How Gold Loans Empower the Unorganized Sector in India

Last Updated: 14 Oct 2024

The unorganized sector of the economy is a very important one in India. It includes millions of unregistered , informal micro businesses such as the vendors of food along our streets; household workers such as maidservants; laborers and workers of small , informal businesses, etc. In smaller towns and cities of India the share of informal sector is very big in the local economy. According to an estimate of International Monetary Fund, the informal sector of the Indian economy is almost 50% as big as the formal sector of the economy. The informal sector is not included by the government in calculation of the Gross Domestic Product (GDP) of the country.

The biggest challenge for those working in the informal sector of the economy is how to get loan financing for meeting their various needs. Government schemes such as Jan Dhan Yojna have increased financial inclusion in terms of having bank accounts. But banks and many financial other institutions do not give loans just because one has a bank account. They require income proof, tax proof etc. before they consider giving a loan to an individual or business. Often workers or businesses from the informal sector do not have such documentary evidence.

Gold loan from a lender, such as IIFL Finance, is a certain way of raising a loan for those part of the informal sector of the economy. No documentary evidence such as income proof, PAN number, tax proof etc. is needed for getting a gold loan from IIFL Finance. Those part of the informal sector also have gold jewelry in some form or the other. They can put this gold jewelry as collateral at their nearest IIFL Finance branch and get a loan at highly reasonable rate of interest. The advantage of raising a gold loan from a top NBFC like IIFL Finance is that you do not have to pay exorbitant or high rate of interest on the loan. Once you pay back the loan and interest on it, you will also get your gold jewelry back.

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So if you are a road side vendor running a food stall, who wants to expand his business by opening another stall, you can get the loan for it through a gold loan from IIFL Finance.