Consumer Financing in Pakistan

FINANCIAL INSTITUTIONS Term Report Consumer Financing In Pakistan

Submitted To: Sharique Ayubi

What is Consumer Financing?...........................4 What are the benefits of getting finance?.........4 Types of financing options for Consumers........4

TABLE

Credit Card Financing.......................................5 Credit History....................................................5

OF

Mortgages Calculator........................................7 Advantages of buying home.............................7

CONTENTS

Disadvantages of buying a home......................8 Personal Loan financing..................................10 Consumer finance: what chances of success. .12 Consumer Financing in Pakistan:....................17 Bank Alfalah Limited.......................................18 Bank Al-Habib Limited.....................................31 Muslim Commercial Bank Limited (MCB).........34 United Bank Limited........................................45 Habib Metropolitan Bank Limited....................52 Summary........................................................54

Consumer Financing in Pakistan

Financial Institutions

Banks behaving like cartel, fleecing depositors: report......55

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Consumer Financing in Pakistan

WHAT

IS

Financial Institutions

CONSUMER FINANCING?

Consumer financing provides individuals the necessary financing for personal purchases ranging from buying a car, shopping purchases to buying a house. Most people don’t normally get access of capital through equity markets so they would normally get access to debt finance through the established financial institutions including banks, credit union, insurance companies etc. This debt is usually in the form of a credit card or loan.

WHAT

ARE THE BENEFITS OF GETTING FINANCE?

A loan gives you the money you need to pay for something big like a house, a car, college tuition, or major home repairs when you don't have the cash to cover the purchase. While small purchases can be paid for in advance with a credit card. Most people could not afford to do these things without finance.

TYPES

OF FINANCING OPTIONS FOR

CONSUMERS

 Home loans  Student loans  Car loans  Personal Loans  Credit Card  Debt Consolidation

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CREDIT CARD FINANCING Provides Information on Credit Card financing and their benefits and pitfalls.

WHAT

IS A

CREDIT CARD

A credit card is a plastic bank card with a magnified strip. Like all bankcards it enables consumers to make purchases and withdraw money up to a limit set by the providing financial institution. Unlike debit bankcards this provides the convenience for the consumer to purchase products immediately and pay for the cost of the goods later.

CREDIT CARD REPAYMENTS Most credit cards can involve no initial interest, but the full price of the purchase or withdrawal must be paid for within the specified period which could be from 30 to 90 days depending on your institution. If it is not paid by the specified date, it may require interest payments. In conjunction with this purchase repayments there is usually an annual fee charged on most credit card accounts for their convenience.

WHO

SUPPLIES CREDIT CARDS

Financial institutions provide their own specific credit cards usually in partnership with major providers such as VISA and MasterCard as they are globally recognized worldwide.

CREDIT HISTORY This area provides information about a consumer's credit history, why it is important and the issues faced if you have had a bad one.

THE

IMPORTANCE OF A GOOD CREDIT HISTORY

When consumers seek financing for their investments, mortgages and personal expenditures all credit approvals will be adjudged on a consumer's credit history. All applicable financial institutions that by law are allowed to lend such as banks use a persons credit history (which is a score compiled on a persons previous credit) in the process for approving there loans. These financial institutions evaluate the potential risk by providing the recipient a loan and the probability that the they would be pay it back including mitigating the potential loss due to the inability of loan recipients to pay back the loan. In particular your credit history is a reflection of information that creditors have reported to credit bureaus, e.g. if you had bought a car or TV from Page 5 of 57

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financing options. Credit bureaus can legally report poor payment information for about 7 years and for bankruptcies for about 10 years.

CONSEQUENCES

OF A BAD CREDIT HISTORY

A bad credit history can pose problems when trying to attain financing from institutions that have strict credit history requirements. With a bad history you may still be able to attain financing but at a higher interest rate which many institutions may offer to offset the potential risk of the bad history.

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MORTGAGES CALCULATOR Provides information about Mortgages Financing including renting vs. buying, variable vs. fixed and home loan benefits.

WHAT

IS A HOME LOAN

A home loan (also called a mortgage) is a loan agreement that enables a person to borrow money to buy a house or other property. The property is used as security for the loan. The lender may take possession of the property if the loan cannot be repaid. A person may obtain a mortgage any financial institution that offers. A standard loan includes a Principal (unpaid loan amount) and interest over a 25 year period. Depending on the loan agreement, the home loan may come at either a variable or fix interest amount. As you pay off the loan initially a large portion of your loan repayment will go towards the interest. However as the borrower pays off the loan, more of the each monthly payment goes to the principal and less towards the interest eventually paying off the loan.

VARIABLE VS FIXED INTEREST

RATE

Variable rate depends on the official interest rate set by the central bank of each country. This rate in conjunction with the banks spread forms the interest rate. This variable rate can fluctuate depending on central bank strategy, by cutting interest rates, there will be a reduction in repayments and increasing interest rates means an increase in repayments to your lender. Fixed rate is a fixed interest rate set by the agreement with your financial institution; this rate is set for the life of the loan period agreed upon with your institution. This means you will have a set repayment to pay consistently through the life of your loan.

ADVANTAGES

OF BUYING HOME

Buying a house has its positive and negative aspects and so before deciding whether to go ahead and purchase that home, look at the pros and cons in conjunction with your situation and decision will be appropriate for you.

ADVANTAGES

OF BUYING

 Build Equity. As you are making your mortgage payment, you're building equity. Equity is the portion of the property that you actually own through your payments, versus the portion that you still owe the mortgage lender. The longer you stay in your home and the more mortgage payment you Page 7 of 57

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make, the more equity you'll have. This may assist you in using your equity in purchasing another property or another useful investment.  Appreciation of housing value. Over time housing prices gradually increase although this may fluctuate, in general housing prices consistently over a long period go up.  Stability and Freedom. By owning your own home you can decorate and renovate your home whichever way you like. Also staying in a common location for a number of years will provide a stable environment for children growing up.  Financial Credibility. Owning your own home helps you establish financial credibility with banking institutions which can help if you intend to finance in the future.  Independence. Provides you with independence and privacy from landlords with inspections of your home. Landlord limitations on pets, renovations etc will not longer apply.  Pride. A house is only a building while a home is when people living within its walls. Owning your own home provides owners with the sense of pride and satisfaction knowing that they created, renovated and enjoyed times within their home.

DISADVANTAGES

OF BUYING A HOME

Buying a house has its positive and negative aspects and it is not for everyone. Depending on your life style and stage in your life it may or may not be the right time to buy a home.

DISADVANTAGES

IN BUYING

Below are some disadvantages of buying a home.  Larger costs then renting. Not only now will you be paying a monthly mortgage but include the added costs of maintenance and repairs.  Bad Area. Depending on the area you moved to could have implications on your long term ambitions; this can require living through a period with bad neighbors, unhelpful council and many other problems that can plague an area. After you've bought a home, you may not have as much flexibility in choosing a new location or job.  Inflexible to job opportunities. After you have bought your own home there will not be as much flexibility in choosing a new job in another location.  Home prices fluctuations. Depending on when you bought your property during a boom or bust period could influence the appreciation or depreciation Page 8 of 57

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of your properties value. There's no guarantee that your home will increase in value, especially if it was bought overvalued.

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Consumer Financing in Pakistan

PERSONAL LOAN WHAT

IS A

Financial Institutions

FINANCING

PERSONAL SECURED LOAN?

