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Sunday, April 14, 2024

Consumer Financing records an increase of 30.7pc in FY21

The government's incentives for affordable housing and transportation for the majority of Pakistanis have led to an increase in consumer financing in the country, showing a 32.8 per cent and 45.7 per cent increase in consumer borrowing year-on-year. 

Pakistan’s leading securities brokerage Arif Habib Limited took to Twitter to talk about the increase in consumer financing in Pakistan.

The tweet read, “Continuous increasing trend in consumer financing starting FY21 amid fiscal/monetary measures taken by the govt/SBP such as construction package/housing financing along with lower interest rates.”

The graph shows the fiscal year 2019 to the fiscal year 2021. The graph shows clearly that the fiscal year 2021 began in July 2020. For July 2020, Consumer Financing stood at Rs541.97 billion, and one year later in July 2021, consumer financing stood at Rs721.56 billion, showing an increase of 33 per cent year-on-year, State Bank of Pakistan data showed.

For the month of July 2021, the financing for the house building stood at Rs106.78 billion, up from Rs80.42 a year ago in July 2020, showing an increase of 32.8 per cent year-on-year.

Similarly, financing for transport saw an uptick too, with personal borrowing of Rs313.86 billion in July 2021, an increase of 45.7 per cent from the same month of 2020, where consumers borrowed Rs215.38 billion.

Credit Cards borrowing increased from Rs43.82 billion in July 2020 to Rs57.26 billion, showing an increase of 30.7 per cent year-on-year.

Personal loans also saw a significant increase of 19.6 per cent from Rs197.70 billion in July 2020 to 236.42 billion in July 2021.

This shows that the major increase in consumer financing was seen in the transport and the house financing sector, showing a 45.7 per cent and 32.8 per cent increase in consumer borrowing year-on-year.

Housing Sector

This increase in borrowing for the housing sector with the Mera Pakistan Mera Ghar scheme that the government had launched. State Bank in its statement on 8th September said that since the launch of the scheme, applications of Rs154 billion have been received under the scheme, and among this, the banks had approved housing finance of up to Rs59 billion by the end of August 2021.

The statement said that pace of disbursement under the MPMG scheme has also picked up, which was slow in the beginning due to different factors including the availability of housing units.

For the month of August, the disbursement under the scheme reached Rs11.49 billion, up from Rs7.71 billion in the month of August, showing an increase of 49 per cent month-on-month.

According to the experts, the Mera Pakistan Mera Ghar scheme is one of the best projects launched by the government.

With borrowers able to borrow at the cheaper single interest rates for the first 5 and 10 years – similar to rental yields – housing has actually become within reach. Notwithstanding the rising construction costs. Connectivity via public transport will connect suburbs to the downtown

Auto Sector

If we look at the figures for the automotive industry over the fiscal year 2021, the local car industry has recorded a 62% Year Year basis (YoY) growth to 181,397 units compared to 111,965 units in the previous year.

The reason behind this exceptional performance of the cars and motorcycle industry is the prevailing low interest rates, economic recovery, and strong growth potential, and rising per capita income.

The first two months of the fiscal year 2022 proved highly profitable for the auto sector of Pakistan, as the car sales posted growth of 93 per cent, followed by an increase of 199pc in jeeps.

Despite a month-on-month (MoM) drop in car sales in August to 17,899 units from 20,669 units in July, overall sales in 2MFY22 soared to 38,568 units from 20,008 units.

On the other hand, car production swelled by 112pc to 32,718 units from 15,457 units in 2MFY21.

Some car variants performed beyond expectations. For instance, Suzuki Alto 660cc production and sales excelled with a big boost of 862pc and 145pc to 8,445 and 11,141 units from 878 and 4,547 units.

Similarly, an increase in production and sales of Toyota Corolla was recorded which went up 72pc and 78pc to 4,118 and 4,262 units in 2MFY22 from 2,397 and 2,395 units in the same period in FY21.

Among the notable sales among the new Korean, were new variants from Hyundai Nishat Motors — Elantra and Sonata — whose sales stood at 415 and 305 units, respectively, in 2MFY22, Pakistan Automotive Manufacturers Association (PAMA) data showed.

The market had been unstable in the 2010-2014 period of time, registering a sharp fall in 2013, after which it grew steadily in the following years.

In 2017 the market was sustained by robust internal demand, reaching 247.330 sales, followed by the current record in 2018 at 264.442.