Muthoot Fincorp banks on UPI in microcredit business

CHENNAI: Muthoot Fincorp is confident of sustaining its 25 per cent year-on-year growth that the non-banking financial company has reported over the last three years now. With year to date disbursements of Rs 46,629 crore, the NBFC relies on its 3,700-odd nation-wide branch network to drive its business.

Shaji Varghese, CEO, Muthoot Fincorp, said while the emphasis is on micro, small and medium enterprises, his mandate is to provide credit access to micro businesses – shopkeepers, in particular. “Micro SMEs uplift is a must, not a choice anymore,” he said, highlighting the role of its ‘vyapar mitra’ app, a win-win for all stakeholders.

Without formal records, the digital India penetration (read UPI) has eased up credit disbursal to the informal sector. For this, Muthoot Fincorp has tied up with PhonePe and BharatPe, wherein, the data is available to disburse loans without human intervention. So far, it has disbursed Rs 1,000 crore-plus averaging Rs 100 cr on a monthly basis.

Lamenting that credit access for MSMEs is below 20 per cent, he said the huge gap that Muthoot Fincorp aims to address is by delivering customised products for this segment. Not being able to establish their business is no longer an issue as the business velocity can be tracked by UPI transactions emerging as the “new record for retailers and traders, seeking credit.”

Muthoot Fincorp is upbeat about this approach, as Varghese said 98 per cent is secured loans and secondly, ‘phygital’ or the widespread branch network is the reason for being able to sustain operations. “How we operate is by having a branch nearby,” he said, adding this is backed by a technology platform, making loan disbursement feasible without any formal documents but with a facility to repay instantly.

“Our aim is to make informal formal,” he said, adding the presence of branches in and around the customers (shopkeepers) makes monitoring easy. There is also the loan against property or LAP credit through which the NBFC caters to even trade modernisation credit. These are loans upto 15 years with a ticket size of Rs 25 lakh. The mortgage loan is almost three years now, which facilitates lowering interest based on repayment (from 24 per cent to 18 per cent), which is settled within three to six months.

Gold loans, its flagship, continues to be the growth driver but other products are merely an extension to the existing business, he sought to point out, giving an overview of the business at a media roundtable here on Thursday.

Dwelling on gold loans, Varghese said a large share was taken by women (34 per cent). “It is a well-established category and no longer a taboo,” he said adding from 10.9 per cent, interest on gold loans went up to 19 to 20 per cent with ticket size determining the rates. West, north and east were the focus markets for the NBFC. Its supply chain finance foray has also picked up with disbursals touching around Rs 300 crore.