A personal loan is a loan to an individual that can be used for almost any purchase, including purchasing cars, schoolbooks, and holidays or paying off existing debts. The lending criteria can be structured to meet different individual’s requirements:  With secured and unsecured loans  Length of loan may vary with individual requirements e.g. 1 to 5 years  Variable vs. fixed interest rates

HOW

MUCH CAN

I

BORROW FOR A PERSONAL LOAN?

Usually the key aspects in guiding the lending institution of the amount to borrow can include:  How much income do you earn per year – Providing pay slips  How long you have been at this employment  Good credit rating If property is secured against the loan, is it mortgaged and if so how much?

HIGH RISK PERSONAL LOANS

VS.

LOW RISK LOANS

Personal loans are considered more risky than other types of loans. Borrowing to purchase a home is considered a good business decision as well as borrowing to invest in a newfound business. These types of borrowing tend to convince lenders that they are of lesser risk. However personal loans can be used for virtually any purpose and this lack of certainty in investment decision provides lenders with higher risk of default.

WHAT

IS THE DIFFERENCE BETWEEN SECURED AND UNSECURED

LOAN

A financial institution may provide a secured personal loan with the offer lower interest rates if security is used against your house or some other security. In case of default the lender is able to seize/claim the security. However in most cases financial institution provide unsecured personal loans. These are higher risk then secured personal loans because the lender is not able to claim on a security such as your home in case of default. Note. Depending on circumstances they may still be able to claim the amount due in case of default.

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PERSONAL

Financial Institutions

LOAN INTEREST REPAYMENTS VS. TIME.

The actual repayment of a personal loan depends upon the repayment method chosen by the borrower. Monthly repayments would incur higher repayments of interest then repayments of weekly or fortnightly. The length of the loan affects how much interest is actually paid. The longer the period of the loan, the more interest you would have to pay. Disclaimer, the use of this website provides no actual advice is to be taken, refer to your financial institution for quality advice.

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Consumer Financing in Pakistan

CONSUMER

Financial Institutions

FINANCE: WHAT CHANCES OF SUCCESS

In a generic sense, institutional arrangements that provide consumers with financing support to enhance their consumption and, as a result thereof, improve their standards of living, should fall within the broad definition of consumer finance. These could range from credit cards, to finance and operating leases, to housing finance. But the semantics of financial markets generally tend to exclude housing finance from this range treating it as a distinct financing product essentially because of its long-term nature. Admittedly, consumer finance spurs consumption and demand that is necessary for the industry to expand its productive capacity or make fuller use of its existing excess capacity, and succeed in cutting prices at the retail level. It also offers the prospects of increasing employment and, possibly, fresh investment in industrial sectors, especially those producing consumer durables. However, the key to sustaining the consumption-demand equation without pushing inflation to unsustainable levels is the maintenance of the critical balance between savings, investment and borrower’s debt-servicing ability. There is considerable truth in the observation that lowering of interest rates by central banks in the mid-1990s, ostensibly to spur demand and economic activity, resulted in acquisition of excessive amounts of “easy” bank credit by businesses and creation of over-capacity there from. Similarly, households too acquired credit (far in excess of their capacity to save and repay) for investing in houses, consumer durables and company shares on visibly inflated prices. The credit boom and the demand created there from, led to meteoric rises in prices and deluded industry into overinvesting in capacity building. Eventually, unsustainable burden of debtservicing forced businesses to crash, and households ended up with negative equities. Maintaining the critical balance between savings, investment and borrower’s debt-servicing ability is possible if input prices remain stable affording businesses to sustain their profitability, and interest rates too remain stable to ensure that, in the medium term, debt-servicing burden remains affordable for both consumers and manufacturers. Unless the system can ensure the maintenance of this delicate balance, economic instability will remain a strong possibility. Countries that tried to achieve an over-kill in spurring domestic demand sometimes overlooked the importance of maintaining this critical balance. We too are trying to achieve the same objective but regulators must ensure that we don't fall in that dangerous trap. Pakistan's economy, already rendered fragile by industrial sector loan losses, simply cannot live through another major upheaval caused by pervasive delinquency of consumer loans. Page 12 of 57

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For the past 55 years, commercial banks in Pakistan had completely ignored consumer financing as an activity. There was scant realization of the fact that the hallmark of healthy economies is not unrealistically high dependence on exports but on domestic demand, and development of indigenous resource and industrial bases that support domestic consumption. Until the early 1990s, even credit cards were offered to a select band of customers who needed them not by way of financial support but as a convenience for paying their bills while traveling abroad, realizing little that in developed economies this mode of financing supported consumption to sustain steady growth in domestic demand which, in turn, prompted investment and industrialization. Even now, the sudden urge for promoting consumer finance has less to do with accepting this reality; it was spurred largely by a depressed investment climate in which reduced borrowing by industrial and commercial sectors coincided with excess liquidity in banks, thanks to 9/11. Lumbered with liquidity that is nearing unmanageable proportions, banks are now aggressively promoting consumer financing. The big attraction in extending financing facilities to the passive consumer segment is the prospect of earning high interest rate spreads because consumers are soft targets as far as haggling over interest rates chargeable to them are concerned. They are much more likely to borrow at unrealistically high rates - a convenience that is no longer available on lending to industrial and commercial borrowers who insist on the finest possible loan rates. But in pricing consumer loans unrealistically high, banks would be making a serious mistake because "they cannot charge a high enough loan rate that could compensate for the loss arising out of an irrecoverable loan." More importantly, if consumer finance has to pick-up as a truly helpful mechanism for spurring domestic demand, it must be ensured that it remains within the consumers' capacity to repay their loans on time, and they feel confident about borrowing again and again. As it is ordinary consumers capacity to borrow and repay loans out of their savings has been rendered precarious by decade’s long cycle of inept economic policies that have made the poor even poorer. Low rise in per capita incomes (whose impact was compounded by falling their purchasing power due to rapid depreciation of the Rupee) caused savings to fall and poverty to rise. This combination steadily depressed demand even for the less expensive consumer durables. The sustained trend of depressed demand prevented the development of a sizable industrial base and marginalized the opportunities for investment and employment. In the last two years, steady reductions in returns on savings have further diminished consumer’s capacity to repay loans. It would therefore be unwise to assume that ordinary consumers will have the capacity to re-pay loans out of their savings. Even in good times, ordinary Page 13 of 57

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Pakistanis were unable to save more than 14 per cent of their disposable incomes. In the current scenario, capacity of the lower middle class - current target of the banks - to save has only worsened. Banks are belatedly trying to redress this enormous macroeconomic structural imbalance but given the historic pattern of economic developments, they will be handicapped in their efforts to promote consumer finance. Signs are that lower interest rates have enhanced the capacity of the middle and upper middle class to borrow and service consumer loans, but not the lower middle class. The demand-pull is pushing prices of consumer durables to unrealistic levels. Take, for example, automobiles. Strengthening of the Rupee and substantially lower interest rates should have lowered their prices. The expectation wasn't met because rise in demand (purposely prevented from being met with assemblers trying to avoid production in two shifts instead of one shift) created a distortion that allowed assemblers not only to keep prices high but also to create a roaring black market in this sector. With banks now offering liberal consumer finance facilities for acquiring home appliances, their prices too are on the rise although excess manufacturing capacity in this sector may encourage the less greedy manufacturers to concentrate more on stretching demand by refraining from pushing up prices. Many observers argue that this distortion is a temporary phase, which will soon become history as production capacities increase to fill the large supply gap. May be so, but going by the example set by the automobile industry (in which, so far, only one assembler has announced a "plan" to double its output) this lag may not be as temporary as optimistic observers make it out to be. Banks providing cheap credit to business and industry at the expense of their depositors can exercise a powerful influence on the manufacturing sector to push the case for compensating savers through lower prices. Unfortunately, however, lack of social responsibility in the corporate sector is too pervasive to bring home this realization to the market players. Aside from the macroeconomic distortions that suppress consumer demand, there are other delicate issues that require focused attention of commercial banks intending to launch a major thrust in consumer finance. The first is the lack of institutional arrangements and practices that hamper the assessment of consumer’s re-payment risk. Ideally, risk assessment of employed individuals should not pose as much of a problem as in the case of self-employed individuals because employers could help in providing a basis for establishing their employee’s repayment capacity. That, unfortunately, is not yet the case. Employers appear averse to taking even the feeblest responsibility on account of their employees. Many employers either don't certify, or certify very inadequately, the financial status of their employees intending to avail a consumer finance facility from a Page 14 of 57

