De montfort University Niels Brock Business College

United kingdom Copenhagen, Denmark

Assignment 1

Marketing of banking and financial services in Pakistan

Module: HUMS 3006

Module Tutor: Hurlum Heisah Submitted by: (with DMU ID)

Words counted: 2283 P14003x10

Date: 17/11/2014 P1400404x

P140x3701

P 14x03533

1
Table of Contents

Abstract...................................................................................................................................... 3

1. Introduction ......................................................................................................................... 4

2. Pakistani Economy ............................................................................................................. 4

3. Financial sector of Pakistan ................................................................................................ 5

4. History of banking and financial services............................................................................. 6

5. State Bank initiative ............................................................................................................ 7

6. Islamic banking ................................................................................................................... 8

7. Marketing ............................................................................................................................ 8

7.1. Products: ..................................................................................................................... 9

7.2. Price ...........................................................................................................................10

7.3. Placement ...................................................................................................................10

7.4. Promotion ...................................................................................................................11

7.5. People: .......................................................................................................................11

7.6. Process:......................................................................................................................12

7.7. Physical Evidences .....................................................................................................12

8. Conclusion .........................................................................................................................12

9. Reference List13

2
Abstract

Pakistani financial services and banking sector are most efficient and profitable sector

of economy. Pakistan economy is developing economy and having potential to become

emerging economy like India and China. Pakistan is country where public sector

institutions going in loss but banking and financial sector sets bench marks for industry.

Banking sector survive during world economic crisis and shows its resilience. Despite of

the fact that, Pakistan facing number of problems, related to politics instability and

governess issues banking and financial services sector showing signs of improvement

day by day. Banks using all medium of service marketing mix to increase its customer

base. State Bank of Pakistans role as regulator and mediator positively increase banks

and financial sector performance. Now banks have diversified portfolios, effective

pricing mechanism, state of the art process, professional work force, and efficient

delivery system and communication tools to generate profits and contribute to the

economy. Still there are enormous opportunities available to grow and financial

institutions exploiting these opportunities.

3
1. Introduction

Financial institutions include wide spectrum of financial institutions like commercial banks,

investment banks, insurance companies, national saving schemes, stock exchanges, micro

finance institutions, brokerages houses and Islamic banks. These institutions facilitate

consumers to use wide range of services to save money, invest in stocks or carryout large to

small business transactions. Similarly, these institutes provide several products and services on

assets and liability side.

In Pakistani economy, there is major contribution of commercial banks. Commercial banks are

privately own banks that provide personal loans, car leasing, letter of credit facility to

import/export goods, money saving schemes etc. Other financial institutions provide hedging

instruments for future risk. After privatization in 1990s commercial banks performance increase

dramatically and currently 80% of the assets are distributed among private banks. Before going

into detail, we have to understand Pakistani economy and their financial infrastructure.

2. Pakistani Economy

Pakistan is one of the developing countries in south Asia with population of around 20 million

people. Pakistan is 36 largest country in terms of area and 6th largest in term of population.

Pakistans economy placed 26th and 44th in term of purchasing power parity (PPP) and nominal

GDP respectively. Resources wise Pakistan has enormous potential. Pakistan having one of the

largest coal reserve in the world. Agriculture, telecom, textile and banking sector are growing

sectors of Pakistan. Pakistan banking sector has amazingly survive during 2008-2009 world

financial crisis

4
3. Financial sector of Pakistan

Banking and financial service sector are always consider as backbone of any economy in the

world. Pakistan has one of the strongest banking systems in the world. It has mechanism to

absorbed shocks like 2007-08 world financial crises. Privatizations, liberalization of private

sector, deregulation and supervision of State Bank of Pakistan (SBP) are major reason for

making it one of the growing sectors in the country where other government institution are going

in loss.

