Consumer Financing

Chapter 1

Introduction: 1

1.1 Defining ‘Consumer Financing’: 1

1.2 Objective of the Study: 2

1.3 Research Question: 2

1.4 Research Methodology: 2

1.5 Literature Review: 3

Chapter 2

Regulatory Framework for Consumer Financing: 4

Chapter 3

Credit Information Bureau Rules and Regulations 8

Chapter 4

Researches Conducted by the State Bank of Paksitan 9

4.1 The State Bank of Pakistan’s Perspective on Consumer Finance 9

4.2 Banking Systems Review 13

Chapter 5

Research Conducted by Consumer Rights Commission of Pakistan (CRCP) 16

Chapter 6

Survey Analysis: 33

Chapter 7

Conclusion: 38

Bibliography 42

Appendix 43

Chapter 1

Introduction:

1.1 Defining ‘Consumer Financing’:

The term ‘consumer financing’ refers to any kind of lending to consumers by the banking sector and financial institutions. It is a type of service that is designed to provide the individuals with necessary finance for personal purchases ranging from financing for consumables to buying a car, to buying a house. The concept of consumer financing is based on the need that provides consumers with financing support to enhance their consumption and, as a result, improve their standards of living.

In this study, the term ‘consumer financing’ is used as it is defined in the Prudential Regulations for Consumer Financing (CF) of the State Bank of Pakistan (SBP). According to the Regulations, consumer financing means “any financing allowed to individuals for meeting their personal, family or household needs”. Thus, corporate or commercial borrowings are excluded from this definition. Consumer financing is broadly categorized into the following four types of products:

Personal Loans Including Loans for the purchase of Consumer Durables:

Personal loans include the loans provided to individuals for the payment of goods, services and expenses, and include ‘running finance’ as well as ‘revolving credit’ to individuals. The...