MSMEs Must Explore New Age Lending Avenues

• As the founder of an NBFC, how does your organization empower small business owners?

Our company takes pride in offering swift and accessible funding solutions to business owners, enabling them to effortlessly tap into the potential of their otherwise dormant asset - gold. Through our innovative gold loan service, we have successfully provided a convenient and efficient means for businesses to raise funds and transform their valuable gold holdings into a productive financial resource.

One of the distinct advantages of our gold loan offering lies in its user-friendly repayment terms. Business owners have the flexibility to choose between two options: either servicing only the interest on a monthly basis, or opting for a bullet loan where the interest and principal are repaid at the end of the loan tenure. This flexibility empowers businesses to effectively manage their financial needs, ensuring they can navigate through challenging periods and strategically plan their working capital requirements. With our support, entrepreneurs can seize growth opportunities with confidence, knowing they have a reliable and adaptable funding solution at their disposal.

• What specific challenges do small business owners face when it comes to accessing financial resources, and how does your NBFC address those challenges?

Small businesses often face challenges in obtaining credit from traditional banks due to their limited financial history and specific requirements. As a result, they sometimes resort to taking loans with extortionary interest rates to meet their working capital needs. However, gold loans present a unique and advantageous alternative. Unlike conventional loans, gold loans have less stringent credit requirements and financial parameters, making them accessible to a wider range of businesses. The application process is simpler and quicker, streamlining the funding process for entrepreneurs.

One of the key benefits of opting for a gold loan is the borrower-friendly repayment terms. This aspect significantly eases the financial burden on borrowers, allowing them to better plan and manage their finances. Radian, as a trusted financial service provider, takes pride in offering gold loans with transparent pricing. We refrain from engaging in fluctuating interest rates, ensuring that borrowers can anticipate and plan their repayments more effectively. This predictability empowers businesses to make informed financial decisions and fosters a stronger financial foundation for their growth and sustainability. With Radian's gold loan solutions, small businesses can confidently access the funds they need, with fair and reasonable terms that promote financial stability and success.

• Gold loans have been a traditional form of borrowing in many cultures. How does your company adapt this concept to modern financial practices and meet the needs of borrowers?

Leveraging the power of technology and personalized doorstep services, we have revolutionized the borrowing experience for our customers. Through our advanced technological solutions, we ensure faster processing, seamless monitoring, and convenient repayment options, all within the comfort of the customer's home. Our commitment to simplifying the borrowing process reflects in our user-friendly interface, enabling borrowers to access funds swiftly and effortlessly.

Recognizing the sentimental value of gold ornaments and their desire to retain possession, we are delighted to announce our forthcoming offering. Soon, eligible customers will have the option to keep their gold ornaments in their possession while pledging them for a loan, akin to vehicle loans. This customer-centric approach reaffirms our commitment to providing tailored solutions that meet the unique needs and preferences of our valued clients.

Harnessing the capabilities of technology, we ensure efficient creditworthiness assessments and the ability to gauge the propensity to pay. Our innovative methods also include "marking" the ornaments, ensuring utmost security and transparency throughout the loan process.

With our combined focus on technology-driven convenience and customer-centricity, we are dedicated to enhancing the borrowing experience and empowering our clients to achieve their financial goals with confidence. At Radian, we continuously strive to set new industry standards, offering a seamless and personalized approach to gold loans that truly sets us apart.

• Are there any plans for expansion or introducing new services/products in the future? How do you see the future of gold loans and the role your company will play in this evolving market?

While the gold loan offering is largely commoditised insofar that the lenders take possession of gold ornaments, and give out funds against that, there are several recent developments that help enhance the experience and value to customers. Doorstep offerings make it easy to take the loan and complete the process while in the comfort of their homes. User friendly apps make it convenient to track, monitor and pay for the loans, and an increasing network of banks and financial institutions in the gold loan space makes capital access easier. Radian is working to make the customer experience better, and selectively provide customers the ability to keep their ornaments with them. In addition, Radian would offer the security of a vault, while opening credit lines against the ornaments, and also providing a doorstep service to customers to access their ornaments as needed. This will likely also appeal to those outside the traditional customer segment in gold loans, wherein they can unlock the value of gold which typically sits in difficult to access, and expensive bank lockers.

• How do you educate potential borrowers about the benefits and potential risks associated with gold loans?

Radian has transparency as a key value, and we explain to customers the importance of timely payments and maintaining a good credit history. We also do not engage in extortionary pricing of "jumping rates" where interest rates are increased disproportionately in the absence of strictly timed repayments. In the absence of repayments, the lenders have the right to auction the gold - we typically make significant efforts to get the customers to regularise their repayments and avoid the situation of auction, and have had good success in doing this. We also provide information on our web site, app, and through customer interactions, on gold price trends and key areas to look out for. Given that Radian is unique in having a physical distribution and using top end technology, our ability to engage with customers is high, and we use periodic meetings with customers to convey key messages and seek feedback.

• How technology is helping NBFC to reshape the industry? 

As mentioned above, technology helps aid efficiency and service standards, in addition to providing the opportunity for innovative products, such as gold loans without the lender taking possession of ornaments. Radian is working on developing an AI module that will enable remote testing and assessment of gold ornaments with the aid of our app. Technology will also enable us to work with customers to provide adjacent services, such as gold buying and selling, adding on personal loans, agri based gold lending, and micro lending with small amounts of gold (which is so far not tenable given the cost of operations).

Inputs by
Sumit Sharma
Founder- Radian Finserv