Saving is something that we all need to do. To develop a regular habit of saving, it is usually helpful to have a structure for your spending. This is where financial management and budgeting have a role to play. And yes, these terms apply to all of us, not just companies and businesses.

Personal Finance Management

When money comes into play, most people feel that it’s just about numbers and how much they make in a period. This approach is both simplistic and ignores a basic point, how you think about money is very important.

There are several steps you can take to get set for some long-term wealth building. Ignore how large (or small) your paycheck is and focus on making your savings account larger. Make this a conscious thought process. Takes steps to develop a healthy mindset aligned toward personal finances.

Managing your personal finances is just a way of listing down where your money goes, and it helps to identify areas where you may be spending money or where you can reduce spending. Do you have money troubles by the end of the month? Or have to cancel plans because of a cash shortage? Or end up with less cash than you anticipated? Or do you need a sizable amount of money in the next year?

This makes you a prime candidate for budgeting and financial management. Both are just methods used to keep track of your money and watch where it is going. Budgeting lets you get a grip on your finances and helps manage your earnings better.

Going through a financial management exercise on your spending is about seeing how much money you earn, where you spend it, and assessing if you are doing it right or reworking your expenditures to match your goals.

This is where financial management apps help to make informed financial decisions. We list the most useful apps available on Android and Apple play stores.

1.   Hysab Kytab

The only app that is developed in Pakistan. Hysab Kytab is a money-saving app that lets users set financial goals, develop a budget, offer review charts, and track expenses. The best thing about Hysab Kytab is the simplified visuals of spending that it offers users. These visuals are simple to understand, and users can easily see where their money is going. It also helps show where users went off track.

2.   Wallet

The Wallet is a financial management app that supports multiple currencies. The app is good to use as it highlights high or risky financial decisions. It also links with banking apps to track minor spending and charges. The more advanced features require a subscription, but most features are free to use.

3.   Pocket Guard

Pocket Guard is another money management app that links with mobile banking apps and tracks purchases, payables, and bills. It also offers comparative budgeting month to month helps to track previous expenses. The app also offers estimates about how and what you should spend and shows what spending will push you out of budget.

4.   Home Budget With Sync

Suppose you manage household expenses with your spouse or other family members. In that case, Home Budget with Sync is an app that allows multiple users to manage household finances by keeping track of their purchases. This way, the user can review their spending to make the right changes to save money.

The home budget has a family sharing feature that coordinates purchases and expenses of the whole household. This makes it easier for a multiple member household to follow the household budget. It also shares where and what spending heads need to be cut down to meet the budget. This app helps multiple users follow a set budget and manage group funds as the users decide. The app offers individual budget options to let people manage their private funds in the same app.

5.   Honeydue

Honeydue is another budget app that is good for multiple users. It is marketed as an app for couples to manage their finances jointly,but it can be used by housemates and family as well. It allows the tracking of all financial details like bank accounts, credit cards, loans, investments and savings. People can limit which information they wish to share with their partners.

The app helps users track their monthly expenses and savings and can be designed to send an alert when bills are due or if an expense head is going over budget.

It also offers a chat option to discuss issues with other people using the app.

Almost every money management app offers the option of tracking incomes and expenses, some version of spending analysis of the past period and suggestions on how to manage better for future ones

Instead of finding an app that will give you the best result, the first step for financial management and awareness is to download any app and start using it.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Best Personal Finance Management Apps in 2022 for Pakistanis appeared first on Smartchoice.pk.

Mutual Funds are a good option for new investors because of the following advantages:

• Mutual funds are designed to make investing low-cost and straightforward. You can begin investing with as little as Rs. 5,000.
• Investors are not burdened with the decision and research involved in selecting the stocks and bonds to be purchased in the funds or the daily management and safekeeping of the chosen investments.

What are Mutual Funds

A mutual fund is a selection of stocks, bonds, money market instruments, or any similar assets bought by the investors’ money. A mutual fund can be different combinations of stocks, stocks & bonds, or any other variety of securities combined under the mutual fund as a single investment pool.

This combination is specified in the mandate of the mutual fund, and they cannot deviate from the set mandate.

Mutual fund investments are managed by Money or Fund Managers, who make the investment decisions and manage the funds to ensure that capital gains are maximized for investors.

Mutual funds are run by Asset Management Companies (AMCs), usually public limited companies. A Trust (and Trust Deed) is established by the Asset Management Company under which a mutual fund is launched. The Trustee acts as the custodian of the fund’s assets while the Fund Manager makes the investment and related operational decisions regarding the fund. Asset Management Companies can launch and manage multiple mutual funds with different or overlapping, or entirely distinct mandates.

Why Invest in Mutual Funds:

Mutual funds offer an optimized investment option to yield competitive returns to meet long-term or short-term financial goals. The investor can invest with the long-term financial goals of arranging funds for their child’s higher education or retirement savings or child’s marriage etc. An investor can also have short-term financial goals like saving for a vacation or buying a new car or a new home.

Before investing in mutual funds, all investors need to know their investment objectives. This will help determine the risk and return profile, investment timeline, and target goals. Understanding these questions will allow an investor to make more effective investment decisions.

By investing in mutual funds, the investor gets the advantage of exposure to different securities under a single investment package. They allow the investor to develop a diversified portfolio of assets while enjoying financial management by professionals.

Another key advantage of investing in mutual funds is that the investor can avail tax credit.

Types of Mutual Funds:
There are two primary forms of mutual funds. These are

1. Closed-Ended Mutual Fund:  These funds are traded on the Secondary Market after their launch through an Initial Public Offering.
2. Open-Ended Mutual Funds: These funds are issued in the form of Units to investors, which can be redeemed (sold back) based on their Net Asset Value (NAV) at any time. These funds can be purchased and redeemed through the Fund Management Company, which daily announces their offer and redemption prices. These funds can also be listed on the Stock Market.

Categories of Mutual Funds:

Mutual Funds are of different categories. These categories are based on where the fund invests, its risk profile, and the investment strategy. In Pakistan, the following mutual fund categories are approved by the SECP.

1.     Money Market Fund

These funds invest in short-term fixed-income securities like government bonds and certificates of deposits, and commercial paper. Their aim is to maintain high liquidity by investing in low-risk instruments that are generally safer.

