks financing for house and automobile on the rise

Commercial banks' credit expansion through house and consumer financing has been on the rise in the closing financial year 2015-16 showing a health growth in values mainly because of falling interest rates.

According to the statistics issued by State Bank of Pakistan (SBP), banks loans under consumer financing portfolios have been increased to 19.6 billion by the end of third quarter of 2015-16 as compared to Rs 18.1 billion in July-March 2014-15 showing a growth of 8.2 percent or Rs 1.5 billion. The central bank quarterly report stated that financing for house and automobile have been stimulated because of the conducive environment on the back of improving economic activities in the country.

Besides, bankers said that house and automobile financing has become an increasingly priority of the banking sector which believed to make profit through margins of different products of consumers financing.

The margins on different avenues from banks have been limited due to lower interest rates, hence banks are very much active to attract masses of middle income group to available banking credit for their personal needs.

On the other hand, falling interest rates have made it possible for consumers to avail banking products to have their own cars and houses at times when borrowing or financing cost were exceptionally low to afford. Banks have made different agreement with automobile companies to attract customers as many as possible which started alluring them as against incentives by the two sectors in terms of freeof cost insurance products and maintenance services.

Besides, banks have also made liaison with importers of cars in order to financing small segment cars to the section of consumers pertaining to middle income groups. In this regard, Islamic banks are more active as because of the fact these two avenues-housing and automobile financing-do comply the requirements of Sharia financing as compared to different products such as personal loan or credit card. On the other hand, house financing has been on the rise though documentation is the major issues in many areas however this financing is quite popular in posh localities in major cities.

Although banks margins through house financing is higher than auto financing but this portfolio is risk too. The rising prices of property in metropolis might restrict growth of credit expansions by banks in the future through banks are actively engaged in the marketing of their house financing products. The growth in credit expansion to house and auto financing is good omen but a large number of private banks are very much reluctant to offer such products to their customers on easy terms chiefly because of risk and complications involved.

Meanwhile, Government has allocated Rs18 billion to multiply sales volumes upto $35 billion a year and stem the country's foreign trade, according to a report. Two key markets, UAE and Saudi Arabia, will be explored and targeted to multiply the export volume while latest fashionwear, mangoes, high-tech electronics and top-grade pharmaceutical are some of the exportable products, reported Khaleej Times.

It said that the UAE's current share of exports from Pakistan is four per cent, the Ministry of Finance said. UAE not only imports a large number of items for its own use, but also serves as a transit point to import goods from Pakistan and several countries for sale and shipment to other countries in the Middle East, Africa and even South East Asia.