Asia Asset Finance gains from gold loans and micro finance
Asia Asset Finance Plc (AAF) has made considerable progress in its business especially in gold backed loans and micro finance in its first complete financial year ending March 31 2016 after the company’s tie up with Muthoot Finance, a 128 year-old Indian family-owned firm, AAF officials said. The company recorded Rs. 175 million profit after tax in the 2015/2016 financial year and now it has set up a Rs. 300 million target for 2017 March 31, AFF Chairman Manohan Nanayakkara revealed at a media conference in Colombo recently. The introduction of gold loans and the expansion of its micro finance portfolio have been the key contributors to this year’s growth, he pointed out.
After three years of falling sharply, gold prices have risen over 20 per cent this year, making the yellow metal the best performing asset class so far in 2016; he said adding that the company has followed international gold prices in calculating the value when granting gold backed loans. The AAF offers up to (maximum) 75 per cent of the value of gold pledged as a loan for customers who in need of funds at short notice, he said pointing out that their default rate was very minimal (almost zero). Repayment of the customer at the end of the loan tenor, zero prepayment charges and lower interest rates compared to personal loans were the three major advantages of gold loans of the company,
according to Mr. Nanayakkara . Lower processing fee, minimum documentation and less time for approval are the other positives. The process involves minimum documentation on the part of the borrower. This is because gold loan is a secured product and you give the institution physical gold as collateral. All those factors along with transfer of technology and ‘business know how’ in the Gold Loan product which was hitherto not in the product offers of AAF have contributed towards the growth in gold loans port folio of the company during the past period of volatility in gold prices, he added.
“The tie up with Muthoot Finance has enabled AAF to secure low cost diversified funding lines on top of the increasing customer deposit portfolio. The strength in the treasury has enabled AAF to be more creative with the products being offered and also make products more flexible to cater to a bigger demographic,” he disclosed. Muthoot has activated AAF gold loan business providing India’s know how and training in handling and promoting the business for Sri Lankan staff, Mr. Nanayakkara pointed out.