2.     Income Fund

These funds generally invest in market securities, term finance certificates/sukuks, commercial paper, and spread transactions. They aim to generate a regular stream of income for their unitholders.

An income fund is generally seen as less risky compared to an equity fund as it is not likely to be affected by market volatility. The probability of capital appreciation is also limited.

3.     Equity Fund

These funds invest in stocks and grow faster than money market or fixed-income funds. This means they carry a higher risk as they are exposed to market volatility.  An equity fund aims to provide exposure to listed equity securities and capital appreciation over the medium to long­ term.

4.     Balanced Fund

A balanced fund offers exposure to both growth and regular income by investing in equities and fixed income securities. Regulations require that balanced funds keep 30% to 70% of their net investments in listed equity securities.

The other remaining can be invested in other certified investments. Balanced funds are exposed to both risks of fluctuations in equity markets and interest rate variations. Balanced funds can be risky like equity funds but are less risky than equity funds based on asset allocation.

5.     Asset Allocation Fund

These funds can invest in any type of securities subject to conditions to diversify their assets across different types of securities and investment styles as written in their offering document. Asset allocation funds are generally considered high-risk funds due to their potential to be fully invested in equities at any point in time.

6.     Capital Protected Fund

This type of fund makes investments in such a way that the original amount of investment is safe to ensure positive investment returns. This fund keeps a significant part of its net amount in a bank in the form of a term deposit. At the same time, the remaining is invested in accordance with the authorized investments stated in the offering document. Unlike other funds, the capital-protected fund has a fixed maturity period specified under the investment period or tenure.

7.     Index Tracker Fund

This type of fund is designed to carry out the activities of a particular index and show the probable tracking in the offering document. Investment of at least 85% of net assets is required in the securities that constitute the selected index or subset.

8.     Fund of Funds

This fund holds other mutual funds in its portfolio rather than investing directly in any security. However, each fund of funds will have its own category, for instance, equity fund of funds, income fund of funds, etc.

An investor can invest in the fund that suits his investment strategy, the investment time horizon, how much risk he can tolerate, his cash flow requirements, or any other investment objectives/ requirements.

The Mutual Funds Association of Pakistan has a very helpful website http://www.mufap.com/ with comprehensive details and comparisons of fund performance.

Key Terms:

Some key terms used in mutual funds investment that you should know are as follows:

Net Asset Value (NAV): 

Net Asset Value is the market value of a mutual fund’s assets after deducting its expenses and liabilities on a particular day. The per unit NAV is the Net Asset Value of the funds divided by the number of units/ certificates outstanding on the Valuation Date. The NAV shows the performance of a mutual fund.

NAV = (Current Market Value of all Assets – Expenses – Liabilities) / (Total Number of Units Outstanding)

Expense Ratio: 

Expense Ratio is the fund’s annual fund operating expenses, expressed as a percentage of its average net assets. An Expense Ratio of 1% p.a. means that 1% of the fund’s total assets will be used to cover expenses each year. Expense Ratios are essential to consider when choosing a category of mutual fund as they can significantly affect returns.

Redemption: 

The units of open-end mutual funds can be partially or fully redeemed at any time from the Asset Management Company that manages the funds.

Fund Manager Report

This is a monthly report produced by an asset management company in which information on the composition and performance of the mutual funds is presented.

How to Invest in Mutual Funds:
The documents needed for opening a mutual fund account are as follows:

1. CNIC Copy
2. Application/ Account Opening Form/ Purchase of Units Form
3. Zakat Affidavit (Optional)
4. KYC Form/ FATCA Form
5. Cheque/ Pay Order/ Demand Draft (payable to the respective Trustee)

Fees & Charges:

You must keep in mind that there are charges involved with investing in mutual funds. Some of these charges are as follows:

1. One-time Fee: This fee is paid for investment/ divestment in an open-end fund. Details of these fees are disclosed in the offering documents.
2. Front-end Load: This is charged on the purchase of units of the fund.
3. Back–end Load: This is charged when an investor redeems his investment in the mutual fund.
4. Contingent or Deferred Sales Load: This is charged only when there is no front-end load. This load ischarged on redemption of investment. However, funds can reduce it progressively if an investor holds an investment for a more extended period.
5. Management Fee: This is the fee charged by the AMC for the management of a fund.
6. Trustee Fee: This is the fee charged by the Trustee to provide trusteeship and other services for the fund’s assets.

Benefits Of Investing In Mutual Funds:

Asset management companies manage mutual funds. They evaluate investment opportunities by researching, selecting, and monitoring the performance of the securities purchased by the fund. These tasks are done by qualified financial professionals who make calculated investment decisions on your behalf.

Diversification

A mutual fund can help reduce investment risk if a company or sector fails by spreading its investments over other securities and investment sectors.

Affordability

Mutual funds are ideal for investors without a lot of money to invest. They have relatively low Rupee amounts for initial purchases and subsequent monthly purchases. For example, you can add funds at set amounts of, say, PKR 1,000 to 5,000 per month or other intervals. This is not difficult to set aside for savings or investment purposes.

Liquidity

Mutual fund unit holders can easily redeem their units into cash on any working day. They will receive the applicable value (NAV) of their investment within six working days. Investors do not need to look or wait for a buyer. The fund buys back (redeems) the units at the current net asset value (NAV).

Well regulated

The SECP continuously monitors all mutual funds through reports that the mutual funds are required to file with the SECP regularly.

Transparency

a mutual fund’s performance is reviewed by different publications, rating agencies, and the SECP. This makes it convenient for investors to compare the performances of different funds. Unit holders also receive regular updates, like daily NAVs, fund’s holdings, and the fund manager’s monthly strategy report.

Tax benefits

Investment in mutual fund schemes entitles the investor to avail tax credit that enhances the overall return on their savings

Things to Know Before Investing In A Mutual Fund

Before selecting an appropriate mutual fund for your savings, you must identify your investment objectives. Your financial goals are determined by your income, expenses, financial independence, age, lifestyle, family stage, etc.

Here are some questions that you should ask yourself and likely answers that will help you select an appropriate mutual fund.

• Why am I investing?

I need some side income, need to save up to buy a home, fund a wedding, save for higher education, or a combination of all these needs.