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bank. Unless provisions are made in relevant labor laws, employers will not provide even this information about their employees, which they should morally feel bound to provide. Fewer among them are prepared to confirm to the financing institution that they have placed on their records the fact that their employee has availed a financing facility. Fewer still are prepared to accept the responsibility of informing the financing institution in the event the finance-availing employee leaves the employer, or is asked by the employer to leave. In the case of the self-employed, the problems are complicated further because many potential consumers do not keep credible records of the stream of earnings from their vocations or businesses to permit financing banks a reliable assessment of their future re-payment capacity. Many consumers don't have even utility service connections in their names. Given these handicaps, credibly verifying consumers' repayment sources will remain a stumbling block. Unless insurance companies lend a helping hand in this effort by providing loan re-payment guarantees to the lending banks, the prospects of expanding the consumer finance market remain dim. Bankers will have to rely largely on their own credit judgment, which may not always be correct. Given Pakistani banker’s track record in lending, such a possibility will always be there. A factor that will further complicate extending consumer finance facilities along sound lines are the continuing inadequacies of our legal system that make it cumbersome for borrowers to collateralize their existing unencumbered assets for the satisfaction of the lending bankers. Another thorny issue is the re-possession of financed assets. While re-possessing vehicles doesn’t pose too serious a problem, repossessing assets such as air-conditioners, refrigerators, and televisions sets, and similar other appliances from households will not be easy. It could be both painful and embarrassing for the lending institutions. Even if these items could be repossessed, re-selling them to recover book values of outstanding consumer liabilities holds out a challenging prospect. Resorting to short-cuts in risk assessment may therefore lumber banks with thousands of small delinquent loans. In most cases, it may eventually be cheaper to write them off rather than go for re-possession and sale of used assets, or initiate court action to recover loans from defaulting consumers. Consumer finance is a risky ball game. The infamous yellow cabs scheme was the only big experiment in consumer finance, which was undoubtedly a bad experience for most banks that took part in it. Admittedly, political twists played a big role in the failure of the scheme but operational inadequacies of banks played a bigger role in this monumental failure. A major factor in that failure was the operational deficiencies in banks, particularly in assessing an individual’s future repayment capacity keeping in view his or her changing circumstances. Foreseeing impending changes in the Page 15 of 57

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circumstances of individuals is not the same as sensing the impact of changing business cycles on major borrowers placed in various economic sectors. Little is available in terms of authentic statistics on this huge customer category. Pakistan Integrated Household Survey (PINS) is a new report, and could prove very helpful to banks in devising consumer finance strategies but its timely release cannot be assured because it may report changes in politically sensitive indicators. Given the absence of credible sources and bases for assessing risk, dealing with thousands of small borrowers makes consumer finance a manpower intensive business. Retail banks with large branch networks have the potential for succeeding in this business but it will require making alterations in bank’s infrastructure and a change in the focus on investigative effort for risk assessment. The organization must be pro-active and sufficient in terms of manpower and management information systems to ensure a reaction speed that is commensurate with the size of the customer base. In this regard it will be crucially important to ensure that administrative resources are matched with the size of customer base on a continuing basis. Until recently, oblivious to the emerging possibility of creating a large consumer finance market, banks were closing down branches and lying-off employees. Admittedly, there was a need for pruning the banks of deadwood but voluntary retirement schemes led to separation of many experienced hands that could have been re-deployed in consumer finance units because they knew the essentials of risk assessment. Banks will now have to inject fresh (and inexperienced) blood in their organizations to support their consumer finance operations.

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Consumer Financing in Pakistan

CONSUMER FINANCING

Financial Institutions

IN

PAKISTAN:

In Pakistan, more or less all the major banks are providing consumer financing. The industry is highly competitive, fairly efficient and has a high potential of future development. Generally banks provide the same kind of options in terms of consumer financing. In this report, the following 5 banks and their consumer financing has been explained.

 Bank Alfalah Limited  Bank Al-Habib Limited  Muslim Commercial Bank Limited (MCB)  United Bank Limited  Habib Metropolitan Bank Limited

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BANK ALFALAH LIMITED Bank Alfalah Credit Card

Your Bank Alfalah Credit Card is your partner everywhere and is globally accepted and welcomed at locations displaying the VISA logo. It is accepted at nearly 27 million locations in more than 150 countries around the globe and over 22,000 Bank Alfalah’s establishments in Pakistan. Alfalah VISA lets you pay for shopping, travel, entertainment, meals and much more. Card members are facilitated through a number of promotions from time to time. In addition, there are a number of strategic business partnerships with leading local and international brands for purchase of home appliances at exciting Step-BY-Step (SBS) monthly installment plan with free home delivery at lowest interest rates. Salient features are: • • • • •

No Joining / Annual / Renewal fee Electricity, Sui Gas, PTCL and Warid bills payment through 24 hour Call Center and Auto Debit instructions SMS for card usage, mini statement, payment receipt confirmation, etc. Cash withdrawal at all 1LINK ATMs Special offer on Warid post paid connections

Rush now to avail matchless features offered by Alfalah VISA. Platinum Card It is accepted at nearly 27 million locations in more than 150 countries around the globe and at over 22,000 establishments in Pakistan. Titanium Titanium MasterCard is your partner everywhere and is globally accepted and welcomed at locations displaying the MasterCard logo. Page 18 of 57

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Gold & Silver A perfect card combination for all segments of salaried & professional individuals. Young Professional This Card is for you, if you are: • a Graduate... • has just started your Career. As a Classic Blue Cardholder you have a privilege of having access to all features of Alfalah VISA Credit Cards including two free supplementary cards. Women Exclusive Now for the first time in Pakistan, Bank Alfalah has introduced a credit card exclusively for women. This card has its unique features which have been tailor made for women in Pakistan. Student Card For the first time in Pakistan, Bank Alfalah introduces a credit card for Students. This card is for you if you are enrolled in a professional university (as per Bank Alfalah’s approved list) with 15 years of schooling experience. Now you can pay your fee, buy books or just with Alfalah VISA... :-) Not only this but you will also earn reward points and can redeem them for a TV, Mobile Phone, CD player & DVDs etc. Supplementary Card Now you can give Free Supplementary Cards to anyone you care for. All Bank Alfalah Basic Card members can apply for supplementary cards in separate categories including Son’s Card, Daughter’s card (children who are above 13 years of age) and House Staff’s card. This feature has been introduced for the first time in Pakistan, yet another beginning made by Bank Alfalah Credit Cards. In addition, supplementary cards can be issued to anyone you like thus giving you complete freedom of choice (Only 1 supplementary card will be issued to Awami Card holder). Visa Mini Visa Mini is a practical and convenient part of your everyday life whether you go for shopping, dine out, buy grocery, want to go for holidays or feel like buying something of interest while you are out just for a jog! You can take it with you anywhere you like with no hassle as it has a Page 19 of 57

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perforated hole in the bottom left corner making it attachable to your key chain, mobile phone or other day-to-day carry along device. • •

•

43% smaller than the regular sized credit card with the same features and benefits. Accepted at over 27 million merchants worldwide and around 22,000 establishments in Pakistan (used on electronic POS terminals only). Has the same security features as the regular sized Alfalah VISA credit card.

