Auto finance potential study released

KARACHI: Financial institutions can increase outreach in the transport sector in view of the China-Pakistan Economic Corridor, as only five percent of vehicle owners currently use formal banking channels to purchase vehicles, a study said on Monday.

The study launched by Karandaaz Pakistan on the bankability of the road transport sector said, “With 13 percent of CPEC’s investment expected in road and highway construction, the impact on the transport sector will be highly positive.”

A large proportion of owners and operators purchased vehicles through personal sources, such as savings or through sale of their own assets. Only a small number of owners bought vehicles through loans from financial institutions, informal money lenders or informal vehicle providers, the study said.

It suggested that a more flexible loan processing method and period also needed to be designed, given the fact that most vehicle owners shied away from formal institutions due to the loan processing time.

According to the study, the transport, logistics and communications sector is estimated to have contributed 13.3 percent of GDP in 2016-17. Of this, more than 62 percent was contributed by the road transport sector.