A record level auto financing in banking sector due to Ride Hailing Services

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A record level auto financing in banking sector due to Ride Hailing Services
A record level auto financing in banking sector due to Ride Hailing Services

A record level auto financing in banking sector due to Ride Hailing Services. Pakistan has observed a significant increase in auto financing in previous fiscal year. As, conventional and Islamic banks have cashed in on the earning opportunities by auto financing of automobiles in the customary low interest rate.

It helped the whole banking industry to manage more than Rs. 43 billion for cars financing to consumers in 2017.

Falling interest rates and improving disposable income of the consumers by Banks help out consumers for auto finance products. It all fueled up by the law and order situation and investment opportunities of carpooling companies.

State Bank of Pakistan (SBP) revealed the statistics which shows, on the whole auto finance portfolio of banking industry increased to Rs. 171 billion by the end of 2017 in comparison to Rs. 127.6 billion by 2016.

It demonstrates that on average Rs. 3.6 billion loans and financing issued every month by the whole banking industry in the outgoing calendar year.

Furthermore, a tremendous increase was also observed banks’ auto financing with increase Rs. 127.6 billion from Rs. 95 billion in 2016 presenting an boost of Rs. 32.5 billion, an average Rs. 2.7 billion per month.

Comparing the data of 2017 with 2016, we’d witness an attractive growth of 32% by conventional and Islamic banks. 

However, the fact is the recent boost in ride hailing services such as Careem and Uber have played an active role in increasing financing services from different commercial banks.

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Karachi, Lahore and Islamabad were the main cities to follow the trends as these cities received an overwhelming benefit from these cab services.

Now, consumers are investing their savings as a 20% or higher down-payment to acquire new or reconditioned cars from banks to make use of them for these services.

As a result, their financed cars make out attractive monthly revenue which not just meets all driver expenses other than also helpful in paying monthly installments for the car.

One of the bank consumers, Muhammad Shahid shared his experience as he has been making a handsome amount of Rs 20,000 to Rs 25,000 per month in opposition to Rs 0.2 million of investment which he used for financing a car worth Rs 1 million by a bank.

According to Shahid, an amount of Rs 70,000 to 80,000 per car is being earned on a monthly basis which is dispersed between the driver, the bank (monthly installment), fuel and car owner (profit).

“The monthly earning varies due to demand but the overall business is smooth thanks to carpooling services and the facility of a bank”.

“I will have my own car in next five months after completing installments, and my take-home will increase ultimately,” he added.

What is role of bank collaboration with Careem & Uber?

On the other hand, banks have played a main role in endorsing and promoting these carpooling services.

Just take the case of JS Bank which launched an auto-finance scheme in collaboration with Careem and generated almost 1,000 entrepreneurs.

Moreover, Bank of Punjab has also signed a contract with Uber to transport 50,000 passengers to carpooling services.

In future, we are going to witness much similar collaboration between different banks and services.

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