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Schedule of Charges The following Schedule of Charges is associated with your Alfalah VISA Platinum Card & Titanium MasterCard. Schedule of Charges Service Fee

3.00% per month (36% APR) on cash advance 3.00% per month (36% APR) on retail transactions 1.50% per month (18% APR) on BTF transactions 1.75% per month (21% P.A. flat rate) on SBS transactions (APR 31.23% to 36.74%) Step-By-Step (SBS) - Factors & APR details: Installment Plan Factor APR 3 months 0.350833 31.23% 6 months 0.184167 35.15% 9 months 0.128611 36.36% 12 months 0.100833 36.74% 18 months 0.073056 36.68% 24 months 0.059167 36.22% 30 months 0.050833 35.66% 36 months 0.045278 35.07% 0.99% per month (11.88% P.A. flat rate) on BTF to SBS transactions (APR 17.73% to 21.44%) BTF to SBS - Factors & APR details: Installment Plan Factor APR 3 months 0.343233 17.73% 6 months 0.176567 20.09% 9 months 0.121011 20.90% 12 months 0.093233 21.25% 18 months 0.065456 21.44% 24 months 0.051567 21.37% 30 months 0.043233 21.21% 36 months 0.037678 21.01% 24% APR on Credit on Phone to SBS Transactions Credit on Phone to SBS - Factors & APR details: Installment Plan 3 months 6 months 9 months 12 months 18 months 24 months 30 months 36 months

Factor APR 0.34675 24.00% 0.17853 24.00% 0.12252 24.00% 0.09456 24.00% 0.0667 24.00% 0.05287 24.00% 0.04465 24.00% 0.03923 24.00%

Late Fee

Rs. 600/- or 10% of minimum amount, whichever is higher.

Cash Payment Processing fee

Rs. 100/- per transaction.

Merchant Discount

Upto 5% of transaction amount.

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Charges VISA Mini Card Supplementary Fee

Rs. 500/-

Cash Withdrawal Fee: - Cash Advance Rs. 500/- or 3% of cash advance amount, whichever is higher Fee/Call & Pay Fee 1% of cash advance amount - Acquiring Bank Charges 1% of transaction amount or Rs. 300/-, whichever is higher - Acquirer Cash Counter Fee (off us cards) Cheque / Cash Pickup Rs. 200/- (available in cities having Bank Alfalah Fee branches) Over Limit Fee

Rs. 600/- or 2% of Over Limit amount, whichever is higher

Voucher Retrieval Fee

Local: Rs. 350/- and International: Rs. 800/-

Card Rs. 500/Replacement/Upgrad e Fee Cheque Return Charges/ Rejected Auto Pay Service Fee

Rs. 800/-

Duplicate Statement Charges

Rs. 200/- (whenever 1 month old)

Step-By-Step (SBS) / Credit on Phone to SBS Processing Charges

2% of transaction amount

Step-By-Step (SBS) / Credit on Phone to SBS Premature Settlement Charges

5% on balance amount or Rs. 1,000/-, whichever is higher

Credit Cover Premium

0.50% of outstanding amount

Utility Bill Payment Charges

Rs. 25/- per utility bill

Platinum / Titanium Priority - Annual Fee

Upto US $4.71 per annum

Platinum / Titanium Priority - Airport Lounge Visit Fee

Upto US $28.25 per visit

SMS Alert Fee

Rs. 25/- per month

Mobile Banking Fee

Rs. 5/- per transaction

Mobile PIN Issuance

Rs. 10/- per PIN

Foreign Transactions

Upto 5% over prevailing market rate or as per SBP directive. Third currency transactions will be first converted into US Dollars as per rate

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quoted under arrangement with VISA and MasterCard. Cross border transaction fee will also be charged as per VISA / MasterCard rules. Arbitration Charges

US$ 500/-

Insurance Plans Cancellation Charge (Life & Education Insurance Plan)

Rs. 100/-

Chip Maintenance Fee

Rs. 300/- for Principal Card member Rs. 300/- for Supplementary Card member

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Bank Alfalah Home Finance

The crown jewel of our Home Finance scheme, the golden opportunity for someone starting a career to buy an already constructed housing unit early in life! We offer a moratorium of upto 3 years in principal payments, for a financing of upto 20 years. You service only the mark-up element initially, and principal repayment starts after the end of moratorium period. Home Start is specially designed for young professionals to own a quality asset.

With this facility, you no longer need to just dream about the home you want for yourself and your family .We will provide you upto 80% of the purchase price of the property, so that you can realize your dream and enter the reality of owning a home!. Payment period ranges from 3 to 20 years. Page 24 of 57

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You own a plot but need financing to construct a home that excites everyone in your family! No problem. We will provide up-to 100% of the construction cost enabling you to say good-bye to rent forever! Even if you don't have a plot, we will provide upto 60% of the value of the plot that you have selected to purchase! Do we excite your imagination? Payment period ranges from 3 to 20 years.

You already own a home, but need extra space for a growing family or want to see some rooms get a new look. Simply apply for financing of upto Rs. 3.50 million or 40% of the surveyed value of your home and get yourself the extra space! You can stretch your payments for upto 10 years.

Does your existing installment on a home finance leave you with nothing to spend? You need not worry any more because we have genuinely attractive rates and flexible payment options that could leave more funds with you each month. With our Home BTF, repaying your home finance will not make you break into a sweat! Transfer upto 100 % of the existing finance. Stretch your repayment period for upto 20 years once again! Page 25 of 57

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Bank Alfalah Car Financing

• • • • • • • •

Quickest processing. No hidden charges. Minimum down payment. Complete repayment at any point of time. Balance transfer facility {BTF} for existing as well as new clients from other Banks. Tenure period ranging from 1 to 5 years. Financing of all brand new locally assembled vehicles and used cars. Financing limit ranging between Rs. 200,000/- to Rs. 2,000,000/- for brand new cars.

Corporate & Individual Car Leasing BAL’s recently introduced car leasing facility for individuals and corporate sector has set new dimensions for the product. Now you are provided with the option of either to get the vehicle leased or financed. Insurance Renowned and reliable Insurance companies are offering the competitive rates of insurance. Pay year insurance premium in advance {at the time of down payment} and the remaining in the subsequent equal monthly installment. How Much Extra Money Being Paid? {Mark-Up} Bank Alfalah's mark-up rates are as follows: Repayments Easily affordable installments on monthly basis in the form of post-dated cheques will set you free of depositing your rental cheques every month. Security Hypothecation of vehicle in the name of Bank Alfalah Limited. You Can Act As a Co-Borrower Acting as a co-borrower will enable your family members {spouse, children18 year and above} to avail the financing facility and get the car registered in their names as well. Page 27 of 57

Consumer Financing in Pakistan

• • • • • • •

Financial Institutions

Two passport size photographs. Copy of National ID card. Bank statement for the last six months. Salary certificate {for salaried individual}. Business proof {for a business person}. N.T.N Certificate. Co-borrower’s NIC copy {if the car is to be in the name of the coborrower}.