• What is my risk tolerance?

I am unwilling to take any risk, or I accept that to earn long-term gains, I may book short-term losses.

• What are my cash flow requirements?

I want to multiply my assets for the future and do not need periodic cash flow; I need a regular cash flow, or I need X amount to meet a need in X years.

• What is my time horizon?
• I need some money in under a year (short term), or one to five years (medium-term), or five years or more (long time)

If you answer these questions honestly, you will have clarity of what to expect from your investment.

This will help you determine an appropriate mutual fund investment strategy.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post All you need to know about Investing In Pakistani Mutual Funds appeared first on Smartchoice.pk.

Key Terms to Understand

Let us begin by revisiting a few basic definitions:

Taxable Income

This is the Total Income minus exemptions and any donations that are eligible for deduction from taxation and deductible allowances.

Exemptions:

Exemptions are income heads that are tax-free, therefore “exempt” from taxes.

Total Income

Total Income is the total of all income that is subject to Taxes under each head of Income.

Head of Income

Under the Income Tax Ordinance, 2001, Income is classified into the following five heads of Income:

1. Salary
2. Income from property
3. Income from business
4. Capital gains
5. Income from Other Sources

Resident

A taxpayer is considered a resident (and therefore has to pay taxes) under the following conditions:

• S/he has been living in Pakistan for a period or periods that add up to at least one hundred and eighty-three days (183 days) or more in the tax year;
• If a person individual is in Pakistan for a period or periods that add up to one hundred and twenty days (120) or more in the tax year AND, in the four years before the current tax year, has been in Pakistan for a period or periods that add up to three hundred and sixty-five days or more;
• Is an employee or official of the Federal Government or a Provincial Government posted abroad in the Tax Year?
• An Association of Persons is Resident for a Tax Year if the control and management of its affairs was wholly or partly in Pakistan for any time in that year;
• A Company is treated as a Resident for a Tax Year if :
  • It is incorporated or formed under any law in force in Pakistan;
  • The control and management of its affairs is wholly in Pakistan for any time in the year; or
  • It is a Provincial Government or a local government in Pakistan.

Non-Resident

An Association of Persons, a Company, or an Individual is considered Non-Resident for a Tax Year if they are not Resident for that year. (see requirements for Residents above)

Pakistan Source Income

Source incomes are defined in section 101 of the Income Tax Ordinance, 2001. This divides Incomes under varied heads and situations. Some of the common source Incomes are:

• Salary received or receivable from any employment in Pakistan. It doesn’t matter where it is paid.
• Salary paid by, or on behalf of, the Federal Government, a Provincial Government, or a local Government in Pakistan, regardless of where the employment (job) is
• Dividend paid by Pakistan Resident Company.
• Profit on debt paid by a Pakistani Resident Person
• Property or rental Income from the lease of immovable property in Pakistan.
• Pension or annuity paid or payable by a Resident or permanent establishment of a Non-Resident.

Foreign Source Income

Any income which is not a Pakistan source income.

Person

• Any Individual
• A Company or Association of Persons incorporated, formed, organized, or established in Pakistan or elsewhere;
• The Federal Government, a foreign government, a political subdivision of a foreign government, or public international organization

Company

• A Company is defined under the Companies Ordinance, 1984 (XLVII of 1984).
• A ‘body corporate’ formed under any law in force in Pakistan.
• A modaraba.
• A body incorporated by or under the law of a country outside Pakistan relating to the incorporation of Companies;
• An amendment has been made through the Finance Act, 2013 to enlarge the scope of the definition of a Company. Now as per Income Tax Ordinance, 2001 a company includes:
  • A co-operative society, a finance society, or any other society;
  • A non-profit organization;
  • A trust, an entity, or a body of persons established or constituted by or under any law for the time being in force.
• A foreign association, which the Board has, by general or special order, declared to be a company for this Ordinance.
• A Provincial Government.
• A Local Government in Pakistan.
• A Small Company.

Association Of Persons

• Includes a firm (the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all).
• A Hindu undivided family
• Any artificial juridical person
• Any body of persons formed under a foreign law but does not include a Company.

Tax Year

• These twelve months that ends on the 30th day of June i.e. on the financial year
• It is mentioned by the calendar year in which the date falls. For example, the tax year for the period of twelve months from July 01, 2017, to June 30, 2018, will be mentioned as the calendar year 2018 and the period of twelve months from July 01, 2018, to June 30, 2019, shall be denoted by the calendar year 2019.

Special Tax Year

This means any period of twelve months and is denoted by the calendar year relevant to the Normal Tax Year in which the closing date of the Special Tax Year falls. For example, the Tax Year for the period of twelve months from January 01, 2017, to December 31, 2017, shall be denoted by the calendar year 2018 and the period of twelve months from October 01, 2017, to September 30, 2018, shall be denoted by the calendar year 2019.

How to Register for Taxes

Any person, a company, or an association of persons (AOP), or foreign national is treated as registered when they are re-enrolled on the Iris portal. The enrollment provides you with a National Tax Number (NTN) or Registration Number and password.

• In the case of individuals, 13 digits Computerized National Identity Card (CNIC) will be used as NTN or Registration Number.

• NTN or Registration Number for AOP and Company is the 7 digits NTN received after e-enrollment.

Both these credentials allow users to access the Iris portal, the online Income Tax system. This is the only way through which online Income Tax Returns can be filed.

Documents needed for e-enrollment for an individual are as follows:

• CNIC/NICOP/Passport number
• Cell phone number in use
• Active e-mail address
• Nationality
• Residential address
• Accounting period

In case you are paying tax on business income you will also need:

• Business name
• Business address
• Principal business activity
• Name and NTN of the employer in case of salary income
• Address of property in case of property income

The principal officer of the company and AOP needs to ensure that the following information is available before starting e-enrollment

• Name of company or AOP
• Business name
• Business address
• Accounting period
• Business phone number
• E-mail address
• Cell phone number of the principal officer of the company or AOP
• Principal business activity
• Address of industrial establishment or principal place of business
• Company type, like public limited, private limited, unit trust, trust, NGO, society, small company, modaraba, or any other
• Date of registration
• Incorporation certificate by Securities and Exchange Commission of Pakistan (SECP) in case of a company
• Registration certificate and partnership deed in case of a registered firm
• Partnership deed in case firm is not registered
• Trust deed in case of a trust
• Registration certificate in case of society
• Name of the representative with his CNIC or NTN
• Following particulars of every director and major shareholder having 10% or more shares in case of company or partners in case of an AOP, namely:-
• Name
• CNIC/NTN/Passport and
• Share %

Income tax rates for Individual and AOP

The Income-tax rates of tax applied on the taxable income of every individual and AOP are in the following table:

Rate of Tax for Salaried Individual

You know your taxable income from the tables above and you deduct the deductable allowances from the income figure.

