Picture of the Day: Dangerous Advertising

Posted on August 6, 2006
Filed Under >Adil Najam, Economy & Development, Photo of the Day
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Adil Najam

This Muslim Commercial bank (MCB) advertisement prominently covers a quarter of the front page of today’s Dawn newspaper (6 August, 2006). I, of course, have no objections to newspapers selling advertising or to advertisers making whatever ads they want. That is their right.

But it is also my right, and our duty, to point out the silliness – and in this case dangers – of the social messaging contained in some ads.

I have long argued that the emergence of a true and well-managed market for credit is amongst the most important things for Pakistan’s future economic progress, because it will level the economic playing field and enhance both opportunity and choice. Having said that, credit is a tricky commodity and needs to be handled – and marketed – with care.

Even in advanced industrialized economies it can go out of hand — in the US total consumer debt is now nearly US$1 Trillion and can lead to countless wrecked lives.

But, back to Pakistan. The type of aggressive — some will say ruthless — advertising of credit that could lead to immense personal tragedy in the future.

Lets looks at this advert. The young, needlessly exuberant, artificially excited, young man in the ad seems to believe and wants us to believe that the best way to ‘celebrate life’ is to buy a bunch of high-end, imported, luxury item that he can otherwise not afford and probably does not need (a guitar, a top-end cell phone/PDA, an even more top end sound system, and a computer ‘literally’ thrown in). Even if he has to get a loan to do so!

This ad is aimed explicitly at students who are told the loan is ‘Fast, Flexible, Affordable.’ Of course, one does not expect MCB to discuss here what better uses a loan could be put to by a student (tuition and education costs, or an entrepreneurial experiment, for example). But one does expect a reasonable bank to advise young people (as they do in many parts of the world) about thinking carefully about credit.

Loans have to be paid back. Targeting this is an age when young people are just moving from a life where someone else paid their bills to when they have to do so themselves. It can be hard enough keeping on top of current bills and thinking about future loan payments can sound too complicated and too far away, while the excitement of that iPod is immediate gratification and an immediate sense of kool!

Even in countries that can afford otherwise, the habits (and mechanisms) of saving so that when they start their life they have something to start it with. Why are we celebrating so excitedly (see, he is literally jumping with joy!) the prospect of our young leaving college with large and unnecessary debts to MCB?

23 Comments on “Picture of the Day: Dangerous Advertising”

  1. MSk says:
    August 6th, 2006 4:15 pm

    you have a point but banks cannot be responsible for customer stupidity!

  2. August 6th, 2006 4:55 pm

    Banks are awash with cash and not many places for them to invest. Babar Sattar recently wrote a nice article on how the stock exchange is essentially meaningless for investment sinc eonly a few companies trade publicly anyways, and a few larhe shareholders retain the rights to manipulate the markets.
    In such a scenario, it is sad that instead of developing early stage venture funds to promote entrepreneurship, our banks and financial institutions are looking at these kinds of ways of loaning their money.
    For sucess of venture funds we need two ingredients: (a) early stage investments into cool new ideas, (b) exit strategies via public markets (IPO) or acquisition by existing large companies. Both would require banks to play a significant role but they simply haven’t been able to step up to the plate. is it because existing banking staff has no idea how these systems work?

  3. August 6th, 2006 4:56 pm

    Banks are awash with cash and not many places for them to invest. Babar Sattar recently wrote a nice article on how the stock exchange is essentially meaningless for investment since only a few companies trade publicly anyways, and a few large shareholders have the means to manipulate the markets.
    In such a scenario, it is sad that instead of developing early stage venture funds to promote entrepreneurship, our banks and financial institutions are looking at these kinds of ways of loaning their money for wasteful spending.
    For sucess of venture funds we need two ingredients: (a) early stage investments into cool new ideas, (b) exit strategies via public markets (IPO) or acquisition by existing large companies. Both would require banks to play a significant role but they simply haven’t been able to step up to the plate. is it because existing banking staff has no idea how these systems work?

  4. Franz says:
    August 6th, 2006 7:43 pm

    I wonder…does Pakistan have central credit reporting agencies that comercial banks report customer information to, and that are then consulted by banks, credit card companies, etc to check a prospective customer’s credit history? Because if not, these banks and their shareholders may be getting more than they bargained for in letting loose these ads.

    On a positive note, this caricature may just be ridiculous, cynical, egregiously irresponsible and therefore amusing enough to precipitate an interesting series of news stories / features on the real potential but also the great risks of credit.

