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Gold loan companies are looking at new growth avenues as they find conventional markets stagnating. They now see untapped business potential in self-employed personnel including kirana shops and street vendors to expand their business and accelerate growth.
Equity broker and private lender India Infoline Finance Ltd (IIFL) has started tapping local kirana shop owners, street vendors and grocery retailers with its gold loan business.
In a short span, IIFL has added nearly 100,000 customers in this category to its total base of 1.7 million customers across tier-I, II and III cities for their short-term financial needs. IIFL also lends against gold jewellery to medium, small and medium enterprises (MSMEs), farmers, traders, exporters and importers.
Self-employed customers, especially at the bottom of the pyramid, find it difficult to access credit from banks considering the paper work and long processing time. However they have unproductive gold at home which can be monetised through gold loans. All these people have Aadhaar & PAN which is used for E- KYC in order to them extend gold loan and bring them under financial inclusion.
IIFL has invested heavily in digitisation and claims to process loan in 15 minutes, offering better and faster service. The company process more than 125,000 loans through digital process which is paperless.
"At IIFL we are committed to removing all barriers including foreclosure charges because we want to give the flexibility to repay or close the loan at his convenience without any barriers," said Saurabh Kumar, Executive Vice President and Business Head, Gold Loans, IIFL.
"With gold prices moved in a narrow range over the last one year, gold loan companies' growth has been stagnant during this period.
While stagnant and rising price scenario of gold is positive for us, gold loan company don't prefer sharp fall in gold prices. In price fall scenario, we focus on early repayment of our customers to maintain a long term relationship and repeat business possibility," said a senior official of a gold loan company.
Stagnation in growth is seen from numbers.
Market leader Muthoot Finance reported total asset under management (AUM) at Rs 27,500 crore for the quarter ended September 2017, compared with Rs 27400 crore for the corresponding quarter last year. Its gold holding stood at 152 tonnes for September 2017 quarter against 150 tonnes in the same quarter previous year. IIFL, however, has witnessed single-digit growth in the past one year with total gold holding at nearly 15 tonnes.
Manappuram Finance Ltd's net profit, however, declined to Rs 160 crore for the quarter ended September 30, 2017 from Rs 192 crore for the same quarter previous year.
Kumar of IIFL says his company has a total asset under management (AUM) of Rs 3,200 crore with average ticket size of Rs 48,000. Its vision is to make access to gold loan easy and transparent and bring more and more customers under financial inclusion.