KARACHI, Feb 7: Consumer financing that witnessed robust growth at its beginning, showed sharp fall in 2008 as each sub sector showed decline instead of rise.

The State Bank reported on Saturday the yearly account, Nov-07 to Nov-08, of consumer financing which tells the story of decline. The period involved was under the domination of global recession which still persists but Pakistani banking authorities have been denying any bad impact of global recession on the local banking industry.

The outstanding credit to consumer financing fell to Rs334 billion in November 2008 against Rs367 billion in November 2007, a decline of Rs33.5 billion. Personal loans fell by Rs16 billion during the year from Rs142.5 billion to Rs126 billion.

The detail shows the credit card business, which has been a great booster for the banking industry, showed a dismal picture. Credit to credit card holders fell to Rs42 billion from Rs46.9 billion.

Loans for purchasing of cars and other vehicles showed sharp decline as auto sales fell by 48 per cent in the first six months of the current fiscal.

The credit to car purchasing fell by Rs18 billion to Rs95.3 billion during the said time span. The slow recovery and high interest rate especially high leasing rates damaged the credit to this sector.

The only house building sector showed some growth but still not significant. The outstanding loans for house building reached Rs65.4 billion during the said period compared to Rs61.6 billion.

However, the growth is negligible as housing and construction and real estate prices witnessed sharp rise during the last couple of years. The credit increase to the sector is much lower than the prices hike in this area.

Bankers said most of the housing loans are given for alteration or additional construction in a house. Banks do not extend loans for purchasing of a complete house as the prices have gone much beyond the affordability of banks since the risk is very high.After the global recession started in 2007, the banking sector has been facing severe problems in most of the developed countries of Europe and particularly in the United States, but Pakistani banks received slight impact of the recession.

Bankers said the impact has now started penetrating in the banking sector as the banks were facing liquidity crunch and the high interest rate has cut down the flow of credit to private sector.

The consumer financing faced a different situation in Pakistan. The real setback was mainly because of failure of recovery from the borrowers. Banks have been asking the government to protect their credit which goes through credit cards by making strict laws for recovery. They said poor recovery in consumer financing was hurting the banking sector.