Pakistan has different kinds of banks. It has central bank, commercial banks, agriculture banks,

industrial banks, exchange bank etc. Central bank responsibility includes fiscal policy and

managing financial stability of the country. State bank of Pakistan holds consolidated reserve of

the country. Pakistani banking industry have witness paradigm shift since 2000, when its

reserves rose up to 100 percent during 2001-03.

With the emergence of new communication, tools and techniques now financial institutions have

access to rural areas of the country. Pakistan is an agriculture country and its GDPs growth

depends on performance of agriculture sector. Development of commercial and financial

banking support agriculture sector as well. Pakistani economy still has tremendous potential to

grow. Recently 3G and 4G network lunched by telecom sector and mobile communicating is

growing rapidly in Pakistan. Large commercial banks are now focusing on new ways of

branchless banking. Almost all GSM mobile companies have launched fund transfer facility with

the help of commercial banks. ATM one link network and internet banking are facilities

customers and increasing dependency on banks.

Pakistani banks adopting electronics modes of payment and settlement procedures. Smooth

save and reliable payment system are keys to boost confidence level of consumers. In Pakistan,

system transforming from conventional paper based manual transections to electronics based

5
system like ATM, mobile banking, internet banking, real time online banking(RTOB). Currently

ATM transactions are account for 64 % of overall payment transactions. Mobile and internet

banking are accounts for 2% and 4% respectively. Still there is huge potential for mobile and

internet banking.

4. History of banking and financial services

Pakistan created in 1947 after Long British rule. Initially the banking sector was very poor. State

bank of Pakistan created in July 1948 as central bank and in first two decades Pakistani

banking systems improves drastically. 1970 era was very bad for Pakistani banking and

financial institutions because in 1974 government nationalize all banks and because of

nationalization banks performance decline. Major reason for this Inefficiency of banking sector

was Pakistani bureaucratic culture and political interference. During that crises pressure on

currency was increased and it badly hurt balance of payment. After 1990 privatization of large

public sector banks set basis for todays growth figure. Privatizations liberate banks to take

maximum output from their resources. State bank of Pakistan regulate all foreign and local

banks. Pakistan financial sector consist of following types of institutions

1) Scheduled banks

2) Microfinance institutions(MFIs)

3) Development finance institutions(DFIs)

4) Non-banking finance companies(NBFCs)

5) Insurance companies

6) Modarabas & Musharka

7) Directorate national saving(DNS)

In above mention institutions State bank of Pakistan regulate Scheduled banks, Micro finance

institutions (MFIs) and Development finance institutions (DFIs) while other institutions are

6
regulate by Securities and Exchange Commission of Pakistan (SECP). Security and exchange

commission of Pakistan regulate stock market and dealing in trading of securities. Banking

sector contribute 70% in contrast from non-banking sector in economy. Pakistan has following

types of banks.

Commercial banks

Specialized bank

Development finance institutions

Micro finance

Islamic banks

The banking sector embraced 36 commercial banks (25 local private bank, 4 public sector &

7 foreign banks) with four specialized banks with more than 9000 branches throughout

country similarly there are six fully Islamic banks. Two industrial and commercial banks also,

operating in Pakistan. Industrial and commercial bank of China ICBC and Sindh Bank are

aiming to support industry.

Privatization of commercial banks was one of the main reasons for growth. 12 Foreign and

20 commercial banks currently hold 80 percent of the assets among commercial banks.

Private Banks promotes professional services and innovative modes of entry into new

markets make it possible for the country where most of the sectors facing management

issues due to bureaucratic culture.

5. State Bank initiative

State bank (SBP) initiatives during last decade provide solid ground for commercial banks to

increase their consumer base. Introduction of Basic business Account (BBA) for low-income

peoples and strict rule of annual branch policy for commercial banks to open 100 branches

7
 including 20% out of major cities make it one of the dynamic sectors of economy. State

banks initiates include, setting future vision for the industry, creating more diversified

banking sector, consumer protection, strengthening competition among banks, setting

interest rates and regulations for achieving financial objectives, strengthening accountability

measures

Pakistan financial service sector ranked 34 out of 52 countries on financial development

index during world economic report in 2008. Pakistan was ahead of Russian Federation,

Turkey and Indonesia. China placed 24 and India ranked31.

