Interview : Kashif Mateen Ansari, Finance Expert

imageQ.No.01: Tell me something about yourself AND your company, please?
I started my career from the army where I completed my training with the distinction of winning the “Sword of Honor” along with five gold medals, which is a record in itself. After serving the army for few years I left it to pursue a very different career in the corporate world. I completed my studies and became a Management Accountant. I did not stop there and went to Harvard Business School, so today apart from being a Fellow Management Accountant I am also a Harvard alumni. Currently I am serving as the secretary of the Harvard Club of Pakistan.

As I travelled along the career path, I tried to gain as diverse experience as I could. I have worked for local and international organizations and lead teams across various countries and territories. In the initial part of my career I have found a lot of opportunity to travel across the globe as part of my various assignments. This has greatly enhanced my experience and exposure. Prior to starting my current Wind Project I was the chief operating officer of Askari group (Army Welfare Trust).
On a personal level my main interests include reading and writing. I have presented a number of papers at national and international conferences. Very recently my papers on Alternative Energy and Accounting for Micro Enterprise have been very well received. I have written on various topics including Privatization, Corporate Governance, Economy, and Energy. I am actively involved in philanthropic work. I feel most satisfied about the humble work that I am doing to help the special children. I am raising funds for the construction of a residential school for special children. Another area of my involvement is education where we are providing scholarships to the needy students of the professional universities.

Currently I am leading Sachal Energy Development, which is a wind IPP. It has completed its development phase which includes getting all the consents and approvals from regulatory authorities and finalization of all the contracts etc. We are about to start the implementation phase and the dream that I saw a few years back will be fulfilled, Insha’Allah. This project will be amongst the initial projects in the alternative energy sector in Pakistan. By the Grace of Allah this project has many achievements where it has achieved first of its kind milestones including it being the first ever privately sponsored power project financed by Chinese institutions. The project is named in the Pak-China Energy corridor in the fast track projects for the first phase. I am quite sure that this project and many others that are coming up will lay a solid foundation for enhancing the energy security of Pakistan through the production of alternative energy.

Q.No.02: Your views on consumer financing in Pakistan
Consumer finance is a well-known financial product across the globe, particularly in developed economies, where it constitutes a significant portion of banks’ lending portfolios. In the Pakistani banking sector, however, the evolution of the consumer financing portfolio is a more recent phenomenon, as banks have traditionally focused on lending to the corporate sector and public sector entities. It started with some prominent foreign banks introducing credit cards in the banking sector in the nineties; their outreach was limited to the top‐tier of salaried customers and businessmen.

Domestic private banks have followed suit and have shown great acumen in adopting new procedures and policies. These include credit risk assessment, setting up the requisite policy and collection units, and upgrading the scope of their IT based systems. In doing so, they successfully introduced several innovative products for the individual consumer segment. On the other side, the consumers responded well to these products as previously they did not have access to bank credit without sufficient liquid collateral.

A combination of factors is responsible for the widespread popularity of consumer finance in the recent years; I will enumerate three of these: first is the financial liberalization process, second is the liquidity and third is the lower interest rate. The financial liberalization over the last decade or so, has led to the creation of a privately owned banking system which is free to allocate resources in response to the demands of the market. Then we saw influx of liquidity in the banking sector in the last decade which motivated the banks to diversify and expand their earnings base by venturing into previously untapped areas, and third, the easy monetary policy stance of the central bank in the same period provided eligible customers with financing options at historically low rates to meet their consumption demand. In this backdrop, consumer finance has emerged as one of the most promising product for banks. Providing access to purchasing power to the middle‐class consumer has been the most significant achievement of this development of consumer financing. People have been able to raise their standard of living by purchasing various consumption goods which were previously treated as luxuries in reach of only a few. The demand for these goods has also led the manufacturing sector to expand its capacity. So the both sides of this consumer financing growth; demand and supply have contributed to the expansion in economic activities. Banks’ auto loans product and loans for consumer durables, for instance, have been instrumental in this aspect. Though still small in proportion, the rising demand for mortgage finance reflects the individual consumer’s need and financial capacity, to acquire private ownership of houses. Hence through consumer financing, banks have played a positive role in promoting economic development in Pakistan.

Q.No.03: How would you comment on consumerism and its benefits to Pakistan?
Answer: Consumerism is defined as the belief that it is good for people to spend a lot of money on goods and services. It is also seen as the actions of people who spend a lot of money on goods and services. As the Society progresses and grows economically consumerism also grows. Consumerism is seen as something directly related to the increasing standards of living. Economic growth can be achieved through consumerism. But economic growth led by consumerism alone may do more harm than good. As any other aspect of life things are good till the time they are balanced whereas overdose can turn even medicine into poison. If we discuss the disadvantages of consumerism there are numerous arguments that can be stated against it. Consumerism encourages highly wasteful behaviour. We waste our money on goods that we often do not need. Advertisers work tirelessly to create an environment conducive to impulsive buying. We waste our time in search of new things to buy rather than thinking ways to use the things we already have. Consumerism also leads to the waste of valuable resources and energy. It also contributes to increasing amounts of garbage and waste in our environment.