Yes you can get a car loan form Bank Alfalah to purchase a brand new car if you are: • • •

Pakistani National Identity Card holder. Over 20 years of age (Maximum 60 years in case of salaried and 62 in case of a business person at the time of maturity of the loan). Salaried, businessman or self employed.

Financing Product

1Yr

2Yr

3Yr

4Yr

5Yr

Car Loan for Brand New Vehicles

14.00 14.50 15.00 15.50 % % % %

15.50 %

Car Loan for Brand New Imported Vehicles

16.00 16.00 16.00 16.00 % % % %

16.00 %

Car Loan for New Commercial Vehicles

15.50 15.50 15.50 15.50 % % % %

15.50 %

Car Loan for Used Vehicles (Local Assembled Only)

17.00 17.00 17.00 17.00 % % % %

17.00 %

Page 28 of 57

Consumer Financing in Pakistan

Financial Institutions

Car Loan for Internal / External BTF (Local Assembled)

16.00 16.00 16.00 16.00 16.00 % % % % %

Car Loan for Internal BTF (Imported)

17.00 17.00 17.00 17.00 17.00 % % % % %

Corporate Discount Rate A Corporate Discount of 0.5% shall continue to apply on all above mentioned rates.

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Consumer Financing in Pakistan

Financial Institutions

Bank Alfalah Debt Card:

CARRY YOUR BANK ACCOUNT WITH YOU WHEREVER YOU GO WITH ALFALAH HILALCARD...!

Alfalah HilalCard is the revolutionary, new-age form of cash that provides you greater freedom, security and convenience, combined with the wide reach of Visa Network. This single card brings just about everything within your reach. Now, you can use your Alfalah HilalCard for all your financial needs around the world, round the clock, wherever Visa cards are accepted, locally and internationally. Alfalah HilalCard - The International Visa Debit Card The Alfalah HilalCard is an International Visa Debit Card which gives you an unlimited access to your current / savings account with a simple swipe, at millions of retail shops and ATMs, worldwide. Why Should you apply for the Alfalah HilalCard? No Interest No Minimum Income Requirement - all you need to do is open an account in any branch of Bank Alfalah Limited • No PIN required for Retail Transactions • •

Accepted at more than 1 Million ATMs and 27 Million retail outlets around the world. •

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Consumer Financing in Pakistan

Financial Institutions

BANK AL-HABIB LIMITED Bank AL Habib Limited offer Consumer Loan facilities to its eligible customers. These facilities are tailored to suit customer requirements with competitive rates and an easy means of payment. We have the solution whether it may be for a brand new car or a house (building/renovating a house).

Bank AL Habib Limited offers Auto Loan facility to its customers, a facility with a minimum down payment, easy monthly installments and a low rate mark-up making it the best deal in town.

Product Benefits and Features • • • • • • • • •

Easy to apply Financing available for imported and locally assembled cars (new & used) Minimum Loan: Rs 250,000, Maximum Loan: Rs. 2,500,000 Maximum loan period up to 7 years for new cars & 5 years for used & imported cars. Affordable monthly installments. Convenient repayment modes No Pre-payment penalty. Choice of reputable insurance companies at attractive terms. Personalized customer service.

Our highly trained executives will take care of your financing requirements. The only thing you need to worry about is choosing the car and its color.

Auto Loans Eligibility You can get a car loan from Bank AL Habib to purchase the car of your choice if you are: • • •

Pakistani National Identity Card Holder. Over 20 years of age (Maximum 60 years in case of salaried and 64 in case of a business person at the time of maturity of the loan). Salaried person, Businessman or Self employed.

Documentation Required (Salaried Individual) •

Two recent passport size photographs. Page 31 of 57

Consumer Financing in Pakistan • • •

Financial Institutions

Copy of Computerized National Identity Card. Bank statement for the last 3 months. Salary certificate/Salary Slip.

Documentation Required (Self - Employed Individual) • • • •

Two recent passport size photographs. Copy of Computerized National Identity Card. Bank statement for the last 6 months. Business Proof.

Terms and Conditions The Auto Loan Facility offered will be subject to the following conditions: • •

Our Internal credit approvals. All offers and criteria listed on this website are subject to change without any prior notice.

The Home where your heart is

Decent homes are difficult to purchase in today’s ever-changing world of real estate prices. Safe & comfortable shelter is the prime necessity for each individual. So let Bank AL Habib with its Home Finance solution provide you with the means of buying, constructing or refurbishing your ideal home. - Home Buying - Home Construction - Home Improvement

Realize your dream with the Bank AL Habib Home Buying facility where you can own your personal property. This scheme offers you to buy & own your dream home Eligibility Criteria - Pakistani National Page 32 of 57

Consumer Financing in Pakistan

Financial Institutions

- Salaried or Self Employed - Minimum 23 to Maximum 57 Years Old - Minimum Net Salary Rupees 20,000/= Salient Features Finance Amount - Maximum amount Rs. 10,000,000/= Finance Tenure - Flexibility of up to 20 Years financing

Bank AL Habib will help you as our eligible customer to build the house of your dreams! Eligibility Criteria -

Pakistani National Salaried or Self Employed Minimum 23 to Maximum 57 Years Old Minimum Net Salary Rupees 20,000/=

Salient Features Finance Amount - Maximum amount Rs. 10,000,000/= Finance Tenure - Maximum 20 Years

For Bank AL Habib, eligible customers, who wish to renovate their homes to meet the changing needs of their family. Eligibility Criteria -

Pakistani National Salaried or Self Employed Minimum 23 to Maximum 57 Years Old Minimum Net Salary Rupees 20,000/= Page 33 of 57

Consumer Financing in Pakistan

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Salient Features Finance Amount - Maximum amount Rs. 2,500,000/= Finance Tenure - Maximum 7 Years

Rates for Mortgage Loans (re-priced yearly at the anniversary) Other Details (Tenure Period etc.)

Salary Transfer Account Holders

Other Account Holders

Self Employed and/or Businessman

Basis

First Year

13%

13.50%

14%

floating

Subsequent years

12MK +250 BPS

12MK +300 BPS

12MK +350 BPS

floating

MUSLIM COMMERCIAL BANK LIMITED (MCB) MCB Pyara Ghar Apna Ghar Pyara Ghar Desire a home of your own? Want to renovate your existing home? MCB Pyara Ghar now provides you with all you want as you can renovate your existing home, buy or construct a dream house that you always envisioned for you and your family. After all, "Apna Ghar... Pyara Ghar" Flexible Financing up to Rs 20 million Financing Tenures from 2 to 20 years Options to buy construct or renovate your house or flat Option for partial payments Option for early payment. Affordable Lower mark up rate Loans up to 80% of the value of your house or flat Option to club your spouse's income to avail higher financing limits Equal monthly installments Page 34 of 57

Consumer Financing in Pakistan

Financial Institutions

Speed Fast & hassle free processing of application Special Benefits Hassle Free Process to transfer your similar facility from any other bank at a discount. Ease Doorstep service and assistance from our dedicated sales staff to fill and submit application along with documents. Availability Available in all major cities i.e. Karachi, Lahore, Faisalabad, Rawalpindi and Islamabad. Existing Customers Get discount if you are already a customer of similar facility of any other bank.

