ISLAMABAD: Pakistani financial institutions have extended a record 297 billion rupees car financing in eleven months of the financial year 2020-21. From July 2020 to May 2021, the banks have provided 86 billion rupees more car loans in comparison with the corresponding period of preceding fiscal.
Low markup and social distancing issue during the ongoing pandemic has increased car financing in the last financial year.
Market analysts said the significant cut in the benchmark interest rate by 625 basis points in 2020-21, to 7 percent led to a sharp increase in demand for auto financing. A similar trend in car financing was witnessed in Pervez Musharraf’s era.
Like commercial banks, some Islamic banks too are offering car loans aggressively to promote their lending, business, and capture maximum market share. It may be noted here that during Jan-March period of fiscal year 2020-21, car makers in the country have reported 76 percent growth in sales.
From Jan-March 2021, the third quarter of the financial year, Pakistan Automobile Manufacturers Association (PAMA) has reported sales of 54,764 cars in comparison with 31,149 vehicles’ sales in the corresponding period of 2020. Pakistan government’s initiative to offer loans to people at subsidized rates generated a positive impact on COVID-19 hit car makers in the country in 2021. To further boost manufacturing and availability of cars at affordable prices, in the new budget, the government has announced incentives for 800cc local car producers such as cut in taxes and import of CKD kits, etc.