Gold loan providers see opportunity as micro loans falter
These lenders are simply taking the advantage of a demand and supply gap created in the credit market ever since microfinance lenders have slowed down loan disbursement to prevent erosion of their asset quality.
Muthoot Finance, the country's largest gold loan provider, for instance, has revised its annual growth projection to as high as 25% from a 15% target set earlier in the year as the demand has suddenly surged in the absence of easier availability of collateral free loans.
Microfinance loans are unsecured while borrowers avail themselves of gold loans by pledging ornaments made of the yellow metal as collateral.
«People at the grassroots need money as they are not getting access to unsecured loans. Therefore, in the next two quarters or so, gold loans will emerge as a substitute for unsecured loans,» Muthoot Finance managing director George Alexander Muthoot told ET.
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