Consumer finance market : Prospects and challenges

By CHANDRA THAPA

For decades, the Asian economy was primarily based on high rate of savings and investments, with consumption being suppressed. Household thrift has been a major cause for the recklessness in consumer spending, giving birth to the mess of many Asian banks.

Ever since the financial crisis in 1997-98, the vast throwing of the deposits by the banks to the conglomerates has turned out be sick, giving rise to non performing assets. In China, of the total lending, four-fifth goes to the state-owned enterprises and almost half of them are bad.

Economists are claiming that South Korea is picking up with Japan in terms of growth and boom in business. What made them to put such concrete claims? Among all the East Asian nations, South Korea is one of the fastest growing consumer markets. After the economic collapse of 1997-98, the South Korean government forced the biggest borrowers to restructure and cut their debt advising the banks to lend elsewhere. This helped in the explosion of retail lending. Half of the Korean’s bank and non-bank lending, which is around US 265 billion dollars, now accounts to individuals and households. In 2001 the spendings through the payment cards accounted around US 341 billion dollars and is still in its growth stage. Plastic money (credit card) is becoming one of the key instruments of consumer finance. Rupert Keeley, regional head of real Visa, says that East Asia is and will be in coming days, Visa’s fastest growing market and the growth is not only confined to payment card expenses but home mortgages, car loans, unsecured credits and other forms of consumer finance will also be soaring at the same alarming pace. This shows that financial institutions are gradually shifting their focus from financing big corporate houses to individual consumers whom they are finding less risky and more profitable. Looking at the new spendthrifts, even the Chinese government has encouraged banks to go after the consumer as a result of which outstanding consumer loans in China rose twenty-fold between 1997 and 2000. All these analyses reveal that consumer financing which was not given due importance earlier has now become a tremendous prospect.

India has also been making promising growth prospects due to the rise of middle class consumers and changing lifestyle. The credit card market, one of the instruments of consumer financing, is growing at a pace of 25 percent and ICICI, now India’s second largest bank after its merging, is moving at an even faster pace and is set to eat the biggest market share. Asian banks are also targeting the young generation. One of the good examples is the trial for issuance of Smart cards to the students by ICICI in collaboration with Infosys, India’s giant software company, and Manipal Academy of Higher education, whereby the students can charge everything on their cards without the need of any cash. Another service, which has been launched by the same bank, enables the customers to top up their Airtel mobile card at ICICI automated teller machines (ATMs). This shows that there is a rapid innovation going on to tap this lucrative market.

Banks are now taking care of every financial aspect of their clients and in many cases of other’s as well as a part of their cross selling marketing strategy. The Indian Railway Catering and Tourism Corporation has collaborated with ICICI to facilitate on-line payment for ticket booking which is due to be launched very soon. Hence, it shows that retail banking with intense stress on handling the financial needs of individual customers is heading towards a big boom.

Now let’s turn our attention to this market and analyze the fact whether the expansion of this business is feasible in the future or not. Whatever a bank does, the prime motive is to keep focusing on the bottom line figure, creating value for shareholders and long term sustainability of their business. Hence, computation of risk and seeking the viability of lending is the most essential part of every credit policy.

Among all the demographics, young Asians are the prime target market but selling to them is a formidable challenge because they are more savvy than their purchasing power. In case of payment cards, the problems are the bad payment infrastructures and limited card acceptance by vendors. China only has 40,000 merchants equipped to swipe a credit card. The biggest of all is the dearth of credit information. In countries like America, Britain and Canada efficient credit information bureaus are the key sources of intelligence for the banks where they can access information regarding their customers. With the help of these institutions, the banks not only find out whether a prospective borrower has already defaulted on a credit but can also know the regularity at which the customer has discharged their liabilities.

Among the developing countries in Asia, only Taiwan and South Korea have such bureaus, while Singapore is establishing one, and two of China’s most developed cities Shanghai and Shenzhen have just initiated to set-up theirs. Across the entire Asia most of the banks are still not in the "black or white" area regarding the people who walk into their branches. This shows whatever lending to the individuals are taking place are not based completely on perfect or reliable information. Hong Kong leads the world in default rate in case of card debt as they were unaware of the fact that how much people had borrowed and the same plight may be encountered by other Asian banks if they do not make justifiable lendings. Another matter of overriding concern is that Asian banks, as well as societies, are new to a consumer driven culture, especially in the absence comprehensive and transparent legal system.

All the above-mentioned problems thrust immense challenges into this lucrative sector, the sector that not only lures the banks but is also an instrument for boosting the economy of a nation. Because consumer oriented borrowing leads to major demand, which encourages spending, resulting in the growth of the economy. It has been observed in many nations that when demand declines the tax refund and the interest rate cut policies have triggered demand putting the economy back on to track. It’s what the market is telling us and we have to heed to it with due care.

Sing and be a hero

By RISHI RAM PAUDYAL

Whether you agree with me or not, I would just like to assert that problems make you creative. In other words, problems are the source of creativity. However, problems turn into creativity only when you want to solve them or express them in some ways through any means or media. So, as problems come by let’s welcome them and try to transform them into our creativity. Creativity could also be understood as a progress or a living thing. There can’t be any development without creativity; neither can there be any growth without it. In this sense, creativity is essential. in other words, problems are necessary.

To illustrate how problems can lead to creativity , I would like to take you to Tribhuvan Park at Thankot.

It was March 24, 2002. The picnic spot was lively, with the clear sunlight, dance and music and the smiles of the nice people present there. The people there forgot who they were, what their positions were, what their ages were and played like children very excitedly and happily, regardless of their sex, creed, and castes.

Events were taking their own turns, and now it was time to sing. In the beginning only a few picnickers appeared, and it seemed that the singing wouldn’t go long. However, that was not to happen. There were other people hidden in the crowd waiting for the right time to express their problems and sorrows in the form of a song.