Confused? See the example below:

In case this example is of a salaried individual, there would be no tax due as their taxable income slabs start from an annual income of Rs. 600,000. In the case of self-employed or AOPs the tax would be applied as below:

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post A Guide To Personal Taxes In Pakistan appeared first on Smartchoice.pk.

Investing in the stock market is one of the most common means of investing all over the world. There is a whole science to it and for someone looking to start investing for the first time, it can be confusing. This article will help introduce you to the technical world of stock investments.

What are stocks and how can you earn from them?

Stocks or shares are units of ownership of a company. Companies issue shares for the money that they raise. People that buy shares become shareholders of a company. Companies that are established, pay their shareholders some portion of their net earnings. This payment is called dividends if it is paid in cash. Sometimes a company pays its shareholders more stock if it doesn’t have the cash to distribute. The additional shares are called bonus shares.

Types of Shares

Shares can be preferred or common, which yields different returns for shareholders. They are traded in the stock market by specialized vendors called stockbrokers or stock traders. Many people invest in stocks by buying companies’ stocks and hope that the company will pay good dividends. People that purchase stocks for an extended period are known as investors. This type of investment is called passive investment.

Most people investing in stocks are passive investors; however, some people buy and sell stocks regularly. These people are known as day traders or active traders.

Active traders trade in stocks over a short term of maybe a day or up to a month, just to capitalize on the share price fluctuation. A basic rule of thumb is to call investors that trade shares at least ten times a month an active trader. These people try to benefit from rising share prices, buying a share as it rises and then selling it as it reaches the expected peak price. These people usually base their decision on information about the share, the company’s anticipated results, or some other information.

For the average person looking to invest in stocks, bear in mind that it is best to keep things simple. If you do not know the stock market, it is best if you dabble in a mix of low cost, indexed funds to get the most out of your investment in the stock market.

How To Trade In The Stock Market?

To start on your investing journey, you must open a brokerage account. This account can be linked to your bank account for fund transfers.  The most common way to trade shares in the stock market is by trading through stock exchanges. Stock markets are where buying and selling forces influence the trading price of a stock. Through a stockbroker, you can buy shares from existing investors who wish to sell them and vice versa.

Stock market transactions can be of two types, primary and secondary market transactions.

Primary Market

When a company first releases its stock, it is called an Initial Public Offering, usually called an IPO in short.  Since there are regulatory requirements that companies must follow, the IPO must be registered, and the company decides which banks it wants to issue the IPO through.

An IPO specifies a fixed number of shares for a specific price. You must subscribe to the shares through the bank’s IPO offering documents. At times, an IPO can be oversubscribed, which means that more people have subscribed for the IPO than there are shares to be issued. Similarly, an IPO can also be undersubscribed, which means fewer people are looking to buy the stock than there are shares.

In most cases, primary market issues are much lesser in number compared to secondary market trades.

Secondary Market

Stock is traded on stock exchanges in secondary sales. Trading in stocks has to meet specific government regulations. Most of these regulations are in place to protect investors from fraud. Over the long run, stocks usually give better returns on the money you invest in them than other investments.

Brokerage

An investor must trade stocks through brokers or brokerage houses registered with the stock exchange. This does not require the direct involvement of the company. Each stock exchange has a number of brokers and brokerage houses registered. Registered Brokers/brokerage houses are allowed to engage in the execution of trade on others’ behalf as per the laws, rules and regulations. The following points are of key importance if you are opting for trade.

• For protection against fraud and misrepresentation, an investor should trade only through registered brokers/brokerage houses and agents.
• Make sure that the brokerage house, broker or agent you pick is authentic. You can check their registration on the SECP’s uploaded list of registered Stock Exchanges brokers and agents on its website. Remember that the registration of all the brokerage houses/brokers and agents are valid for a period of one year. this registration is renewed annually.
• If you find an unregistered broker or agent, report them immediately to the SECP as it is in the general interest of other investors.
• The list of registered brokerage houses/brokers and agents can also be found on the respective websites of the Exchanges.

 Trading Platform

When assessing a brokerage house or agent to invest in the Stock market, make sure to see how you like their trading platform. An online trading platform helps its users to assess the market through pricing charts and indicators that track stock prices and behaviours. A comprehensive trading platform that is easy to use and understand is essential to place orders on the stock exchange.

Research

Availability of research into industries, sectors and market behavior can be helpful in making informed and sensible decisions about shares in your portfolio. Having market information is important to successful stock trading. Having informed market research and other information is useful.

Steps to open a brokerage account

You need the following to open a brokerage account:

• CNIC
• A Pakistani bank account.
• Salary slip; if you are self-employed, provide a bank statement. This helps in having swift credit history checks.
• You must research which brokerage will work for you and then visit them physically once.
• Once you finish all the paperwork and admit all the documents, you will have to wait for 1-2 weeks.
• After the verification and account processing is done, you will be granted access to trade with stock exchange issued stocks.

Once the account opening formality is completed you will not need to visit your brokerage firm as the majority of dealings and trades will be handled online on the platform.

Benefits of Investing in Stocks

At times, the stock market over or underprices shares based on market and industry trends. Similarly, the stock market undervalues shares based on negative news and events. These events and news could be directly related to the company or could impact it indirectly by being connected to the industry that the company works in.

This can be confusing for investors as while the company’s financials and valuation are the same, the market price is affected by different news or events. An example would be shares prices falling after a poor World Cup performance.  Unrelated and related events can influence prices for the short term but this is not relevant for passive investing we discussed above.

In spite of the challenges, investing in shares has some benefits to offer:

1.    Capital Gain

A strong fluctuation in stock prices can give you a better gain from your investment than a simple long term investment. As stock prices change every day, this makes stocks a sound long-term investment.