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Consumer Financing in Pakistan

Financial Institutions

MCB Car4U Kahin na Kahin tau Hai 1 Car 4 You Need a new car or a used one? Like locally manufactured or imported cars? MCB Car4U can give you all ... MCB Car4U through its flexibility, affordability, speed and other special benefits makes you keep up with the fast pace of life ... because we know Kahin na Kahin tau Hai.. 1 Car4U. Flexible Option for financing or leasing Financing tenures from 1 to 7 years Options for new as well as used cars Option for local as well as imported cars Financing up to Rs. 20 lacs Option for early payment. Option for Replacement Loan Option for first year insurance financing Affordable Lower mark-up rates Lower insurance rates Only up to 10% down payment Equal monthly installments Speed Fast and hassle free processing of application Priority delivery on different vehicles Special Benefits Option to pay your 1st installment after 3 months Pay your down payment after your loan is approved Availability Currently available in 16 major cities: Karachi, Lahore, Faisalabad, Rawalpindi, Islamabad, Quetta, Multan, Peshawar, Hyderabad, Sialkot, Gujrat, Gujranwala, Sargodha, Mirpur (AJK), Jhelum, and Sahiwal. Will soon be launched in Rahim Yar Khan, Sukkur, Mianwali, Abbottabad, Mardan and many more cities Page 36 of 57

Consumer Financing in Pakistan

Financial Institutions

Existing Customers Get 1 % discount if you are already our customer for Personal Loan, Pyara Ghar or Business Sarmaya. If you are our branch customer, you can avail this facility anywhere in Pakistan.

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Consumer Financing in Pakistan

Financial Institutions

Smart cards / Debit CARDS

MCB now brings you MCB Smartcard -a secure and convenient instrument of payment with unmatched functionalities. It provides 24-hour direct access to your bank account. The convenience and flexibility of MCB Smartcard will help you live a smarter life. It not only helps you manage your expenses, but also eliminates undue interest on your day to day credit card transactions. Your balance is always within your reach and you spend accordingly. MCB is the only bank to introduce a debit card that gives the option to choose from domestic and international cards for local and global usage respectively. You can avail the following functionalities on your MCB Smartcard Smart Features. SmartCard is your debit card for cash free convenience. Use it for your shopping and purchases at a rapidly growing nationwide network of merchant locations including petrol pumps, stores, bakeries, departmental stores, jewelers, travel agents, restaurants, chemists, hospitals etc. It’s simple, safe and convenient to use: Shop at locations displaying the Cash Free sign and the MCB Cards logo. For payment, no need to pay cash. Simply present your card. Merchant will swipe your card for the amount of the transaction. You simply authorize your transaction by entering your PIN (Personal Identification Number) yourself. The PIN is for extra security. The purchase amount is debited from your account To make your transaction safe and secure, MCB has installed State of the art smart terminals at your merchant locations, to ensure your personal convenience. At restaurants & fuel Stations your merchant will bring portable terminals to you for your PIN entry. Smart Support Whether you are traveling for business, vacation, or performing Haj or Umrah, SmartCard gives you access to your bank account in Pakistan. Your International SmartCard with Maestro and Cirrus logos is welcome at over 5 Page 38 of 57

Consumer Financing in Pakistan

Financial Institutions

million merchant establishments displaying the Maestro signs at their outlets. In addition, your card is accepted at 634,000 ATMs with Cirrus logo. Your international SmartCard gives you round-the-clock convenience and helps avoid unfavorable exchange rates of money changers as well as time wasted in providing documentation while converting traveler cheques.

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Consumer Financing in Pakistan

Financial Institutions

MCB VISA MCB Visa is not just another card in your wallet. It not only provides the conventional credit card services in a manner that is superior in comparison, but goes an extra mile.

Makes MCB Visa the most affordable credit card in your wallet.

MCB VISA offers you a wide range of products that will cater to your diversified taste perfectly.

Intelligent Reward Monitoring and Redemption System.

Buy now and pay off latter in easy and affordable monthly installments!

Saving you from the hassle of making multiple payments on your various credit cards.

You need cash and want to pay back in installments. Just Dial for it!

Life is too precious to be spoilt by unforeseen events and mishaps.

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Consumer Financing in Pakistan

Financial Institutions

How About a credit card that acts like hard cash.

Now Experience peace of mind of having a credit card free from fraud or misuse!

Page 41 of 57

Consumer Financing in Pakistan

Financial Institutions

SCHEDULE OF CHARGES Joining Fee Annual Fee Chip Maintenance Fee Supplementary Annual Fee Supplementary Chip Maintenance Fee

Gold FREE FREE upto PKR. 500 p.a FREE PKR. 300 p.a

Classic FREE FREE upto PKR. 350 p.a FREE PKR. 300 p.a

Service Fee/Markup on Cash Transactions 2.83% per month translated into an APR of upto 34% calculated on daily unpaid balance from date of transaction Service Fee/Markup Retail (Fixed APR) 2.83% for service fee/markup per month translated into an APR of upto 34% Service Fee/Markup Retail (Variable APR /i-revolve) Upto 35% to 30% APR based on continuous revolving of per retail transaction for six months or above This is charged on per retail transaction basis from an APR of 35% in the first revolving month and based on revolving of the transaction the rate continues to decline each month for six months to a minimum of 30% i.e. sixth revolve month and continues at this rate till the transaction is fully paid. Month APR (upto) 1 35% 2 34% 3 33% 4 32% 5 31% 6 and beyond till the transaction is not fully 30% settled

Per Month 2.91% 2.83% 2.75% 2.66% 2.58% 2.5%

Late Fee Rs.600/- or 10% of minimum amount due which ever is higher Cash Advance Fee Rs.500/- (per transaction) or upto 3% of the cash advance transaction amount (whichever is higher) plus all charges passed on by the acquiring bank Cheque/Cash Pickup Fee PKR. 200/Over limit Fee PKR. 500/ Voucher Retrieval Fee Local: PKR. 250/- per document Foreign: PKR. 800/- per document Page 42 of 57

Consumer Financing in Pakistan

Financial Institutions

i-insure Package 1: PKR 600, Package 2: PKR 300, Package 3: PKR 200, Wallet Protection: PKR 75 per month Credit Security upto 0.40% of total monthly outstanding balance i-plan APR Starting from 17.93% upto 21.28% Processing Fee: PKR. 250/- per transaction Prepayment Charges: PKR. 500 or 5% of outstanding installment balance (whichever is higher) i-dial APR Starting from 17.93% upto 21.28% Processing Fee: Bank remittance charges plus PKR. 350 (per request) or upto 3% of amount requested (whichever is higher) Prepayment Charges: PKR. 500 or 5% of outstanding installment balance (whichever is higher) i-switch APR Starting from 17.93% upto 21.28% Processing Fee: Upto 3% of transferred amount or PKR. 350/- (whichever is higher) Arbitration Charges for Disputed Transactions USD 500/- or equivalent Card Replacement Fee PKR 500 for Gold, PKR 350 for Classic and PKR 300 for Supplementary Cheque Return Charges / Insufficient funds on Auto Debit Upto PKR. 600/Pay Order / Demand Draft Issuance Fee Upto PKR. 500/Cash Payment Processing Fee Upto PKR. 100/- per bill for MCB account holders Upto PKR. 200/- per bill for non-MCB account holders Duplicate Statement of Request PKR. 300/- per statement (more than 1 month old) Foreign Transactions 5% over prevailing market rate or as per SBP directive. Third currency transactions will be first converted into US Dollars as per rate quoted under arrangement with Visa. Cross border transaction fee will also be charged as per Visa rules Page 43 of 57

Consumer Financing in Pakistan

Financial Institutions

Credit Worthiness Certificate 1 Certificate per 6 months – Free Subsequent requests - PKR. 200/- per certificate Supplementary Chip Maintenance Fee PKR. 500/- per Cheque Plan Conversion Fee Upto PKR 200

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Consumer Financing in Pakistan