  5. MSk says:
    August 6th, 2006 8:39 pm

    I know this is unimportant but more i see this picture more i think it is doctored. the angle of teh legs and teh torso do not match. seems like they patched two pictures together. you really want to bank with someone who does that!

  6. Raza Haider says:
    August 6th, 2006 10:12 pm

    Pakistan does not have any credit reporting agencies and no standard for credit risk (akin to the US scoring system). I was shocked during a recent trip to Pakistan to see people with credit card limits that are equal to 6-12 months income. I fear there is a huge risk of default that these financial institutions are taking on which could materialize in the event of a any economic slowdown.
    On the other hand there is hardly any credit being offerred to the poor which is where access to affordable credit can have a huge positive impact on poverty alleviation and economic growth. Just an indicator Bangladesh has given approximately $800M in microfinance loans while Pakistan has give over $20M.
    Banks in Pakistan should use some of their cash to spur this untapped market which has been proven to be successful in many countries for the institutions, the economy, and the poor.

  7. ayesha says:
    August 7th, 2006 3:11 am

    I don’t think its the customer stupidity or the recklessness of the banks that is to blame here. The simple fact of the matter is the majority craves the materialistic consumerist culture. So if the masses will buy it, the banks will sell – even if they have to hoodwink the gullible.

  8. August 7th, 2006 4:46 pm

    Raza, as I indicated in the post there is a grave danger of the uninitiated jumping into the credit game without realizing its risks. The ease of getting credit in a society not used to it can be a dangerous brew and, like you, it worries me greatly.
    On the microfinance side, I fear that even the $20M given in Pakistan as so-called microfinacne is of very poor quality and at least some of it is simple usary imposed through strong arm tactics. Bangladesh, being the leader and lead innovator in the field, is probably the wrong example to compare with. But it is indicative that nowhere has microfinance succeeded simply as a financial instrument. In the absence of an understanding of and a committment to its social dimensions (i.e., credit as a right and social capital as a legitimate collateral) it can lead to significant problems. Having worked in thsi field for long, my fear is that too many microfinance providers in Pakistan have embraced the practice (becasue there was VERY easy donor money for this, without embracing the idea and the key principles behind it). If I am at all correct in this analysis, then one lesson would be that traditional banks are the exact wrong instrument to provide micro-finance (because of questions of scale). However, they may be very well suited as providers of meso-credit … an even less well tapped market and one that is particularly critical to enterpreneurial development.

  9. Franz says:
    August 7th, 2006 5:23 pm

    Maybe I’m out of the loop… I haven’t come across the term ‘meso-credit’ before…this may be inexcusable since I wrote half my MA thesis on microcredit and banking for the poor. Is that just credit for the void left between the poorest who qualify for microcredit and government & industry that qualifies for foreign direct investment (FDI), World Bank lending or domestic big-bank loans? ….lending “for medium-scale job-creating enterprises and market development”, perhaps (I found that via google in a southern African report from Sussex in the U.K.)

  10. August 7th, 2006 5:37 pm

    Franz, sorry for the jargon. But, yes, you got it right. Its essentially teh idea that a lot of my friends – like Ashok Khosla at Development Alternatives India, or Tariq Banuri – have talked about for long. If you want a loan in tens and hundreds of thousands of dollars, you know where to go (traditional banks) and there is a lot of money available…. if you want a loan in tens or hundreds of dollars, you also know where to go (community lending mechanisms) and there is now more money available for this than used to be…. but if you want loans in tens of hundreds of dollars, it turns out to be the most difficult of all to get money…. you are not rich enough for teh banks to consider you credit worthy and you are not poor enough for the development wallahs to be interested in helping you…. but that is often the scale where a lot of enterprise development happens…

    A little self-projection, if I might…. Tariq Banuri and I explore some of the bases of these ideas in our book ‘Civic Entrepreneurship’.

  11. Raza Haider says:
    August 8th, 2006 10:40 pm

    Adil – great critique on the existing microfinance sector in Pakistan. There are a lot of people doing more harm than good because of the “easy donor money” but there are still a few enterprises that are heading in the right direction. I agree with your point that it is very difficult to get micro finance right. However, I do think that microfinance, if coupled with the social and entrepreneurial ingredients, can be a profitable segment for financial institutions to expand into. There are a few successful examples in India (i think ICICI and a few other banks have micro credit departments). What is critical is that these banks (traditional or new) have to play a much more hands on role with their clients in terms of providing them with sustainable business ideas (beyond just buying an additional goat or cow) as well as ongoing support on how to manage these micro enterprises.