2.     Dividends

Established and well-performing companies in the shareholder market offer dividends and bonus shares to their shareholders at the end of each financial year. This allows for capital appreciation if you continue to reinvest the dividends you receive. The more shares you own, the more profit you will earn at the end of each financial year.

3.    Liquidity

Investing in shares is a liquid investment. Most shares can be easily bought and sold on any working day on the stock market

How to Trade in Stocks

The underlying concept behind investing is simple, you know the price of something and the predictions or forecasts for the price. Ideally when it’s available for a lower price in the market, you buy it. This is kind of like buying a product on sale. It’s the same product, but you buy it for less. This means that you save money while investing in something worthwhile

Bear in mind that it is better to see the financial analysis on the company’s financials, keep an eye on its dividend payouts, revenue, cash flows, events related to the industry, its brand target market, and its competitive edge.  This is where your broker’s research should be useful.

The more information you have, the more reliable your buying decision is going to be. The process of analyzing a company’s financials as well as non-financial components is known as intrinsic analysis.

Since such analysis involves multiple factors, many investors make mistakes in their stock valuation.

Why All Investors Should Be Careful of Stock Prices

As an investor, you should realize that the stock market is complex and unpredictable for even the most seasoned investors. If the market is rising, it is time for any investor to sell off their short-term holdings and gain based on the rising market.

Most newbies and even some seasoned investors get excited by rising trends and buy specific stocks rising daily. Investors’ buying interests usually drive such rises, and there is no guarantee of how long such rising trends, known as rallies, would continue.

When you go to a mall, you don’t walk into a store and buy just anything. You usually have a list or know what you want to buy and which shops to go into to browse. The same should hold for investing in the stock market.

You should have a list of sectors, stocks, and performance history to know which stock performance and valuation fits into your investment preference or risk appetite. Ideally, you should also know which stock should be bought at which price range and sold off at what level.

Some basic rules to follow before you start investing in a new stock are:

1. Always research the company you are planning to invest in. What is their business, and which products do they sell? Do the products have a steady demand? Is the competition strong? Does the company have the muscle and capacity to supply the product?
2. How long has the company been in business? Does it have a good stock performance record?
3. Does it have sound Corporate Governance policies?

The stock market is all about news and perceptions. It is fueled and runs on the information. But should you invest in shares based on the news? A hot tip from a dealer or your broker should be taken with some healthy scepticism.

A golden rule is to buy on the rumour and sell on the news. Institutional investors would already be aware of the rumours, and jumping onto the buying bandwagon will only reduce your margins if there are any left. For instance, if market rumours claim that a company is due to get a big contract, its share price would start rising and would cross its intrinsic and fundamental valuation.

People begin to buy based on the rising trend, and the price would increase further. Once the rumour is proven to be false, everyone who bought during the rise would stand to lose money. However, if you had already purchased before the rumours and sold during the rise, then you stand to gain from your investment.

Buying based on rumours and news means that the stock price has already risen to accommodate the rumour prices and would be priced higher than its actual prices. You need to bear in mind that the stock market is fluid; it cannot remain high or low for an indefinite period. You have to follow market prices and pick up stocks when they are at low points.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post All you need to know about investing in Pakistan’s Share Market appeared first on Smartchoice.pk.

Finances are amongst the most important part of life for people anywhere in the world. Getting finances right is one of the pillars to building a successful marriage. Research has shown that money is the primary reason for marital conflict in couples, regardless of their age bracket.

Disagreements about money are the top forecast parameter of whether a couple will stay together or not. Arguments about money take longer to recover from and cause resentment and further conflict.

In managing money together, there should be clarity about who will bear what expenses, especially if one partner earns more than the other. If both partners are earning and plan to continue to do so, managing money as a couple can be awkward to sort out with two salaries and two (different) financial situations joining. Or one partner has an existing debt burden or financial responsibilities like family support or student debt to pay off. In such cases, a clear decision needs to be made by both partners to ensure a clear distinction of finances.

Regardless of whether you are just getting started on the financial aspects of your relationship or you’ve been trying to work things out for a while, there are some different ways money can be managed as a couple. Follow the tips below to improve your money management and marital life.

Managing Money with a Single Income

If only one spouse is earning, they will be the one managing the marriage’s finances. However, the non-earning spouse can help reduce expenses by managing the budget in any way possible.

Insurance

If a spouse is unemployed and looking for work, learn from this and opt to get some form of insurance to cover any emergency. Insurance in any form acts as a buffer between financial crises in case the earning partner falls sick or is unable to work due to physical issues.

Having an insurance policy helps to protect the couple financially, allowing them to maintain their expenses and pay bills.

Joint Account for Expenses

Managing the expenses of a household and managing to save is even more important if only one is earning. It is better to manage savings and limit expenses by having a joint account for household expenses. This will allow for the budgeted expenses to be managed better.  Savings should be kept separate in another account that is not easily accessible by either spouse. Plan for any emergency and make sure that your spouse knows which accounts are for which purpose and enlist them as next of kin so that in case of sudden death or incapacity, your finances are manageable by your spouse.

Combined Finances

If both spouses are working, an agreed amount from both incomes can be deposited into the joint family expenses account, and both spouses use the account for all joint household (or agreed upon expenses). This allows for tracking the expenses and should help control the joint budget. All expenses and savings are managed from the pooled income.

Doing this will require both spouses to sit down and discuss their incomes and household expenses. After this, a reasonable household budget for joint use should be easy to finalize. This joint budget should be set according to a mutual agreement, and it should be manageable for both incomes.

Doing this will require cooperation about personal expenses and impulse buys. Whatever the parameters, they should be clarified here so that there is no argument about spending in the future.

Combined Finances with Individual Pocket Money

In this option, both partners combine their incomes into the joint account, and all expenses and savings are managed from the pooled income. One of the expenses is pocket money for both spouses for their personal use.

This can be a better option for couples with a shopaholic spouse. This helps to avoid arguments by giving the impulsive partner money to spend as they wish, without affecting the joint expenses or affecting savings. The other partner also gets money to spend as they wish.

The details need to be agreed upon; however, is the pocket money equal? Or based on the contribution to the joint account? What spending will be done under pocket money? Dining out? Gifts for each other? All these questions need to be settled.