Financial Institutions

UNITED BANK LIMITED

You as an individual can gain and benefit the most through UBL Consumer Banking. In UBL you get friendly, efficient and attentive personalized banking services - a unique banking relationship experienced by each UBL client. You can utilize the following services. UBL Address UBL Drive UBL Credit Card

Owning a house of your very own is a cherished dream. A lot of planning and hard work is involved in making this dream come true. That is why, at UBL we aim to make your decision easier, by offering you the right ingredients that can help you realize your dream with absolute convenience. UBL Address empowers you to become the proud owner of a home by offering a variety of product and pricing options that are flexible yet affordable. So choose the best product option and pricing to suit your needs. All product options are amortized and range over a tenor of 3 - 20 years. Buying a Home Why rent when you can buy? Buying a home of your choice has never been so easy. With a maximum financing limit of 80% you can easily buy a house or apartment that best fits your requirements. So go ahead and start the search for your dream home because with easy and affordable installments you need not think of renting a house when you’ve got UBL Address. Building a Home Have you ever settled for anything less than perfect? There’s nothing like building your perfect home, your way. With every detail in place like the elegant French windows or the perfectly manicured lush green lawn, just the way you’ve always imagined. By chalking out well planned fund trenches at each phase of the building process, UBL Address brings you your dream house one step closer. Land Plus Construction What do you do with an empty piece of land? Construct your dream house with all the aesthetic details you’ve ever wished for. UBL Address helps you through every stage of construction by providing you with well planned out fund trenches so that you can better manage your construction. Page 45 of 57

Consumer Financing in Pakistan

Financial Institutions

Floating & Adjustable Rate Options Enjoy unparalleled freedom by choosing the most flexible and affordable rates. Be in control of your financial outflows by opting for a pricing plan that’s most suitable for you:

Floating Rate In this option, you get a fixed rate for a period of 12 months, which gets repriced annually. (Upward or downward, only to the extent of Kibor) Adjustable Rate Your mark-up rate will be fixed for a period of 3 years, and will be adjustable after the fixed rate period. However, after completion of 3 years, the rate will be floating and will be revised annually (upward or downward only to the extent of Kibor Eligibility Criteria Minimum monthly income: Rs.15,000 Age: 23 to 65 years Resident Pakistani Self-employed businessman/professional or salaried individual Minimum loan size: Rs. 500,000. Markup Rates Both Floating and Adjustable Rate Options are available. The Floating Rate Option is subject to annual revision from the time of loan booking. Any change in the mark up rate may be either upward or downward revision (if required) after every twelve (12) months from the date of the booking of the loan (upward or downward only to the extent of Kibor). Markup rates are calculated on the basis of the prevailing one year Karachi Inter-Bank Offered Rate (KIBOR*) which is taken as the base rate. A margin that varies from one pricing option to another is charged over and above the base rate, the details of which are as follows: Segments Salaried

Pricing KIBOR* + 3.5% = Applicable Markup Rate

SEB/SEP

KIBOR* + 4.5% = Applicable Markup Rate

Page 46 of 57

Consumer Financing in Pakistan

Financial Institutions

The applicable markup rate will be the rate prevailing at the month of booking. This will be communicated to the applicant through the Repayment Schedule * KIBOR is defined as the average rate “ask side” for one year tenure as published on Reuters Page KIBOR or as published by Financial Market Association of Pakistan in case Reuters Page in unavailable.

Page 47 of 57

Consumer Financing in Pakistan

Financial Institutions

UBL Drive is a unique auto financing product which offers you features, options and flexibility unmatched by any other bank, because at UBL, You come first. New Car Financing UBL Drive allows you to drive away in your own car by making a down payment of just 15% and to top that with low monthly installments. Used Car Financing With UBL Drive you can buy your favorite used car (up to 5 years old) at the most affordable rates. Cash Your Car UBL Drive is not just a car loan; it’s a financing facility that gives you Cash on your car, you can get up to 75% of your car value. Drive in with your car and drive out with cash. No Down Payment Before Approval UBL Drive is the quick and hassle free route to the car of your choice. Offering you for the first time in Pakistan, No Down Payment and processing charges till your application is approved. After approval, you can take your Purchase Order to any of our authorized dealers, pay the Total Cash Outlay amount and simply drive away with your preferred car Simple and Convenient Process Just bring the car of your choice to an authorized dealer for evaluation of value and get your car financed at the spot. No third party appraisal and no additional hassle. Low Installment & Flexibility In our fixed plan, you are offered a variety of affordable rates and installment plans, suiting your needs.

Page 48 of 57

Consumer Financing in Pakistan

Financial Institutions

Pays (Pay As You Select) For the first time in Pakistan, UBL Drive allows you to choose from different repayment options to suit your present & future expected cash flows: Pays-up You can design your own repayment plan with installments increasing every year, starting with low installments to suit your cash flows. The graph below indicates the increasing trend of monthly installments you will be paying over the life of the loan.

Pays-down Step down allows you to pay higher at the beginning with your installment reducing in subsequent years. Your total payment during the duration of the loan remains very affordable. The graph below indicates the declining trend of monthly installments you will be paying over the life of the loan.

Processing Charge A processing charge of Rs. 4,000 will apply.

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Consumer Financing in Pakistan

Financial Institutions

Credit Card Welcome to the world of UBL Credit Card, the most exciting and vibrant credit card brand in Pakistan. We offer you a range of innovative and exciting cards that is not only powered by the security of chip but also enable you to personalize it any way you want. In order to get more information on our credit cards range. UBL CREDIT CARD … MAZAY MEIN RAHO! Welcome to the world of UBL Credit Card. Pakistan’s 1st Chip Credit Card that guarantees you both enjoyment and high value. It assures you global acceptability in more than 22 million establishments worldwide in 130 countries and in more than 12, 000 outlets within Pakistan. CHIP based credit cards have globally proven to be the most secure way of conducting credit card transactions. This unique high tech CHIP guarantees your financial security while conducting transactions on credit cards, both within Pakistan and around the world.

FEATURES & BENEFITS Your UBL Credit Card’s exciting and value added features will change your life in a manner which will ensure that you constantly enjoy living it. Cash Advance You can now withdraw cash through your UBL Credit Card’s instant cash advance facility from any designated UBL Card Payment Branches nationwide and more than 780,000 ATMs and financial institutions worldwide displaying VISA/PLUS logo. The service charges for cash advance will be applied from the day of the transaction. A cash advance fee will also apply for each cash withdrawal. Buy Today, Pay Later Your UBL Credit Card gives you the financial flexibility to buy today and pay after a month at no extra charge. You have the option of paying a minimum Page 50 of 57

Consumer Financing in Pakistan

Financial Institutions

5% of the outstanding balance or any other amount of your choice up to your total account balance. A service charge of only 3% per month will apply to whatever remaining unpaid balance that is carried forward.

Credit Guardian UBL takes care of its Credit Card members payments in time when they cannot. Our Card members can now get total peace of mind and insure themselves against unforeseen emergencies. In the event of any temporary disability where UBL Card member is unable to pay his/her monthly dues, Credit Guardian will allow payment of the outstanding monthly amount. Moreover, in the unfortunate event of permanent disability or death, the entire outstanding amount will be waived off. Credit Guardian Facility is available for a minimal fee, charged automatically on the card balance every month. Free Travel Accident Insurance Each time our Card members use their UBL Credit Card to purchase airline, train or bus tickets, they are automatically covered against any sort of accident that might befall them while traveling: The coverage amounts are: Classic Card: Up to Rs. 3.5 Million Gold Card: Up to Rs. 7 Million.