6. Islamic banking

Islamic banking in Pakistan is flourishing rapidly. Pakistan is Muslim majority country and

people trust an Islamic bank. Modaraba and Musharakah financing provide consumers

facility to use funds in Islamic way of banking. Modaraba is contract between investor and

manager where both parties mutually agreed to distribute share of the profit earned from

different Islamic securities among subscribers. Musharakahis a partnership structure

among subscribers and bank on profit and loss basis, bank invest in Islamic securities and

on the basic of return both parties share profit or loss equally

7. Marketing
Marketing plays a very important role in success of banks and financial institutions.

Traditional Marketing mix consist of 4 pillars i.e. product (all services that bank offers to

consumers), price (bank charges and commission receives), placement (branch network,

ATM locations) and promotion (promotional mix, media used). However, services require 3

additional ps called people, physical evidence and processes. Banking provides financial

services according to service marketing services are intangible, inseparable, variable and

8
perishable. Now banks are using ATL (above the line) and BTL (blow the line marketing)

activities to promote its services.

Different marketing strategies are applicable to government and private sector. This is

because government backed financial institutions are financial secure as compared to private

sector. However, this does not mean government sector financial institutions do not need to

worry about marketing. The fear of privatization has forced government institutions to

improve their performance. So financial institutions are using marketing as a tool to improve

their performance.

Services require concrete approach to market them because of its intangible nature.

Marketing tools provide it chance to create awareness about product and services offered by

bank. Similarly, due to heterogeneous nature of services it is very difficult to standardize

processes but banking industry in Pakistan shows sign of professionalism by provide serves

in standardize manner.

7.1 Products:

Banks are financial intermediaries that buy and sell financial obligations. Bank offer to

consumers debt financing, car leasing, Lockers, Saving schemes and provide LC for

imports. As we said banking is service so the products of banking are intangible,

heterogeneous (mean different experience every time), perishable and inseparable. (Means

consumption and production are inseparable). Pakistani bank are providing state of the art

services to consumers facilities like one link ATM facility, Branch network, Internet banking,

mobile banking facilitating consumers in very professional and timely manner. Similarly,

consumer can benefit from financial services like insurance and mortgage to secure their

future.

9
Cellular network revolution led Pakistan on the way where banks have opportunity of large

base of consumer using mobile phones. Simple message alert and utility bills and fund

transfer facility are now available with mobile top up centers mean consumer have access to

basic banking facilities close to their home and office reducing barriers. Another profitable

product for banks is car leasing, Car leasing services are encourage by SBP during last

decade that helps banks to make profit. UBL Omni and Easypaisa by Telenor are two very

innovative ideas that help industry to pave new ways of growth.

Although use of credit card reduced over the years but debit card use increased. Banks are

discouraging credit card facility due to low per capita income but debit card facility utilized by

huge number of Pakistanis.

7.2 Price

Pricing in banking and financial sector refer to cost of doing transaction like bank charges,

annual fees and interest charged by bank on loans, fees charged by financial institution from

clients. To attract potential clients bank offering number of facilities freely on current account.

State bank of Pakistan regulate interest rate offered by banks. Depending on circumstances

SBP develop economic and monetary policy to promote business by reducing interest rates

and when require cash, intervene by increasing interest rates

7.3 Placement

Placement refers to number of branches and point of sale facility available in different

locations. SBP set a criteria for larger banks to open 20% branches out of urban cities

promote banking in rural areas as well. Expanding boundaries due to high mobile usage

provides opportunities to major and microfinance banks to operate in mobile locations in the

country. Agriculture banks provide easy loan to formers so that they can cultivate crops. Still

due to low literacy, rate rural public is unaware of the banking services

10
Mobile transfer facility enables poor people to send money to without establishing accounts

in bank. These branchless banking concepts are getting popular among low income and rural

public. Major banks providing internet banking but due to low density of internet still there is

long way to go. CRM and telebanking provide boost to banking services now 24/7 telephones

assistance available almost throughout Pakistan.

