KARACHI, May 1: Despite high lending rates, consumer financing has got a leading role in the banking sector while bankers believe it has remarkable potential for further growth, like telecommunications grew in recent days.

Bankers said at the end of 2007 share of consumer financing reached above 15 per cent of the total advances of all banks.

However, analysts said officially available data showed that consumer financing was up 14.3 per cent in September 2006. The Prime Minister of Pakistan and the State Bank officials have been advocating higher growth in consumer financing.

The consumer financing brought new fortunes for banks as lending for consumer financing is of highest rate.

“I believe that the average rate of consumer financing is not less than 18 per cent,” said Abid Kaleem, senior official at a local bank.

He said lending rates for consumer banking ranged from 16 to 22 per cent.

Despite high lending rates, like 22 per cent, consumer demand for credit has been rising, enabling the banks to make maximum from this sector.

In the first quarter of the current year, banks earned a profit of 24 per cent while the net interest income rose by 31 per cent to Rs36.7 billion.

Analysts said it was difficult to identify that how much con-

sumer financing contributed to total net interest income of Rs36.7 billion. But he said highest interest income was flowing from consumer financing sector.

“Bank advances have declined sharply during the current fiscal year, but income from interest is rising which reflects that there are high rates of lending and these include consumer financing,” said an analyst.

The credit to private sector has fallen by 24 per cent during more than nine months of the current fiscal and is far behind the target set by the government.

The private sector borrowed Rs262.8 billion from July to April against the annual target of Rs390 billion.

While the consumer financing was on the rise, credit to traditional corporate sector, like textile has significantly declined.

Analysts said despite lower outflow of advances to textile and other major sectors, the banks have managed to increase their earnings mainly because of increasing role of consumer financing.

The Prime Minister, Shaukat Aziz, in a meeting with the heads of the banks on Monday urged banks to further increase consumer financing.

Bankers said the scope of consumer financing was much more than what the banks had achieved till today. They believe that higher lending rates were not an obstacle in the way of their fast growth.