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Consumer Financing in Pakistan

Financial Institutions

HABIB METROPOLITAN BANK LIMITED

HMB Auto Finance HMB Auto Finance is available up to Rs. 3 Million Minimum Down Payment is 15% of the total amount. Processing Fee is Rs. 3,000/-. Vehicle to be registered in the name of customer and marked HPA with the Bank.

HMB Auto Leasing HMB Auto Leasing is offered to all our Commercial & Corporate Clients. Minimum down Payment is as low as 10% of the total amount. Auto lease limit depends on the strength of the Company’s financials and credit checks. A Processing fee is charged at 0.25% of the Lease amount. The Vehicle is to be registered in the name of the Bank The Insurance cost to be borne by the customer.

HMB Personal Loans Clean loans are offered up to Rs. 500,000/- . A Processing Fee of 1% of the loan amount or Rs. 1,500/- is charged.

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Consumer Financing in Pakistan

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HMB Education Loans Financing for Education Loans are available for Graduation Post Graduation PHD Diploma courses Financing for Tuition fee, Books and materials. A Mark–up is charged at confessional rate. There is No processing fee. Convenient repayment options are offered. The Tenor is from 6 to 60 months.

Rates And charges Personal Loan Salaried Person

19%

Businessme n

22%

Minimum Loan Maximum Loan Rates*

Auto Finance

Auto Leasing

Upto 3 years 14.5% More than 3 years 15.5% Minimum 14% Imported Cars Maximum 16.5% 16.5% Imported Cars 16.5%

Rs. 25,000/-

Rs. 100,000/-

Rs. 100,000/-

500,000/-

Rs 3,000,000/-

Blanket limit

Floating

Education Loan 13.5%

13.5%

Rs. 25,000/Rs. 100,000/Floating

* Six months Kibor rate. * Rates to be reviewed every 6 months and revised if KIBOR is increased more than 0.5%.

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SUMMARY S.N O

BANKS

1.

Bank Alfalah Limited

2.

Bank Al-Habib Limited

3.

Muslim Commercial Bank Limited (MCB)

4.

United Bank Limited

5.

Habib Metropolitan Bank Limited

AUTO FINANCE Amount 2,00,000 to 2,000,00 0 2,50,000 to 2,500,00 0 Upto 2,000,00 0 Upto 2,000,00 0 1,00,000 to 3,000,00 0

HOME FINANCE

Markup

Duratio n

14% to 17%

3 to 20 years

10% to 20%

7 to 20 years

Upto 10% only

2 to 20 years

Upto 15%

3 to 20 years

14.5% to 16.5%

-

Amount 3,500,00 0 maximu m 2,500,00 0 to 10,000,0 00 Upto 20,000,0 00 Minimum 5,00,000 -

EDUCATION LOAN

Markup

Duratio n

Amoun t

Marku p

14% to 15%

1 to 5 years

-

-

13% to 14%

5 to 7 years

-

-

13.5% to 14%

1 to 7 years

-

-

12% to 16.5%

Upto 5 years

-

-

-

25,000 to 1,00,00 0

13.5%

-

BANKS

BEHAVING LIKE CARTEL, FLEECING DEPOSITORS: REPORT

Banks in Pakistan are earning windfall profits by taking undue advantage of the weak regulatory framework and are behaving like a cartel within the policy space provided to them by the State Bank. This has been stated in a report, Consumer financing in Pakistan: issues, challenges and way forwarded, launched by the Consumer Rights Commission of Pakistan (CRCP) and the Asia Foundation on Friday. According to the report, consumer financing has significantly contributed to the economic turnaround of the country by stimulating consumption and investments. There has been a phenomenal increase in the private sector due to easy availability of credit. However, the report said, the manner in which consumer financing was being delivered had seriously jeopardized the competitiveness in economy. The most important issue is that Pakistan has one of the highest interest rate spreads in the world, Hamid Siraj of the CRCP said while explaining details of the report. He said that an analysis of the interest rate behavior in Pakistan showed that the spread had vacillated between 5.95 and 9.58 per cent during the period from 1990 to 2005. In recent years, the spread has exceeded seven per cent on an average. The report says the high interest rate spread indicates that competitiveness in the banking sector in Pakistan is either absent or very poor. This issue is largely attributed to weak regulation of interest rates despite the fact that the SBP has powers to control the spread through monetary policy. While nonoperating loans and high administrative costs could be considered as major reasons in countries where the spread is high, these cannot be said to be true of Pakistan because banks are earning huge profits at the cost of savings of depositors. High interest rate spread is damaging the competitiveness in the economy in general and in the financial sector in particular. The report says the State Bank should exercise its powers to determine a reasonable rate of returns for banks as well as depositors. As a matter of priority, the interest rate spread should be reduced, at least, to the level of average spread in the South Asian region. The banking sector is earning record profits by charging unrealistic and exceptionally high interest rates. As a result, despite considerable ratio of nonperforming loans, the annual profitability of banks has reached 76 per cent on an annual basis over the past few years. This is evident from the pretax annual profit of all banks, which was Rs7 billion in 2000, but jumped to Rs123.4 billion in 2006. In recent months, deceleration trends are on the rise

Consumer Financing in Pakistan

Financial Institutions

in consumer financing due to increasing loan default and use of credit worthiness information by the banks. The report says that another critical issue is that almost all consumer loans are on the basis of variable mark-up, which has reduced the loan-servicing capacity of borrowers due to progressive increase in the rates. In addition, the growth in consumer financing has put great inflationary pressure on economy. CONSUMER PERSPECTIVE: Acquisition of easy bank credit by household consumers has spurred the demand for many essential and luxury items. Ultimately, the increase in demand has not only escalated the prices of essential items, but has also stimulated hoarding and black-marketing, thus multiplying the problems for poor consumers. In fact, proliferation of loans has given rise to new development challenges. Citing an instance, the report says the need of new roads in metropolitan cities is directly linked with growth in auto loans provided by the banks. From a consumer perspective, consumer financing has been helpful in improving the quality of life of the people who have the capacity of servicing the loans. However, there is mounting evidence that this capacity is deteriorating due to high spread and variable interest rates on loans. Depositors are not getting due returns because of the high difference between lending and deposit interest rates. Further, the volume of consumer complaints is rising day by day due to processing delays, service inefficiencies, hidden charges and poor disclosure practices. Lack of consumer education on banking terms and conditions, policies, rules and regulations is also a critical factor in securing financial rights. As the consumer financing portfolio is increasing, quality of related banking services is becoming a serious issue. Processing delays, service inefficiencies, unauthorized debits and noncompliance with requirement of providing monthly bank statements are few examples of poor quality of banking services. For example, in the first eight months of the operation of banking ombudsman in 2005, about 40 per cent complaints filed with the ombudsman related to consumer products, 30 per cent of which were related to credit cards alone. CONSUMER AWARENESS: The study presents a critical analysis of the regulatory framework for consumer financing, emerging issues from micro and macro standpoints and the nature and magnitude of consumer grievances. Drawing on secondary data sources and user surveys, the study covers all main consumer financing products, including credit cards, car financing and leasing, personal loans and house financing. It provides evidence-based proposals for designing and implementing strategic and practical interventions to strengthen the regulatory mechanism and consumer financing sector in the country.

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Financial Institutions

The study also concentrates on issues in consumer awareness on banking terms and conditions, policies, rules and regulations as a critical factor in securing financial rights. It says that as the consumer financing portfolio is increasing, unsolicited banking, processing delays, service inefficiencies, unauthorized debits, etc., are emerging as main problems for the users of consumer financing products.

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