Separate Finances

In this method, both incomes are kept separate. Both spouses manage their budgets, bills, and expenses. There are no joint bank accounts, budget, or bills. Both control their income and are financially independent. However, this is an impractical (and impossible to manage) option as you will be living together and managing the house, its utilities, and grocery expenses.

This separation allows the responsible spouse to protect their income from their spouse’s irresponsibility. Ideally, the couple splits expenses in this situation, like the husband pays the utilities and the wife manages the grocery bill. This may be a better option for higher-income earners as they can manage their separate responsibilities without needing assistance. It can also allow for better financial management if one spouse is not responsible for financial management.

Share all Expenses Equally

In this technique, all expenses are divided equally for all agreed expenses. This means that all agreed-upon expense heads like dining out, groceries, utilities, and insurance payments are all split equally and shared. Many couples swear by this method as agreed-upon expenses are easily managed without argument, and most have money left over to save and spend as they want.

However, this method is only fair if both spouses earn in similar income brackets. If the income brackets are different, the lesser earner will face a strain and have lower money left for saving and personal spending. If added to the joint spending pool, this method will also affect long-term decisions like insurance policies, house loans, etc.

The lower earner will not afford the new expense and may not agree to opt for it. in such cases, you can decide to reevaluate the joint financials for long term financial planning

Share Expenses By Income Percentage

In this method, a fixed percentage of each partner’s income goes to paying the joint bills. This ensures that the person making more money contributes a larger percentage for the bills. The person making less pays less. If you earn 60% of the income, you will pay 60% of the bills.

There are various ways to manage this, but the easiest is to have all accounts separate, with one joint account for joint expenses with equal access for both spouses. List down how much you both earn and add it up. The individual income divided by the total income w3will give you the percentage income for both partners.

Add up total average expenses and multiply by the income percentages to get the amount you will need to pay to manage the joint expenses.

To sum up, there is no fixed formula to budgeting, and when there are two individuals and incomes involved, the task becomes even more complex. However, you can always use a mix and match approach, using the larger income for spending and the lower-income for savings.

While saving and managing expenses is the main goal, you can always change the approach to see which works best. You can always try one method and switch to another after a month or more. The key is to remember that you are a team now and need to work together to plan for a better future together. It is important for a couple to be involved in financial decisions and agree upon all major decisions.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Tips On How To Manage Money After Marriage appeared first on Smartchoice.pk.

In addition, many private employees have gone through the unprecedented challenges of the pandemic lockdown with half, cut or even no pay. It makes sense to have a backup source of income more than ever before.

Even if the growing costs of living weren’t a factor, having a secondary source of income is always a good idea. Earning money on the side, whether for meeting financial needs or as a hobby makes sense.

Let’s explore things that you can do on the side to increase your income.

1.  Call Center, Web Site Support

Pakistan falls among the cheapest English speaking population in the world. Many businesses from the US, UK, Australia, and Canada look for low cost but fluent English speakers for call centre, customer service and website chat support jobs. If you have a good accent, and typing speed you can work part-time and opt for work from home options. You need to have a strong English speaking and typing speed for such jobs.

Many such jobs are available on freelancing platforms like Fiverr, Upwork, and Freelancer. However, getting a project is a matter of consistency and patience. There are many fraudsters also looking to get work done for free so make sure that you use your common sense in dealing with people on any platform.

2.   Start a Blog, vLOG, or Instachannel

Assess yourself and your hobbies, do you enjoy gardening? Or do you love animals? Can you give 1 or 2 hours of your day daily willingly to this hobby? Based on the answers to these questions, you can decide to write (blog), record or photograph your activities to make a blog, vlog or Instagram or YouTube channel about your hobby. Many people start blogging about fashion, makeup, technology, cars, cooking, celebrities, entertainment, and gossip. Many others write about other channels and media accounts. The key is to have good quality and not to copy other channels. Originality is always welcome.

You must make sure that you have enough material to write or speak about for at least six months. And if you want to write, make sure that you are comfortable writing about whatever you decide to write about.

Once you have a certain level of visitors, usually over 1000 visits a day, you can have ads placed on your account. This is usually done through Adsense or Info link.

3.   Data Entry

Data entry is a skill that is in the most demand on most freelancing platforms. Data entry is all about typing. You need to have basic level English and good typing speed to get the job done. However, usual data entry projects need a lot of time. It is better to pick up one-off small projects from freelancing platforms like Freelancer, Fiverr and Upwork.

Again, all freelancing platforms require effort to bid for projects and it takes time to build up a client base.

4.   Reselling Products

One new side business that has grown with the growth of online shopping is that of reselling goods. Many people are going for reselling clothes, perfumes, cosmetics, mobile accessories, kitchen and household items and even small electronics. It usually involves designing a Facebook or Instagram page. Many resellers build a WhatsApp group for broadcasting live sessions to their regular clientele. The main requirement is to build up a client base and sell whatever items you can earn a profit off.

This is a fairly easy market to get into and is also competitive as many people are

5.   Referral Marketing

For those with a strong social network, you can utilize your contacts to refer them to businesses. This is similar to what bloggers and social media influencers do through their channels.

6.   Photos and Digital Artwork

There is a steady stream of demand for unusual images of everyday objects. Similarly, digital art is something that is taking off in a big way and if you have an aptitude for digital art, you can earn a good income by picking up projects through local advertisement and media agencies as well as through freelancing platforms.

7.   Arts and crafts

If you have a unique skill, like making wooden items, jewellery, knitting and crochet, or painting, you can make things in your free time and sell them online via OLX, Facebook or Instagram.

8.   Part-Time Accountant, Bookkeeper and Office Assistant

Many small businesses are willing to hire people to manage their accounts, do basic bookkeeping or manage their office schedules if it will save them money. These are all activities that can be done remotely. Since our time zones are different, you can easily pick up a job that requires 1-2 hours of work from you at night or over the weekends. One person I knew used to do this work during their lunch break at work.

In the case of accounting, you need to be familiar with Google Suite, QuickBooks and Cloud services.  Many agencies are available online that are looking for bookkeepers and virtual assistants to source jobs to.

