New Delhi. In India, gold is not just a metal but is considered a symbol of trust, tradition and emotions. In every Indian family, gold is saved as property and security. A family turned this love for gold into an opportunity and made it one of the most successful gold-loan companies in the world. We are talking about Muthoot Family. The business of giving loan against gold, which was started nine decades ago, has today taken the form of an empire of more than 13 billion dollars (Muthoot Family Net Worth). Today the company has 209 metric tons of gold, which is more than the gold reserves of Singapore. The gold-loan portfolio has reached Rs 1.25 trillion, while the portfolio of a giant bank like SBI is around Rs 725 billion.
Indian families own the maximum amount of gold in the world. About 34,600 tonnes. In times of economic crisis, instead of selling their gold, people take cash by mortgaging it. The Muthoot family was the first to convert this sentiment into a systematic business. Understanding this need of the Indian society, this family strengthened its business with time and today has established its branches in every city, town and small area of the country. George Alexander Muthoot, managing director of the company and an industrialist belonging to the third generation of the family, says, “The market is growing so fast that today even rich people consider taking a gold loan as a status symbol.”
Family in business since 1887
The Muthoot family has been in business since 1887. Ninan Mathai Muthoot started wholesale trade of grains and wood in Kozhencherry, a small village in Kerala. With his hard work and honesty he took this business to great heights. In 1939, Ninan Mathai’s son M. George Muthoot started a partnership firm named Muthoot M. George & Brothers (MMG). This was chit fund (kitty) business. At that time people were going abroad and money was needed immediately for the journey. M George Muthoot started a convenient system of giving loan against gold jewellery, which proved to be a game-changer.
Gave modern form to old tradition
Taking loan by pledging gold is an age-old process in India. Earlier this work was done by local jewelers, who would change the interest according to time and circumstances. But Muthoot presented this traditional process in a modern and safe form. The purity of gold is scientifically tested at their branches, the safety of the jewelery is ensured with state-of-the-art technology and to top it all, the entire process is completed in less than an hour. The customer neither needs credit history nor complicated documents. This facility became a boon for the middle class and lower middle class of India.
Muthoot family comes from Orthodox Christian community.
The Muthoot family comes from the Orthodox Christian community. Their traditional business started in small towns of South India. The prevalence of English names in the family is such that 9 out of 15 directors of the company are named ‘George’. But this never affected the Indianness of his business. He took his model forward by understanding Indian sentiments, especially the respect for gold.
Muthoot Finance is a symbol of the power of shadow banking
The growth of Muthoot Finance Limited also reflects the strength of India’s ‘shadow banking’ sector. Compared to traditional banks, these companies reached out to the common people and provided them with fast, simple and secure financial options. The facility of taking loan against gold is not new in India, but making it an organized industry and adapting it to the financial needs of crores of people was the biggest achievement of the Muthoot family.
The company is away from pomp and show
The branches of Muthoot Finance are not grand. They are often opened in areas where banks are hesitant to reach. The Mumbai branch is located in a narrow lane between a grocery store and a hardware store. But from security point of view it is no less than any big bank. Metal grill door, security guards, stringent checks and strong safe – all this assures the customer that his gold is completely safe. Today the company reserves about 209 metric tons of gold for customers, which is more than the official foreign reserves of many countries.
Gold loan portfolio is Rs 1.25 trillion
The growing influence of the company can also be gauged from the fact that its gold-loan portfolio has reached Rs 1.25 trillion, whereas the portfolio of a huge bank like SBI is around Rs 725 billion. This difference tells us which institution the common man of India trusts the most for immediate help in exchange of his jewellery.
Unconcerned with competition
Competition is continuously increasing in the gold loan segment. Bain Capital bought a major stake in Manappuram Finance and international companies like Mitsubishi UFJ are also trying to enter the Indian market. Big banks are also increasing their gold loan portfolio rapidly. Despite this, George Muthoot is completely confident. He says that the market is so huge and expanding rapidly that there are ample opportunities for all companies. He says that we do not need to take any hasty decision, competitors will automatically overcome their challenges.
