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Muthoot is a firm believer of inclusive development. Dr. C. Rangarajan committee on Financial Inclusion defines financial inclusion as " the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost." It is one of the most critical aspects of growth and development of the country. Financial inclusion can not only bring tremendous gains to the disadvantaged, but also can contribute to the creation of a more vibrant and stable financial system thus benefitting the society as a whole. In India, the focus of financial inclusion mainly veered around integration of rural India into the banking fold. The challenges which have been faced on this have been many–folds like large area, high cost of small value transactions, weak delivery model, unsuitable products, lack of proper infrastructure availability, low return on investment and customer behavior preventing expansion in these areas. Hence, our country has a long way to go in achieving 100% financial inclusion.
Banker to the Unbanked
Over the years, Muthoot ventured into the last mile of the remotest rural areas of India and reached out to those millions of Indians who were in dire need of funds for either business or personal purposes. Muthoot facilitated the 'aam aadmi' living in rural and semi–urban areas, who do not have access to organised credit with immediate financial assistance. Built brick by brick with ethics, values, reliability, dependability, transparency, goodwill and integrity , we considered thousands of rural Indians as perfectly bankable, even before the term 'financial inclusion' was coined, became the sole connect for people living in small villages and thereby playing a big role in financial inclusion.
This venture enabled Muthoot Finance to successfully migrate people from the unorganised sector to the organised sector saving them from the clutches of unorganised money lenders. It also brought thousands of rural and semi–urban Indians into the organised credit for the very first time. Moreover, it provided every Indian a share of the much talked about economic growth and freedom through their untapped valuable asset.
Since 1950s, the Company had been assisting the general public of Kerala and surrounding areas for going abroad to Countries like Ceylon, Malaysia, Singapore and Gulf to seek employment. It was Muthoot, who came to their financial assistance in aiding them for applying for air tickets and visa when no other organised player was willing to fund them. Today, these NRIs are a major contributor for sending NRI funds which is a major source for development of the State of Kerala and also foreign exchange contributor to the nation.
A pioneer and leader in the sector, Muthoot Finance's revolutionary steps in promoting loans against household gold jewellery with the least hassle and documentation has today changed the concept of gold loan from a 'last resort' or 'desperate loan' option to a 'life style banking product'.
The Company became the sole connect for the economically weaker section, lower middle class and middle class living in rural–like semi–urban areas. Customers come confidently and pledge their family gold with us, which was once looked down upon by many as a social taboo.
The Group's 126 years of unblemished track record is a testimonial in itself. Today, Muthoot Finance has a customer base of over 6 million and serves around 80,000 customers a day.
During the year under review, Muthoot recorded a growth of 18% in revenues, rising from Rs. 4,549 Crores to Rs. 5,387 Crores. Net Profit grew at 13% crossing another major milestone at Rs. 1,004 Crores –over the Rs. 892 Crores achieved in fiscal 2012. The branch network also witnessed a growth of 11%, enabling wider presence across the length and breadth of the country at 4,082 branches across 21 states and 4 Union Territories. These achievements become all the more impressive when we consider the challenging environment which prevailed throughout the last financial year brought about by regulatory changes and sentiment–driven market speculations.
K.U.B. Rao Committee Report of the Reserve Bank of India has driven out undue uncertainties about the sector and exonerated the sector from the negative perceptions that crept into the minds of various stakeholders. The report categorically says that Gold Loan is a socially useful function and that it provides a strong rationale for careful regulation of the activities. At a time, when financial inclusion is a major policy goal, the services rendered by the gold loans NBFCs, which are a part of the organised loan market are contributing in a reasonable measure to cater to the borrowing requirements of a needy section of the society. Further, Gold loans have only a casual impact on gold imports of the country, substantiating the emergence of a liquidity motive for holding gold. In India, buyers do not borrow to further buy gold and thus gold loans do not drive up the imports. Further, an increase in gold loans extended by NBFCs and banks does not impact significantly, the gold price in India.
Thus, going forward, the industry's prospects are appearing very bright on the back of much clearer environment, stable regulations, easier liquidity, benefits of operating leverage on account of economies of scale and larger customer base.
There is tremendous scope of growth, given the size of the domestic stock of gold available in the country. About 65% of gold holding is located in rural areas, making them a potential growth driver for financial inclusion. Driving on the product market niche created by them, the NBFCs led by Muthoot Finance are likely to maintain their due share of business inspite of competitive forces. The growth enablers are aplenty, given the potential for higher branch leveraging and new customer additions.
For the economy, it is very crucial that the idle gold stocks are monetised for productive purposes to the maximum extent possible. The issue of the rising gold demand in India is indeed very critical and complex. Although, the gold and loan practices in the country are still primitive and largely unorganised, it plays a key–role in the Indian economy. Therefore, it is of utmost importance to transform the critical gold segment into an organised sector through the strengthening of institutional infrastructure.
Heart for Cause
We, at Muthoot have always believed that our success is meaningless unless the communities that we serve, too are thriving. Thus, we continued to serve the society under the umbrella of 'Muthoot M George Foundation'. At Muthoot, we have thus been catering to the needs of poor and the underprivileged in the best manner possible.
Note of Appreciation
Success can be achieved only through a collective effort. I would like to take this opportunity to thank all the stakeholders for collectively making the Company what it is today and hope it reaches greater heights. On account of a commendable performance, Board of Directors would like to announce a dividend of 45% for the FY 2013.
M.G. George Muthoot