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The near-total freeze in operation of microfinance institutions (MFIs) is forcing poor women to pledge their gold ornaments with NBFCs to raise money for emergency requirements in parts of Andhra Pradesh, the largest microfinance market in the country.
According to Bharathamma, who leads a group of women who make a living by stone cutting in Katapally village near Bhongir in Warangal district, on an average, three out of five women in self-help groups (SHGs) are meeting their cash requirements by pledging their ornaments.
“We are taking gold loans because there is no pressure from companies to repay our loans. They are better than moneylenders who force us to repay after a month,” she told Business Line .
For Shaheda Bibi, from Poolapalli in West Godavari District, the non-availability of credit from MFIs is a blessing as well as a curse.
“We are happy because we are not forced to repay old loans. So, even if we pledge our ornaments, we can get them back,” she said adding that in the last four months, she had pledged one of her bangles thrice and got them back twice.
Interestingly, non-banking finance companies (NBFCs) such as Manappuram and Muthoot Finance are being preferred by many rather than banks and pawn-brokers. Apparently, banks are a ‘no go area' because they ask them to repay dues under the SHG-bank linkage schemes.
Due to better transparency and low interest, modern NBFCs are better than traditional pawn-brokers, they opine.
Gold-loan seekers rising
When contacted, Mr K. Hari, a senior functionary of Manappuram Gold, said there was “discernible” increase in gold-loan seekers in the last six months.
“We have 400 branches in the State with most of them in rural areas. The lack of micro credit is definitely a factor though our business is growing in other places as well,” he said.
Gold-loans were being preferred because of ‘lower' interest at 12 per cent per annum and speedy process, he said.
A functionary of Muthoot Finance said the ticket size of gold loans is smaller, at one to three grams on an average.
“One indication of efficacy of gold loans is the fact that people are taking back their gold in three to four months,” he added.
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