August 13, 2002	Tuesday	Jamadi-us-Saani 3, 1423

KARACHI, Aug 12: The consumer financing will increase the demand of locally produced items but it is hard to predict any specific percentage at this moment, Habib Bank president Zakir Mehmood told Dawn.

“The main aim of the new scheme is to boost the domestic industry,” he said referring to the example of car demand and sales, which boosted due to banks’ attractive financing scheme.

“Consumer durable items demand and sales will not go up overnight. The market of these items will increase progressively. Consumer financing is meant for long term purpose,” the HBL chief said.

He said: “Our retail banking and consumer finance department are actively working on it these days.” Mr Zakir said that currently the bank was reviewing the product reliability of domestic industry as well as their sizable market share in various products. It is also being reviewed as to which domestic industry can provide quality, service and after sales service to the consumers in an efficient way.

He, however, did not say as to how many companies have been initially selected for the consumer financing.

Electronic and domestic appliance manufacturers will urge the banks to give loans to general public under consumer financing scheme for the purchase of only “locally assembled consumer durables” instead of imported and smuggled items.

“There are elements of security and guarantee required by the banks, which the local consumer goods makers can provide,” Pakistan Electronic Manufacturers Association (PEMA) chairman Sarfarazuddin told Dawn.

He said PEMA would shortly give the proposals to the banks’ heads in this regard. He, however, hinted that mainly companies like LG, Samsung, Nobel, Philips, Dawlance, PEL and Waves will likely be on the list of banks.

The State Bank on July 30 had allowed all banks to give loans to general public for purchase of consumer durables (like televisions, washing machines, deep-freezers and refrigerators, computers, etc.

Analysts in electronic sector predict a tough competition in the market since many private companies have already made their presence felt by announcing various instalment packages and incentive schemes for purchase of consumer durables.

“This step will definitely help in expanding the market in a big way and we would be able to increase our production substantially,” a leading Korean consumer durable producer informed commerce minister Abdul Razak Dawood few days back.

Electronic items particularly television sets have got a boom following the entry of Korean brands in the markets in the last two years, thus giving a tough time to old players of popular Japanese brands. The Korean companies introduced various discount schemes followed by availability of sets on easy instalments and down payments that resulted in developing a craze among the people to switch over to Korean brands.

A total of 450,000 TV sets were produced in 2001-02 by nine manufacturers as compared to 372,000 sets in last fiscal, the PEMA chief said, adding “in this fiscal, we expect a 20 per cent increase in production of TV sets,” he added.

The recent arrival of satellite channels has also boosted the demand followed by price cuts offered by the manufacturers to attract consumers.

A leading domestic appliances manufacturers said the idea of consumer financing through banks was a welcome step and the market would expand. “It is just like an instalment business,” he added. He did not give any exact percentage as to what extent the demand will increase. “A lot depends on the terms and conditions of banks,” he added.

At present there are four main producers of refrigerators and deep-freezers who have captured a sizable market share by introducing various discount schemes and slashing the prices by 2,000-4,000, thus wiping out the imported and smuggled items.

Around 275,000 refrigerators and 100,000 deep-freezers are annually being rolled out by the local industry. “The demand of these items have been picking up by five to six per cent every year,” a manufacturer said.

The State Bank, in its circular on July 30, had already said that the move was in line to promote consumer financing in Pakistan that had strong linkage with the growth of industrial and trading activities. It says the banks are encouraged to have properly formulated lending policies for consumer financing with adequate delegations of powers to their branches for quick disposal of requests from the interested borrowers.

The SBP has also exempted the banks from submitting a copy of income tax/wealth tax statement relating to minimum information on borrowers if the borrowing for purchase of consumer durables remains below Rs100,000.

The liberalization of consumer financing by banks is in line with the government policy to fuel industrial growth as stated in the trade policy 2002-03.