Carmudi has recently published a white-paper that encompasses
current and future state of the flourishing car financing market in Pakistan , and
how consumer attitudes towards credit have transformed in recent years,
especially with the growing trend of Islamic banking and Finance. The report is
based on studies of data and reports by government institutions, authorities
and interviews with financial institutions, car dealers, and banking experts
throughout Pakistan .
Growing Islamic Banking and particularly Islamic Auto Finance
remained the main focus of the study. According to the report in Pakistan
conventional banking has facilitated car financing, generally. And auto
financing has positively contributed in the new as well as used car business.
Whereas Islamic Banking also enables auto finance for consumers who strictly
follow the Islamic principles of riba free business and lending either. Though
Islamic Banking counts only 1% of global banking business but also Islamic
banking is rapid growing all over the world and especially in Pakistani market.
Now a days banks like Meezan bank, Dubai Islamic Bank, Al Falah Car Ijarah and
KASB Modaraba are providing riba free auto finance.
Based on the micro and macro-economic indicators, political
stability, and increase in foreign investment in Pakistan , the economy is predicted
to further stabilize. Further in the wake of rising per-capita income auto
demand will also be high. Enabling environment, low car financing rates and
Islamic financing ensures growing Auto finance
industry in Pakistan .
“Car Financing is an integral part of the Auto Industry and the recent trend of
Islamic Car Financing is giving a positive outlook to both consumer financing
and automobile Industry. We see more and more people asking us about lease and
financing options and it’s very healthy to see financial institutions come up
with new offerings”, commented Raja Murad Khan, Managing Director of Carmudi Pakistan .
In May 2015, the IMF stated that Pakistan made “significant
progress” by fulfilling targets under its $6.6 billion loan program. The
country’s economy is on a high with low crude oil prices and $14 million in
remittances from 6 million workers abroad. Following a 4.1% expansion during
the last fiscal year, the IMF predicted a 4.5% growth in the economy starting
July 1st of this year that was mainly driven by increased domestic demand in
car sales and construction of 20% and 5% respectively.
According to a study by Nielsen in 2014, 78% of Pakistanis
were having plans to purchase new or used cars during next two years. Whereas
89% were focusing on upgrading their existing vehicles subject to financial
soundness, stated in the report. Auto industry won high sales in 2012 that is
again expected in the wake of sustaine economic growth and subsequent increased
lending coupled with 9.5% penetration rate of Islamic financing during current
financial year.
It is also noted that between July 2014 to March 2015,
consumer financing saw a growth of 6.4% (Rs. 16 billion), down from 9.8% (Rs
21.5 billion) in the same period of the previous year. Due to high demand for
new car models and amended regulations
permitting banks to provide financing for vehicles older than nine years old,
auto loans posted a 20% increase, up from 17.8% the year before. Increased
income per capita, improved agricultural sector and the kickstart of the
economy also contributed to the healthy growth in consumer credit, particularly
in the auto sector.
ercial vehicles online.
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