Keeping these negatives in the view we can coin a term as balanced consumerism which we take as good consumerism. So for our discussion here we are talking about balanced and good consumerism which balances spending and investment. Good consumerism is very important for Pakistan’s economic growth as it will boost healthy economic activity, manufacturing and employment.

Consumerism can help Pakistan by inducing mechanism of compulsory savings among the masses this way they would try to create assets and uplift their standards of livings. On the other hand, it will usher new investment in the industry thus promoting employment and economic activities. In the specific Pakistani contest our large population itself can become an engine of economic growth. Demand of consumer goods and availability of consumer financing can give rise to indigenous economic activities.

Higher consumer spending contributes in the economic activity by creating more demand for goods and services which encourages more investments in plants, equipment, services and real estate. These investments create jobs which further encourage demand. Higher consumer spending also indicates the emergence of a strong middle class with growing purchasing power. It should be clear that the very act of consumption is likely to encourage the private sector to expand their businesses to meet the growing demand.

Q.No.04: Could you comment on prospects of investment in financial sector of Pakistan?
Answer: Pakistani financial sector is one of the well organized and better regulated sectors in Pakistan. However, currently it is facing challenging conditions due to macroeconomic problems and law and order issues. According to a recent report by the international rating agency Moody’s; current conditions are weighing on business generation, asset quality and increasing exposure to government securities. However, Pakistani Banks have a strong deposit base and as confirmed by the rating agencies the deposit growth is also quite healthy. This makes our banking sector quite lucrative for investments. If we couple this with demographic growth and the density of the banking services to the general public, it appears that in the long run this sector will remain the darling of the investors.

As we discussed earlier that higher consumer spending feeds back into economy by creating more demand for goods and services which encourages more investments in plants, equipment and services etc. These investments create jobs which further arouse demand. This consumption encourages the private sector to expand their businesses to meet the growing demand. Many countries in Asia like Indonesia, India and Vietnam promoted consumerism as a policy to promote and sustain economic growth. From investment perspectives, these countries have emerged as the most exciting destinations for the investors. Keeping in view the future expectations of the GDP growth of Pakistan it is highly likely that it will be led by consumer spending and obviously consumer financing on one hand and long term financing for the businesses on the other hand will be the drivers of this growth. This means that the financial sector will be at the heart of this economic growth. So in my view the prospects of the financial sector are very bright.

Q.No.05: Your views on competition in the banking sector:
Answer: There is a healthy competition in the Pakistan financial sector. Specifically this competition among the banks has resulted into increased product range for the consumer. There has been a gradual shift from the traditional limited product range of credit to the government and the public sector enterprises, trade financing, well known large corporate loans, and credit to multinationals. This has resulted into better access to the general public of the consumer finance at affordable rates. Because of this competition SME’s and non-traditional sectors have also benefitted. The borrower base of the banks expanded significantly as the banks diversified into agriculture, SMEs, Consumers financing, mortgages, etc. The middle class that could not afford to buy cars or houses/apartments as they were excluded from the clientele of the banks as far as the lending is concerned, had been the biggest beneficiaries of these new products and services. Now they have the financial means available in the form of consumer financing for their requirements. This has resulted into increased consumer spending on one hand and higher investment in the related manufacturing set ups and also in the non-traditional sectors on the other; having said that I think that we can still see some increase in this competition if the regulators nudge the sector in the right direction.

Q.No.06: What must be done to promote the financial sector of Pakistan?
Answer: Although Pakistan financial sector is well regulated and quite developed but there are still areas which can be improved. It is needless to say that the stabilization of the micro economic situation is most important to promote the financial sector. Improved corporate governance will help strengthen this sector further. This sector has to further reform itself to bring the fruits of financial liberalization to the common man. In order to further grow this sector the simple grievances of the ordinary people have to be addressed. First and foremost would be the access to finance as that has been a sour area in Pakistan traditionally; as per reports just till few years ago hardly 12% of the population had access to formal banking which includes almost 3% for the women. Access to informal financing is a bit higher but none the less this state of affairs is quite sorry in this age of information and development. Although some work has been done on the rates for small deposit holders but this area also needs some more attention. Then there is in-availability of suitable assortment of flexible products for smaller costumers, service delivery standards and the general availability of the services.

Government can contribute in the promotion of this sector by further strengthening the regulatory framework so as to reduce any mal-practice by any player as this will increase the credibility and reach of financial sector. Also government can reduce the tax burden on the banks and ease out the bureaucratic red tape.

Posted on Oct 10, 14 | 9:53 pm