7.4 Promotion

Advertising and promotion are necessary medium to create awareness and increase

visibility. Promotional mix offer chances to persuade and attract consumer. Last Decade

witness a revolution in Pakistani media and number of channels lunched during Musharrafs

Regime open new doors for advertiser to effectively advertise. Different banks adopting

different ways to attract consumer.

Cricket is popular sports and major banks are associated with cricket. There are teams

managed by banks to compete on national level. Additionally super star players employed as

celebrity endorsement in ads. In 21st century in Pakistan banks are actively participating in

print and Television to promote their services.

7.5 People:

People are one of the important resources in the context of services. Initially with the creation

of Pakistan there was no skilled human resource available but now professional people are

available to banks. Especially privatization of banks in 1990 effect banks performance and

over the year established skill resource for the industry. Customer care requires trained

people to handle situations. Developed countries even bound to establish call center in

everywhere to reduce their cost. Developing countries like Pakistan have opportunity to use

their people effectively.

11
7.6 Process:

One of the major issue Service provider face is standardization of processes. It is necessary

to maintain standardize processes so that customer can benefit from efficient delivery of

service. Despite of their innovation major banks like MCB and HBL still have manual systems

to improve. In urban centers, mostly banks have online branches but rural areas are still

suffering from manual system of service delivery. As compared to 1990 era situation of 2000

drastically changed now banks have more branches and more improved system due to

increase rate of internet and tele density.

7.7 Physical Evidences

The environment and ambiance played a vital role to satisfy customer. Service marketing

guru In her famous article services capes Bitner, 1992 describe, environment is necessary

ingredient for service success. Banks and financial institution developed state of the art

branches and neat and clean system improved their efficiencies. With compares to other

institutions, commercial banks have developed culture and norm of much improve systems.

Public sector banks still need to improve their services but private banks performing

enormously professional manners

8 Conclusion

Over the last 20 year Pakistani banking and financial market develop itself for other to bench

mark. After privatization, commercial banks are earning profit and offering innovative

services. Due to SBP initiatives banking sector show resilience. Still there are enormous

opportunities available for domestic and foreign banks to increase their market base by using

new ways of marketing. Social networking sites and mobile devices provide rewarding

opportunities to banking and financial service sector

12
 9. References List

'BANKING AND FINANCE SECTOR AT A GLANCE' 2011, Economic Review (05318955), 42,
2, pp. 44-46, Business Source Elite, EBSCOhost, viewed 15 November 2014.

http://www.kpmg.com/PK/en/IssuesAndInsights/ArticlesPublications/Documents/BankingSurvey

2013.pdf [Assessed on 10 Nov 2014]

http://forum.secp.gov.pk/showthread.php?183-Introduction-1-Pakistan%92s-financial-sector

[Assessed on 15 Nov 2014]

http://www.sbp.org.pk/research/bulletin/2011/Vol-7-1/2Ishrat.pdf [Assessed on 14 Nov 2014]

http://www.issi.org.pk/publication-files/1302497247_37103097.pdf [Assessed on 16 Nov 2014]

Rashid Rehman, R, & Waheed, A 2012, 'Individual's Leadership and Decision Making Styles: A
Study of Banking Sector of Pakistan', Journal Of Behavioural Sciences, 22, 3, pp. 70-89,
Academic Search Elite, EBSCOhost, viewed 16 November 2014.

http://www.dgtrdt.gov.pk/research/38th_syndicate_reports/2.pdf [Assessed on 14 Nov 2014]

http://www.sbp.org.pk/bsd/10YearStrategyPaper.pdf [Assessed on 10 Nov 2014]

http://www.sbp.org.pk/about/speech/governors/dr.shamshad/2006/Pak-Dinner-25-Jul-06.pdf

[Assessed on 11 Nov 2014]

13