After some time came out this gentleman, Murari Binod Pokhrel, with a piece of paper in his hand. He looked around giving a smile and requested the audience to listen to him attentively. His presence alone had already captured the attention of the spectators. Nobody was going to miss him even if he hadn’t made any requests.

After making sure everyone was listening to him, the singer let his melodious song go in the air:

I’ve passed my youth but

English hasn’t been easy for

me, lai, lai...

My hair has gone gray but

I’ve never learnt English

well, lai, lai...

Chorus: For auction, this English

Salute to this English 2

I feel that my learning of

ABC since my childhood

was in vain,

I don’t know why I’m fed up with English today

I don’t even feel like pronouncing the word "English" today

Chorus: For auction, this English

Salute to this English

I don’t even feel like

pronouncing the word

‘English’ today

I’m badly wounded by

English so please apply some

medicine on my wound.

Chorus: For auction, this English

Salute to this English 2

As he used the powerful statement ‘I’m badly wounded by English’ he became successful in gaining the sympathy of the audience and became their hero. The majority of people present there identified his problem of the English language with their own. They seemed to have lost a lot of opportunities simply because of the lack of command over the English language.

You don’t necessarily have to act in a film or do something great or save somebody’s life to be a hero. You can simply open up your heart and sing your problems, and become one like him.

Need for supplementary resolution

By PREM L CHITRAKAR

The United Nations (UN) is supposed to observe the Day of Baishakh Poornima as an international day at its headquarters and other UN offices. This resolution, adopted at the 79th UN plenary meeting on December 15, 1999, was sponsored by 34 member countries of this world body. But this is unlikely to happen on May 7, 2002, owing to lack of amicable mechanism developed by the UN.

However, if the UN resolution is to be implemented successfully and meaningfully or such days are to be continued in the years to come beginning from this year, or its implementation is to be made effective and meaningful as well as creditable in terms of conceiving a new global paradigm of world peace and security based on Buddha’s peace message -- a supplementary resolution is also to be introduced in the UN General Assembly before May 26, 2002 and get it adopted.

The major paragraphs of the resolution No 54/115 - adopted have been (1) Acknowledging the hope expressed by the International Buddhist Conference held in Sri Lanka in November, 1998 that the Day of Baishakh - the day of Full Moon in the month of May, each year, be recognised internationally and in particular at the UN headquarters and other UN offices. (2) Recognising that the Day of the Full Moon in the month of May is the most sacred to Buddhists who commemorate on that Day - the birth of Buddha, his attainment of enlightenment, and his passing away. (3) Considering that international recognition at the UN headquarters and other UN offices would constitute an acknowledgement of the contribution that Buddhism - one of the oldest religions in the world, has made for over two and half millennium and continues to make to the spirituality of humanity. (4) Resolves that without cost to the UN - appropriate arrangements shall be made for international observance of the Day of Baishakh at the UN headquarters and other UN offices, in consultation with the relevant UN offices and with permanent missions that also wish to be consulted.

If one objectively examines the UN resolution No 54/115 adopted by the 79th UN plenary meeting, the last paragraph of the resolution seems inadequate and incomplete to observe the Day of Baishakh by the member countries effectively and creditably.

An appropriate arrangement has not been made for observing the Day of Baishakh at the UN headquarters and other UN offices. In other words, this matter has not been well thought out by the UN, according to available information. But the UN resolution must get implemented meaningfully in order to conceive a new global paradigm of world peace and security in the years to come.

Annually, the UN members have been observing different days -- World Food Day and World Environment Day -- ever since the UN was established in 1945. These different days observed every year highlight their importance. Such different UN days not only create awareness but also deepen the understanding of their importance -- aims and objectives. These different days have also been observed based on given themes, provided by the concerned institutions and organisations, which have been created or developed under the UN system to deepen the understanding of thoughts or ideas of the theme or to spread the message of the theme adopted.

Under these situations, the observation of the Day of Baishakh should not be limited to the UN headquarters and other UN offices. The Day of Baishakh should, therefore, be observed, each year, not only by the UN member-countries but also by I/NGOs under the UN clarion call.

Fundamentally, the Day of Baishakh should create awareness about the four noble truths -- noble eightfold paths, theory of dependent origin, principles of impermanence and middle path, besides deepening the understanding to salvage or liberate mankind from their sufferings.

Similarly, an international observation of the Day of Baishakh is also to be considered as an opportunity not only to the UN but also to the smaller or weaker nations as well as big and powerful nations of the world to know the peace message of Lord Buddha or in conceiving a new global paradigm of world peace and security. It is, therefore, necessary to adopt an appropriate theme to observe the Day of Baishakh in the years to come.

The theme should include one of the teachings of Lord Buddha: "Hatred is indeed, never appeased by hatred in this world. It is appeased only by loving-kindness. This is an ancient law". This is a message of peace in Dhammapada.

Nepal is not only the country where Buddha was born but it is also the country where Shrabakayan, Mahayan and Bajrayan are still being practised by a large section of Nepalese people. Nepal should, therefore, be recognised as one of the countries which holds authority on Buddhism. In order to provide appropriate theme for observing the Day of Baishakh, an International Institute of Buddhism Studies should also be established in this country. The establishment of such an institution in Nepal is necessary not only to provide appropriate theme for observing the Day of Baishakh but also to undertake necessary research as well as to disseminate the invaluable teachings of Lord Buddha, for the salvage of mankind.

Thus, if the UN resolution is to be implemented meaningfully as well as creditably, in the years to come, a supplementary resolution of the resolution No 54/115 is necessary to be tabled in the UN General Assembly before the forthcoming May 26, 2002.