9.   Online Tutoring

Tutoring students, whether physically or remotely is a great option, particularly for people good in tough subjects like maths, physics, accounting, and finance. Many agencies are available that source skilled tutors for foreign students.

Similarly, many people look for online support for life coaching in key issues like positivity, fitness, weight loss, and public speaking. These are all fields in which both physical and real-time support can be offered to earn a decent income.

10.   Social Media Management

Like the items listed here are mainly based on using social media, many businesses also need to hire someone to help manage their social media presence. This is a very diverse field. Some businesses need someone to design posts and caption pictures for their social media accounts. Others require more advanced promotional campaign designs and posts on various forums. Some also just need someone to handle customer queries and book orders for them. This is something that can be managed after some trial and error.

These job options need to be approached with some research and caution. All can generate a substantial income on the side for you and can become an alternate career if you want to take it as a full-time career.

However, like all things, side income streams need time and effort to give results. Many scammers and frauds are operating, both in Pakistan and on online forums and platforms.

Many scamming sites look to get information from you to use for malicious purposes that pose as reliable clients and businesses paying high salaries. Work hard, but don’t be so eager to get work that you skip doing your background research into the site, business that you are in contact with. Look for site reviews, google the client’s name or the company he/she represents. A very useful resource in background checks is LinkedIn. You can always see if the person you are talking to is actually working for the company they claim to represent.

Seasoned recruiters working online are aware of the scams that freelancers face and genuine recruiters or clients are willing to accommodate freelancers’ conditions when starting work. Never hand a project over without partial or advance payment. Make sure to finalize payment terms as well as payment gateways if getting clients from some website and not through freelancing platforms. Some clients do not have flexibility in payment gateways and the payment terms should be clear before you work on their project.

Freelancing platforms take a percentage of your earnings, and many clients fool new freelancers by finalizing work terms off the platform to “save” commission charges. This is a huge red flag. Never agree to work off-platform without advance or full payment. Almost all freelancers and remote workers have a horror story to share of scams and losses they faced due to lack of research and moving off-platform.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post 10 ways to increase your income in Pakistan while working full time appeared first on Smartchoice.pk.

The Asaan Account is focused on the common people. It is available to all low income unbanked/under-banked people who face difficulties in account opening due to complicated account opening requirements or lesser means of access. It particularly focuses on the low income segments of the population and women from all segments who do not operate their accounts due to limited mobility, excessive documentation, and lack of accessibility to traditional banking avenues.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Everything you need to know about the Asaan Mobile Account appeared first on Smartchoice.pk.

Payment gateways play a significant role in the eCommerce industry in Pakistan. Businesses often face the problem of finding the best payment gateway for their stores when they have to sell their products or services online.

We are here to help you shortlist a potential payment partner by giving you a list of the best payment gateway in Pakistan.

Payment Gateways

Before we list the payment gateways, it is necessary to know what an online payment gateway is and how it works. Simply put, a payment gateway is a system through which payments (usually online) are managed and their details transferred to the concerned banks.

Usually, when you buy things online, you give in your credit or debit card details on a special payment portal that opens after you opt to pay. This secured portal is the front face of the payment gateway. A payment gateway works as a liaison between a buyer, seller, and the seller’s bank.

As technology has expanded, so have security concerns about financial data security. With online commerce growing in popularity, no one wants to have their financial data at risk. This has increased the focus on having an effective payment processing system that secures both the buyer and seller from financial crime.

The primary purpose of payment gateways is to ensure security and facilitate smooth and low cost digital transactions. With the growth of eCommerce, the demand for accessible, safe, and secure transaction processing is a growing focal point for Pakistani consumers and entrepreneurs. E-commerce stores, online retailers, online booking, and reservations providers for travel sites are all examples of businesses that need to accept online payments from their clients.

Payment Gateways managed by Banks in Pakistan

Since payment gateways are the digital versions of banking services, several banks provide online payment processing services. Since payment gateways can be taken as the digitization of a bank’s key business, it makes sense for banks to specialize in this segment.

At present, three banks are offering online payment gateway services. These are HBL, MCB and UBL.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post The best payment gateways for e-commerce businesses in Pakistan appeared first on Smartchoice.pk.

The Banking Mohtasib can address any disputes and complaints that are based on Banking practices, discriminatory behaviour, operational issues, operational inefficiencies, violation of Banking Laws and Regulations, Harassment during or for recovery of Bank Loans. In the case of the bank being a Public Sector bank, the Mohtasib can also entertain complaints related to staff corruption, discrimination against customers, and maladministration.

Functions of the Banking Ombudsman

Ombudsman programs are considered successful globally. They have proven effective in solving banking related disputes. These programs have also served to improve the overall service quality and efficiency of the departments, sectors that they cover.

In many cases, Ombudsman offices have the authority and scope to identify problems that cause issues for the users and the customers. This identification can help to improve the business process to avoid future disputes between the business and its customers. This flexibility makes them a better stakeholder than the legal system, which can only resolve individual cases that come up to them for resolution.

Another important role is the cost saving element they offer. The legal option always has some high costs and expenses involved, which can stop many people from pursuing their grievances. The Ombudsman offices offer a quick, informal, and flexible option.

In Pakistan, the Banking Ombudsman works to implement good governance

in the financial sector. The Ombudsman offices ensure that all complaints are investigated and hopefully resolved through an independent body that offers impartial, free, and prompt service. The only condition is that the banks should come under the jurisdiction of the Banking Ombudsman.

The Banking Mohtasib does not entertain complaints against the State Bank of Pakistan, Micro Finance Banks, Investment Companies and Banks, Insurance Companies, Mutual Funds, Venture Capital Firms, Leasing Companies, DFIs, National Investment Trust, Housing Finance Companies, Overseas Branches and Subsidiaries of Pakistani banks.

What the Banking Ombudsman can do and what they cannot

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post A Comprehensive Guide to the Banking Ombudsman of Pakistan appeared first on Smartchoice.pk.

For a person that applies for a loan, there are a lot of things that they need to know. For one, how does the loan approval system work? Secondly, how would a bank know whom to give loans to? Thirdly, why would they give the loan to you and not someone else who also needs to buy a house or get another credit card or buy a car just like you? 

