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Topic: Role of banks in Consumer Financing in Pakistan and a deep insight to Issues and Challenges faced under consumer financing

Background
Personal Loans have become a significant portion of life for millions of Pakistanis. It plays a vital role in the day-to-day life of the families. Normally they track loans for personal necessities such as overhaul and/or purchase of house, education of their kids, marriage of their daughters and meeting urgent medical expenditures etc. In the initial period when the perception of banking was not well recognized, Pakistani people, particularly in rural areas used to borrow money from the unlicensed creditors on fractional terms and at a compound interest of very high rate.
From the banking sector viewpoint, consumer loan past is comparatively now—about 10 to 15 years and comprises schemes such as Auto loan, credit cards, house loans, and personal finance Over the last ten years, Pakistan’s banking sector has considerably encouraged the consumer financing by releasing a wide choice of products like credit cards, auto loans, personal loans etc.
It allows people to increase their living standard by permitting them to meet the expense of various consumption goods, which formerly might have been out of their reach.. Henceforth, this also directed the manufacturing sector to increase the capacity, attaining scale economy and devour its benefits. Correspondingly, a lot of other socio economic development and values can be noted due to promoted consumer financing; surely banks have played their due role in inspiring economic expansion in Pakistan.
Though, there also exists the other side of coin— the path of such financing is likely to have tests too, as familiarizing consumer financing service might suffer short and long term impacts. From economic viewpoint, there is a tension lies between the creditability and capability.
Rationale of Study
Our topic is based on the problems which are faced by consumers while buying consumer banking products in Pakistan. This study is derivative with respect to consumer prospective. For this tenacity we pick some variables that are Interest factor, lack of awareness, Customer services, Security against loan and Procedural complications.

Scope of the Study
The study aims to achieve a sound financial system in our country. It also focuses to improve socio economic conditions of the citizens by removing barriers of consumer financing.
Problem Identification
Consumer financing is decreasing day by day due to various factors i.e. high interest rates, high spread, lack of awareness, hidden bank charges, processing delays and ineffective service etc. Our study will try to reach the insights of these problems in order to remove them.
Problem Statement
The problem statement of our research is “Reason and Causes that avoid customers from purchasing consumer banking products in Pakistan”.
• Research Questions
“What are the foremost problems of consumer financing in Pakistan observed by the consumers?”
Objectives
Our study aims to fulfil following objectives:
• To overview problems faced by customers while purchasing banking products
• To see the relationship and effect of following variables on consumer financing i.e Interest factor, lack of awareness, Customer services, Security against loan and Procedural complications etc.
• To find potential solutions to these problems
Questions of the Study/ Hypothesis
• H1: Interest factor has impact on customer decision for purchasing consumer banking products.
• H2: Interest factor has no impact on customer decision for purchasing consumer banking products.
• H3: Lack of awareness has impact on customer decision for purchasing consumer banking products.
• H4: Lack of awareness has no impact on customer decision for purchasing consumer banking products.
• H5: Security against loan has impact on customer decision for purchasing consumer banking products.
• H6: Security against loan has no impact on customer decision for purchasing consumer banking products.
• H7: Procedural difficulties have impact on customer decision for purchasing consumer banking products.
• H8: Procedural difficulties have no impact on customer decision for purchasing consumer banking products.
• H9: Customer contentment has impact on customer decision for purchasing consumer banking products.
• H10: Customer contentment has no impact on customer decision for purchasing consumer banking products.
Consumer financing is very supportive for providing high standards of living to the people by elevating their purchasing power to the innumerable consumption goods which were formerly out of their range. The demand of product increases which arouses the manufacturers to increase their capability. Consumer banks play their character in emerging the Pakistani economy.
The study of Household Finance/Consumer Finance is very perplexing because the behavior of consumer is problematic to measure accurately. The restrictions faced by consumers are not captured through text book model (Campbell, 2006).
In broad outlook consumer finance has created complications for less financially educated people. Consumer banking products are deliberate mainly to rise purchasing power of middle class customers, so that they may become able to raise their standards of living by buying a variety of consumable goods which were properly treated as luxuries (Baber, Iqbal and Afzal, 2008).
In Pakistan most of the clienteles of consumer banking are illiterate. They don?t even know about the certification, policies, rules, regulations, terms and conditions of services which provided to them. The credentials in banks is usually methodological and the information which can distress the financial right of consumer is never written openly in these documents.
Consumer financing is decreasing due to high interest rate spread (in recent years, the spread has surpass 7% on average and has now reached 13-14%) and variable interest rate on loan. High interest rate is detrimental competitiveness in financial segment. The number of consumer grumbles is steadily increasing due to processing delays, service ineffectiveness, hidden charges and poor disclosure practices. Useless and untrained staff is also worsening consumer financing in Pakistan (Kamal and Hussain, July, 2011).
Consumer financing has decayed to over Rs.30 billion because many banks has either abridged or completely stopped financing. The other cause of drop in growth is high interest rate ranging from 17-19%. On credit cards and personal loans, the overall rate is about 30-35% (Sabir, April, 2011).
As this study depends on customers prospective thereby data should be collected from customers. The collected data can be used for evaluating null hypothesis and variables. Afterwards data can be analysed and interpreted for final Conclusion and Recommendations.
Gender discrimination must be avoided in collection of data. People of different age groups, educational level and occupational status must be included in our population. Both, who had already taken consumer loan and who haven’t taken any consumer banking facility must be included in population. Data must be collected in natural environment and no artificial environment should be produced for this tenacity.
Researcher should use questionnaire method for assembling data preferably close ended questions. Online polls on social media sites or e questionnaires can also be used to provide effectiveness in research.As this topic is based on consumer’s viewpoint so the data must be composed from customers, whichever availing or not availing consumer banking services. For this determination researcher must visit banks and general public.Study needs to be conducted in an estimated span of 3 to 4 months. It is because collection, organisation, implementation and analysis of data need time.

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