2010 [Type the company name] Mohammad Ahsan Dahar I.D :_ 8683 Section:- C [CONSUMER FINANCING] Contents INTRODUCTION ....................................................................................................................................... 4 CONSUMER FINANCING .......................................................................................................................... 4 What is Consumer Financing? .............................................................................................................. 4 Growth of Consumer Financing in Pakistan .......................................................................................... 5 Types of Consumer Financing .............................................................................................................. 6 (a) Personal Loans: ........................................................................................................................... 6 (a.1) personal loan what banks hide from you: ................................................................................. 6 (b) Auto Loans ................................................................................................................................. 7 (c) House Financing: ......................................................................................................................... 7 (d) Credit Cards: ............................................................................................................................... 8 Need of I.T in Consumer Financing ........................................................................................................ 10 Fast application processing: ........................................................................................................... 10 Better Services to customers: In ..................................................................................................... 10 Mass consumer client record handling: .......................................................................................... 10 Reduce calculation errors: ............................................................................................................. 10 Efficient loan recovery ................................................................................................................... 10 Auditing and fraud detection: ........................................................................................................ 11 Reviewing Consumer Financing through Articles :- ............................................................................. 11 (1) 'High interest rate hampers consumer financing growth' .................................................... 11 (2)Consumer financing losing luster:- ............................................................................................. 13 Prudential Regulations .......................................................................................................................... 14 Pre-operation Requirements ............................................................................................................. 14 Minimum Standards for Consumer Financing Activities .............................................................. 14 Information Disclosure ...................................................................................................................... 15 Exposure Limits ................................................................................................................................. 15 Risk Mitigation Ability ........................................................................................................................ 15 Margin Requirements ........................................................................................................................ 16 Borrower’s Eligibility .......................................................................................................................... 16 Insurance Premium ........................................................................................................................... 16 Auto Loans ........................................................................................................................................ 17 House Financing ................................................................................................................................ 17 Personal Loans .................................................................................................................................. 17 CONSUMER FINANCING IN PAKISTAN : .......................................................................................................... 18 BANK ALFALAH LIMITED ............................................................................................................................ 18 Bank Alfalah Credit Card ................................................................................................................ 18 Schedule of Charges .......................................................................................................................... 21 UNITED BANK LIMITED ............................................................................................................................. 25 UBL CREDIT CARD … MAZAY MEIN RAHO! ...................................................................................... 25 MUSLIM COMMERCIAL BANK LIMITED (MCB) ............................................................................................. 27 Conclusion ............................................................................................................................................. 30 INTRODUCTION Over the last seven years, Pakistan’s banking sector has robustly engaged in consumer financing by unleashing a variety of products such as credit cards, auto loans, housing finance, and personal loans, etc. The unprecedented growth of consumer financing is largely attributed to the liberal economic policies attuned to the principles of free market economy, and huge liquidity available to the banks in the aftermath of 9/11. This environment prompted many banks to make their pie of profits bigger by selling consumer financing products through tactical and persuasive strategies, even where no genuine demand existed. As a result, supply-driven approach and aggressive marketing have further catalyzed the boom. From a macroeconomic standpoint, consumer financing has considerably contributed to economic turnaround of Pakistan by stimulating consumption and investments. There has been a phenomenal increase in private consumptions due to easy availability of credit from banks. In tandem with this development, a number of problems and challenges have emerged with adverse effects on the national economy as well as the individual consumers. At the macroeconomic level, the boom in consumer financing has demonstrated strong inflationary impact despite stringent monetary policies. Personal and auto loans, for example, have resulted in increased demand for consumer goods, expansion of road networks, and imports of petroleum products. From a consumer’s standpoint, a whole plethora of issues has emerged as a result o unfair profit-earning strategies of banks in absence of consumer awareness about terms and conditions, rules, and regulations, etc. In this context, Consumer Rights Commission of Pakistan (CRCP) has undertaken this research with financial support of The Asia Foundation. The main objective is to map and highlight the emerging issues and challenges associated with consumer financing. CONSUMER FINANCING What is Consumer Financing? Consumer financing means any financing allowed to individuals for meeting their personal, family or household needs. The facilities categorized as Consumer Financing are given as under: Like personal loans, auto loans, house financing, and credit cards. These finance give people to live these own choice. All the people can not afford to achieve their desired. But they want to enjoy the life, and then they go to banking and applying for financing. The bank takes some necessary steps and then allow to people to enjoy the life. Rapid growth in the consumer finance portfolio of the banking sector in recent years has generated an ensuing debate, mostly critical of its alleged role in inducing consumption led growth in the economy. The general perception is that consumer finance has created problems for the less financially literate customers. The aims to explore some of these perceptions and present data and evidence in perspective, while taking into account the high sensitivity of these loans to increasing interest rate dynamics. Notably, the household sector in Pakistan is underleveraged by global standards, and emergent risks are well managed by the banking sector . Consumer finance is an established financial product across the globe, particularly in mature economies, where it constitutes a significant portion of banks’ lending portfolios. In the Pakistani banking sector, however, the evolution of the consumer financing portfolio is a more recent phenomenon, as banks have traditionally focused on lending to the corporate sector and public sector entities. While two prominent foreign banks took the lead in introducing credit cards in the banking sector in the mid- ‘90s, their outreach was limited to the top tier of salaried customers and businessmen. Emulating the experience of various foreign banks who had a head-start in this area, domestic