Role of an eCIB in Pakistan

All standard loans issued to people or even companies require a credit assessment. Credit assessment is the bank’s selection or sorting process to decide which loan application would be the safest option to issue a loan to.

To assess who would be a better option out of the many people that apply for loans every day, there is a standard system in all financial institutions. The basic requirements for loan approval are to have 

1. A clean credit record. 
2. The level of your debt-to-income rate

These two are the main elements that determine the approval of the borrower’s loan application. 

A clean record is checked through the eCIB report that is generated from the Credit Information Bureau (CIB) of the State Bank of Pakistan. The ‘e’ in eCIB is for electronic as it is generated online by accessing the SBP’s eCIB portal. 

The eCIB is a summary of your behaviour as a borrower over time. Do you make your credit card payments on time? Do you pay your bills promptly? How much of your credit card limit have you used? Have you ever defaulted on a loan payment or a credit card payment in the last two years? Are all your older loans paid off? 

Answers to all these questions sum up your eCIB report.

Reasons for the eCIB

The Credit Information Bureau gathers and organizes credit data on borrowers from its member banks. This financial data is then processed in its systems and the resulting information is sorted in the form of credit reports. 

This information is then available online to the Banks for use in their loan assessment and loan risk management. The chief purpose of this system is to allow banks to know the credit history of their current and future customers. This leads to a cleaner loan portfolio for any bank and fewer defaults in the banking system.  

The information from the Credit Information Bureau is central to the risk management of loans and the promotion of a safe loans culture in the banking system.

Having the State Bank run the CIB means that information submission is virtually guaranteed since the SBP is their regulator. 

Types of Credit Reports

 There are two types of eCIB reports in Pakistan: 

• Consumer eCIBs for  Individual Borrowers

These Consumer Credit Report show the credit information of individuals/sole proprietors’ borrowers 

• Corporate eCIBs for Corporate Borrowers 

The Corporate Credit Report reflects the credit information of public/private companies, firms/partnerships, corporations, and any other type of business.

The eCIB report has details about the status of funded & non-funded facilities and the amount of outstanding, overdue, write-off, and repayment history of the borrower. 

Bear in mind that while an eCIB may be showing default, delays in repayments, write-offs, etc, it does not directly stop any bank from booking more loans against the borrower. The majority of the banks are allowed to make their own decision based on their internal credit (lending) policies and repayment capability.

However, the majority of the banks take eCIBs as a serious matter and do not issue loans to borrowers with poor repayment history, unless there is a genuine reason for the weak repayment. 

The information contained in the eCIB is considered to be confidential, and not shared with the borrowers or any other party. This is mandated by law and eCIBs can only be shared between Banks and the SBP. 

Credit Information Reporting for Consumer/ Individual Borrowers: 

Once an overdue, or late payment, write-off, or waiver is reported in the eCIB, it remains reflected in the history section for two years even after getting a No Objection Certificate (NOC) is issued from the reporting bank. 

Banks are only allowed to report loans data in their eCIB reporting and overdrawn accounts or nonpayment due to an internal system or human errors are expected to be resolved so that their borrower does not suffer because of their internal issues. 

Similarly, in the case of car loans, where the financed car is stolen or met an accident, they are not allowed to report a default provided the bank gets the insurance claim. 

Banks are expected to review their borrower’s eCIB for prudent portfolio management and to see that their borrower is faring well with all their debt.  

This means that if you default or delay credit card payments, your car loan officer (from another bank) may get in touch to see what’s going on with you and why your payment was reported. 

How will a Bank Use an eCIB Report?

Every bank has its in-house credit (lending policy). This policy determines which loan applicant will get a loan approved or rejected. Most lending policies set risk levels and baselines for loan approval. For instance, one bank may approve car loans where the applicant is earning PKR 100,000 per month and has net monthly liabilities of 60,000. Another may require that you have free funds of at least 50%, i.e., max. liabilities of net monthly Rs. 50,000. 

The information about the borrowings that you have at present will add up to your total debt. If this is too high and your pay is just going towards repaying debt, then the chances of you getting another loan is very slim. If you have less debt, and your repayments take up less than 30% of your paycheck, then your probability of loan approval would be high. 

In the case of credit cards, the SBP has set maximum credit limits for individuals and if you already have 2 cards, you probably will not be able to get a 3^rd one approved. Similarly, if you have had a couple of late payments, one bank may ignore it, since they have a criterion of 3 late payments. Similarly, another may reject the application because they only accept a max of one delayed payment. 

Since the eCIB reports the status of all your loans and credit cards, all late payments and the details of your payment history will appear in the eCIB report. Even if you have cleared all dues, resolved any dispute, etc, the will reflect in your eCIB history for two years. The purpose is to make it easy for banks to assess if you are managing your current loans and if you can be allowed to borrow more money. 

For a loan processing officer, having two identical loan applications with similar earning and borrowing details, but with one having a clean eCIB and another with a history of late payments makes the approval task easier. The applicant with a clean eCIB report would probably get their new loan approved, while the other applicant doesn’t. 

What Can I do to keep a Clean eCIB Report?

It is very important to have a clean credit history as a borrower so that your eCIB report is clean. Most of us use credit cards and personal loan facilities. It is very normal to miss dropping off a payment check on time in life’s busy routines. While it doesn’t seem like a big deal, at the time but these small mismanagements affect your eCIB. 

Many borrowers get an unpleasant shock when they go for a new loan like a car loan or a house loan or even a new credit card with good features and find that they are rejected due to poor financial management of their existing facilities.  

Being financially responsible includes making all payments before their due dates to avoid late payment fines and reporting in eCIB. As a borrower you should ensure that you pay your installments on time, credit card payments before the last date, and utility bills on time as well. 

Being financially responsible pays off in terms of getting your preferred loans approved, as well as saving you money in the form of fines and late payment penalties. It also allows you to keep your eCIB clean. 

Bear in mind that all financial institutions have to send in eCIB reporting to the SBP every week. Any nonpayment, delayed payment will be reported, regardless of what any bank staff states. If your payment is delayed from your end it will be reported. If it was delayed due to bank staff’s error or some system error, then the bank can avoid reporting, otherwise, there is no way that you can avoid eCIB reporting your late payment. 

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post All You Need To Know About eCIB In Pakistan appeared first on Smartchoice.pk.