Kerala Strikes Gold

Gold Loan Companies Create History

Indians are the custodians of the largest collection of gold jewellery in the world, and traditionally, they have used this gold to pledge and tide them over short term financial needs. South India has been at the helm of the gold loan business, and Kerala has been a major player in this sector. However, corporatization has transformed a business which was associated with old fashioned money lenders into a new business model with high creditability and immense potential for growth. Gold loans are no longer considered the last resort of those in distress. Instead, they are seen as the sensible way to raise short term capital- similar to taking a loan against a fixed deposit. The growing popularity of gold loans among the middle classes also rises from the fact that the lender incurs the cost of safekeeping the pledged loan and insuring it, thus freeing the owner from fear of theft or loss. ,”

Growth Factors

In Kerala, as elsewhere, the biggest boost for the gold loan business was the increase in the price of gold. This meant an increase in the amount per gram of gold that could be given as a loan. The changing lifestyle of the middle classes saw incomes rise too, thanks to economic growth. This in turn led to a consumerist lifestyle along with the confidence that loans taken to maintain that lifestyle could be easily repaid. The Scheduled Commercial Banks who were the leaders in the gold loan business have now been overtaken by the Non Banking Financial Companies, or NBFCs in Kerala like Kosamattam Finance, Muthoot Finance, and Mannapuram Finance. These companies have all been around for more than half a century. However, they have now come to centre stage through innovative branding and positioning their own credibility as the biggest asset their customers can rely on. The Gold loan companies have won over customers who found getting loans from normal channels difficult, by providing convenient, affordable flexible and accessible loans across the country. In fact, they have simplified procedures to the point where a gold loan can be obtained in five minutes!

Beyond Kerala

The big gold loan companies are using marketing and advertising effectively to register an all-India presence, growing beyond their Kerala origin to go local in northern, western and eastern states. Today, offices of Muthoot, Manappuram and Kosamattom Fimance can be seen in all the major metros in the nation. When Muthoot Finance set out to expand its national presence, one of the first things the company did was to set up its chairman’s office in New Delhi. The company also became the principal sponsor of the IPL cricket team, Delhi Daredevils, and this has given a boost to its image as a national player. These companies have succeeded in unlocking the value of gold sitting idle at home so that it is used for better purposes like expanding business or education or agriculture… and by doing so, they have proved that the Kerala entrepreneur thinks big, thinks positively and thinks differently.