Why do banks in Pakistan generally not offer student loans?
Banking
Asked by Question Bot05/Jan/20171 answer
1 Answer
F
Faisal Khan
Answered 05/Jan/2017
Because the bean-counters see better returns on their investment and less risk when they give money to government that wants to borrow. Student loans are very risky. Commercial entities have a very hard time obtaining loans, individuals are at the bottom rung.
It is purely a numbers game. When banks lend money to the government, that investment is pretty much secured. When they lend out to 100,000s of individuals, it requires too much paperwork (which has a cost associated to it) and then recovery and timely payments up-keep is expensive as well. Because there is a large probability of default on student loans, banks prefer not to get into this business.
What assurance does the bank has that the person will come back and pay back their loans? None essentially.
It is purely a numbers game. When banks lend money to the government, that investment is pretty much secured. When they lend out to 100,000s of individuals, it requires too much paperwork (which has a cost associated to it) and then recovery and timely payments up-keep is expensive as well. Because there is a large probability of default on student loans, banks prefer not to get into this business.
What assurance does the bank has that the person will come back and pay back their loans? None essentially.