June 24, 2008	Tuesday	Jamadi-us-Sani 19, 1429

KARACHI, June 23: Credit card, car financing, personal loans and consumer durable business of banks remained almost stuck up or witnessed only a slight improvement during the last 10 months.

The fastest growing consumer financing, which rapidly grew after the old established and biggest textile sector in terms of loans, found no way to move ahead except the house building sector.

The outstanding loans for the entire personal loans (including consumer financing and bank employee loans) witnessed a growth of about Rs24 billion to Rs422.5 billion from Rs398.8 billion in June 2007.

The last five years have been a booming period for growth of personal loan sector and the banks were relying heavily on this sector for their profit.

The 10 months details provided by the State Bank show that the only major growth under the head of consumer financing during 10 months was house building which recorded a growth of about Rs11 billion.

However, the business of credit cards, which were propagated and advertised to promote the business, failed to show any progress. During the 10 months, the business showed a growth of Rs2.8 billion to Rs45.6 billion till April 2008.

The business was hurt mainly on the basis of massive irregularities on part of the banks selling credit cards.

The complaints, including wrongly charged late payment fee, unexplained charges, very high cost of interest from 35 to 42 per cent per annum and no satisfied reply from the banks to card holders made this sector doubtful.

“One of the reasons for low growth of credit card business is heavy default in this sector,” said a senior banker. He said the high default was mainly because of very high rate of interest.

Credit card recovery process also earned some bad name during the last couple of years and several people committed suicides when failed to make repayments.

The growth in personal loans was almost stuck up as loan position showed that the outstanding amount of this segment remained at Rs142 billion as it was in June 2007.

Bankers said the personal loans got direct impact of high interest rate. Bankers said banks can not afford to provide personal loans even at 14 to 15 per cent in the wake of 11 and 12 per cent inflation.

“Despite low real interest rate in Pakistan, banks are unable to absorb the harsh reality of very high inflation which put a cork on flow of credit for personal loans,” said the banker.

The case of transport, mainly car financing is not different.

Car financing remained a booming business for at least five years since 2002 but finally it came to a halt.

The car financing, which boosted the banking business in the country, could only add to the total outstanding amount of the sector to Rs108 billion from Rs105 billion in June last year.

Bankers said the consumer financing has been the focal point of the banks as the corporate sector growth remained slow during the five years.

The manufacturing sector, still getting biggest share of loans, failed to create potential for diversified growth.

Bankers do not see any big scope in manufacturing sector while the poor performance of the consumer sector would hurt the banking business in the country.

“There is a vast scope of consumer financing, but it needs a settled economic and political stability for which banks will have to wait for another year,” said Abid Saleem, an analyst.