  12. August 9th, 2006 12:20 am

    Raza, I think you are correct. The challenge is enterprise development. But even more than that it is about ‘livelihoods’ (I realize I am getting ‘academic’ here, but hey that is what I do!). That is a much more useful concept because ‘development’ is a nebulous concept, ‘livelihoods’ is not. Given our population size, and within that the demographics (especially the younger skewed population) the question of employment – and therefore livelihoods – is central. If you look at the economic history of Pakistan, one interesting aspect is that periods of high economic growth have mostly NOT been periods of low unemployment (largely because these periods have usually been buoyed by external forces (especially international assistance, remittances). However, high growth with high unemployment can be a socially volatile mix (and has been for Pakistan)… politically it breeds restlessness and frustration especially amongst the ‘employable unemployed’ (recall Karachi politics in the 1980s as a case study in such frustration)… developmentally, it means that the human resources are not being deployed right. Yesterday they announced the new Gini Coefficient numbers for Pakistan, which suggest a sharp increase in the gap between the top and bottom 20%s in society… this (along with latent inflation) is very disturbing and screams out (again) for concentrating not just on growth but also on issues of employment, of inflation, and of distribution… all of which are critically linked to livelihoods generation.

  13. Maryam Amin says:
    August 10th, 2006 9:24 am

    This has been a great discussion. you should do more on economic affairs. I have some family members who regularly have to borrown money or cut on other things becasue they are becomming addictsd to teh credit cards. its not crisis yet but could become

  14. mansoor says:
    August 11th, 2006 4:16 pm

    i was going to do a post on this on KMB… had the picture taken and all.. then i come upon here :D guess i’ll be cross posting this one as well

  15. pakistani ad lawyer says:
    August 12th, 2006 5:58 pm

    To Air, or Not To Air (the Ad)…. One way to evaluate at this…. I think one overarching tension here is responsible marketing vs. freedom of commercial expression. Specifically, what is “reasonable” in the context of the type/sophistication of the audience the advertising is targeted towards, and reaching. In the U.S., a “reasonable consumer” standard is generally applied (what’s “reasonable” depends on the audience — elderly, children, etc.). Of course, competing consumer protection and commercial interests play a role as well. Finally, what, if any, safeguards are in place to prevent harm to the consumer are also are a factor.

    I don’t know enough about the ad/situation at issue here, but I just wanted to give some food for thought….

  16. Sattar says:
    August 13th, 2006 2:09 am

    Very interesting post. A very large number of Pakistanis and I myself routinely criticize what we consider the American society’s attitude towards debt and how banks routinely exploit the lower middle class with credit card offers, 0% APR, etc etc.

    It used to be that when a Pakistani started making more money than he was used to getting, he would buy property. Now, that trend seems to be declining as the younger generation has so many outlets to burn money on. I think this can have very dangerous consequences…..OWNERSHIP is extremely important…remember Thomas Jefferson??

  17. elahi says:
    August 15th, 2006 10:18 am

    Sattar, you are correct. Savings are going down and we are in danger of sliding towards a credit card society. Credit is good but needs safeguard

  18. Hamid says:
    September 19th, 2006 12:49 pm

    this site does have a thing for ads in Pakistan, no? :-)

    but this is a really serious issue. credit when used badly can mess people’s life and I think we may be heading that way

  19. Peshori says:
    October 7th, 2006 12:42 pm

    I am very glad you are highlighting this. this is already a problem. A friend of mine first took loans to buy a car he could not affor and is now getting more loans to pay off the loans. He broke down the other day beause he feels trapped in a cycle of debt he can no longer get out of.

  20. March 26th, 2007 6:25 am

    I know an ex-colleague of mine who actually used CitiBank’s Credit card, exhausted it, then got one from standard chartered, exhausted it, and the best thing is, the credit card people never knew him by face, so he would simply walk up to them in office and say that the person concerned is not in office. To make things worse, he one day told them that their customer has immgirated to Canada…and the credit card people couldnt do nothing. The wosrt part again is, that he always kept people’s money in circulation as debt, like paying my money by getting a load from elsewhere and so on…years after years !

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  22. Social Mistri says:
    April 7th, 2007 1:30 am

    Thank God the miserable leech like behaviour of most credit card depts within Pakistani banks makes them less popular than they would be otherwise… We would be in real trouble if we were dealing with human beings rather than trolls. The insufferable attitudes, incompetence and chimgadarpana of these credit card phone ninjas creates a natural check on how many people will want to even talk to the bank to get their limits increased.

    If you’ve been offered credit cards and have been silly enough to get one, you’ll know what I’m talking about.

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