In the past, banks have been reluctant to give credit, particularly to non-corporate and non-government customers. For example, a middle-class customer requesting credit to buy a motorcycle would typically be denied.
The blame for driving up the danger of default was placed on excessive interest rates and a lack of security. Better security conditions and historically low interest rates, however, have forced banks to reposition themselves so that they are now in competition with one another for customers. In this article, we will explore why bike financing has become such a trend among Pakistanis.
Background
The number of motorcycles sold in Pakistan has not increased in over ten years, with sales levels hovering around 1.7 million units during 2010 and 2011. But during the past 1.5 years, its sales have increased dramatically, reaching a record 1.91 million in 2015. Over the past few years, branded, heavy-duty bikes such as the Suzuki 150cc, Yamaha YBR125, and Honda CG125 have become more and more popular.
These motorcycles varied in price from Rs135,000 to Rs 140,000. When asked about the increase in motorcycle financing, Meezan Bank responded that banks were showing interest in financing bikes due to its affordability and longevity. It is untrue that bike financing in Pakistan was unheard of. Although there has always been a credit facility, the revived and higher interest is a recent development.
Changing times
Since a few years ago, MBL, like other banks, has been involved in bike financing, or Bike Ijarah. Considering Pakistan’s expanding need for motorcycles, particularly in urban areas where they are a fundamental necessity, and the opportunity that exists for working middle class—the bank reopened it in January 2016 as a distinct division with a committed staff,” MBL’s management stated.
In December 2015, MBL and Pak Suzuki inked an agreement to begin the first phase. “We are expanding our range by including Honda bikes, following the successful debut of Bike Ijarah with Suzuki.
The Memorandum of Understanding (MoU) with Atlas Honda has been inked, and the bank stated, “We are also very close to adding Yamaha on board.” In response to a query, MBL stated that the bank provides Bike Ijarah to both business and salaried customers. But according to management, it had a far better response.
JS Bank and other banks were also introducing comparable programs for bike on installments from the bank. JS Bike Financing makes it easy to buy a new electric motorcycle by providing installment-based bike financing options. Their reasonable markup rates position us as one of the best car loan providers in town, whether you’re looking for a bike loan or are thinking about taking out a bike loan on installment from the bank.
The financing Amount is between minimum PKR 100,000 up to Maximum PKR 3 million, and the financing tenure is between 1 to 3 Years vehicles above 1000cc, and 1 to 5 Years vehicles under 1000cc. They also provide the lowest down payment (as low as 30%). So, Give JS Bike Financing a call or visit the website of JS Bank to put you behind the wheel of your ideal motorcycle right now!
The motorbike industry in Pakistan is primarily composed of Chinese and Japanese manufacturers. However, banks only conduct business with Japanese firms (Yamaha, Atlas Honda, and Pak Suzuki) since it is simpler for them to do business with established businesses rather than Chinese assemblers, which are made up of tiny players that fall under the informal sector.
Banks don’t work with unofficial or Chinese motorbike producers. According to Association of Pakistan Motorcycle Assemblers Chairman Sabir Shaikh, “They feel more at ease with the organized bike makers, who are primarily Japanese.”
Bicycle financing was initially launched by Chinese assemblers in Pakistan in 2006, enabling them to counter Japanese manufacturers and gain an advantage in the market. The Japanese are, however, quickly regaining market dominance as a result of rising incomes; this tendency was further strengthened in 2015 when Yamaha made a surprise return to Pakistan.
“I think their dealers are too weak, so even if Japanese bike makers manage to sell 10% of their bikes through financing, that will be a big success for them,” Shaikh, a Chinese-speaking businessman, stated at Pakistan’s largest motorcycle bazaar, Akbar market.
Conclusion
According to market analysts, one of the main reasons banks are becoming more interested in financing bicycles is because they expect their own incomes to decline in the upcoming months as a result of historically low interest rates, which is good news for individuals who want to finance bicycles.