Auto industry asks State Bank of Pakistan to launch consumer finance schemes only for locally made cars

Lahore, August 14, 2012 (PPI-OT): The auto parts manufacturers, appreciating the State Bank’s move to reduce discount rate by 150 basis points, urged the central bank to bring it down to single digit, as banking spread at 10.5 per cent policy rate is still high after including KIBOR, making undue profit at the cost of industry.

In a press statement, PAAPAM chairman Nabeel Hashmi said that at present the situation is compounded because the credit of private sector is going up whereas reluctance is also observed by banks for providing financial support to industry due to energy crisis and negative industrial growth owing to high cost of production and manufacturing as well as massive borrowing by the government.

He stated that to attract foreign and domestic investment, good law and order, political stability, provision of uninterrupted electricity and low interest rates are crucial.

He called for rationalization of consumer finance schemes rates for car financing, urging the authorities to refuse consumer financing of used or imported cars, as they do not contribute to any economic process or industrialization.

He suggested the government to impose necessary safeguards for vibrant industry, however the industry must also respond with an aggressive localization drive that shall enable it to place better priced vehicles in the Pakistan market.

It called for reintroduction of the scheme for refinancing facility for modernization of small and medium enterprises.

“In order to make available and affordable vehicles to the Pakistani public a special consumer finance/leasing schemes with single digit markups be reintroduced for locally made cars, two wheelers, HCV and buses (linked with local contents) to promote growth of local auto industries, besides creating employment and generating investments in high cost components and assemblies,” Hashmi elaborated.

Cost of vehicle financing is automatically paid back with economic benefit in the shape of taxes, jobs and technology creation, he added.

PAAPAM vice chairman Munir K Bana said that auto sector would like consumer financing with innovative ideas like vehicles with higher local contents (made in Pakistan components) may be given special financing rates.

He said that the State Bank Pakistan decision to cut interest rate would help stimulate private sector growth and a flagging economy but demanded of the central bank to announce monetary policy for a period of one year instead of two months as it would not only make rate cut meaningful and result oriented but also give the much-needed confidence to the investors.

PAAPAM Managing Committee senior member Usman Malik said that the SBP governor deserves appreciation for accepting the private sector demand that has been opposing the SBP tight monetary policy stance since long. He, however, called for measures to overcome energy crisis, security challenges and political instability. He said that if these factors are not taken into account, they would continue to create problems for the economy in general and for the private sector in particular.

He said that the cut will not only give boost to local investments because of ease in cost of doing business but foreign investors confidence will also go up and they would be willing to put their money in new ventures in Pakistan. He, however, hoped that after two months when new monetary policy would be announced, the interest rates would further be lowered to single digit.

He said that the availability of cheaper liquidity to the business community was need of the hour as in the last five years SBP tighter monetary policy stance in the name of financial discipline had failed to give any results.

For more information, Contact:
Syed Nabeel Hashmi
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM)
16-B, Westwood Colony, Thokar Niaz Baig, Lahore.
Tel # +92 42 37498474-5
Fax #+92 42 37498476
Cell: +92 333 4372500
E-mail: ;

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