The former management consultant now runs a fintech company – Kinara Capital, which provides unsecured business loans to small Indian entrepreneurs in a 24-48 hour disbursement cycle.
Shah, who left India at the age of 17 to pursue an undergraduate degree in computer science at Knox College in Illinois, USA, returned to India after 23 years to build fintech NBFC whose the headquarters is in Bengaluru in 2011.
The trip was not easy. “Getting from a career in management consulting to starting a non-banking financial company was indeed difficult,” says Shah. But she understood Kinara’s operating model. However, understanding the company’s metrics was a big challenge. “I came from consulting services, so running financial services in India was like understanding a foreign language,” says Shah.
While pursuing his MBA at Columbia Business School and Haas School of Business at UC Berkeley, Shah decided to take the leap and set up a Non-Banking Financial Company (NBFC) in India. “I noticed that microfinance was doing well in India, but small business owners were having problems raising capital between ₹1,000,000 ₹10 millions”.
Growing up in a middle-class Gujarati household in Mumbai, Shah also shared how her mother struggled to run her small business as a woman. “My mother ran a small supply store, and she had this ambition to create a chain of these stores but she couldn’t do it. It’s because she never had access to capital. My mother dreamed big but never had access to achieve them,” Shah said.
She recalls the initial challenges: “How do you start an NBFC? How do you build a data-driven model? How do you change that different style of operation? How do you find lenders and investors who trust your business model?” Regulatory compliance was also a big challenge, she says. However, his undeniable approach and drive to build an NBFC fintech resulted in Kinara Capital. During her days in Silicon Valley, she completed pro bono mentorship programs at Stanford and UC Santa Clara for social entrepreneurs, which helped her meet these challenges while building Kinara’s capital.
Social impact investment funds such as Michael & Susan Dell Foundation and Patamar Capital contributed to the first phase of Kinara in 2011. Once the company became profitable, Kinara secured equity financing from funds such as Gaja Capital and Gawa Capital.
“There have been several mentors in my life. Different people have come into the picture at different points in time for different purposes. There was always someone ready to introduce someone else. Sometimes, an introduction led to a conversation that either led to a nugget of information or advice on certain things, etc.,” she adds.
The Kinara founder recalls an incident where someone asked her, “Whatever you do, the key is how are you going to close your client.” She says this little request helped her build an advanced digital model that Kinara runs on.
Kinara Capital business model
Shah explained that credit scores are done using automated credit decisions based on artificial intelligence and machine learning (AI/ML). “We have been working with the same customer segment for 10 years. We have empirical insights into these customer segments across states and over a period of time. This allowed us to build our data science model without any intervention The model is based on large sets of customers, we have worked with this model, we have collected and collated data ourselves that is not available in the market,” she pointed out.
Shah said most of the NBFCs in India opt for a mortgage model when disbursing the loan, but it is Kinara that provides an unsecured loan in the shortest possible time. “For a fully digital lender, it becomes difficult to lend a loan if the customer does not have formalized information, and for a traditional lender, land ownership is crucial in the form of a mortgage. However, we (Kinara) are sitting in between those two universes. Kinara provides unsecured lending, but we will do it digitally with last mile customer service,” Shah said.
In 2014, N Iswarya founded a company called Mukund Automats which manufactures four and two wheel auto parts, which they supply to companies like Royal Enfield, Yamaha and TVS among others.
Initially, Iswarya started with three employees and four machines, but no bank was willing to lend his business. She then approached Kinara Capital and secured a loan of ₹7.25 lakh, then a second loan of ₹10,000,000. The loan helped her purchase additional machinery and expand the workspace from 1,000 square feet to 5,000 square feet. In addition, the total number of company employees has also increased from 3 to 54. At present, Mukund Automats runs a successful company with a larger facility and 24 machines.
This is just one of many small businesses that Kinara has helped grow. The company has helped women entrepreneurs like Princy Anitha (founder of World Innovation Technologies), Priyanka Motichand Ponde (Santoshi Enterprises) and Saraswathy (founder of Saraswathy Steel), among others.
Kinara Capital’s special scheme for female entrepreneurs
Hardika Shah has also started a special loan disbursement scheme especially for small women entrepreneurs called the HerVikas scheme under which loan is given at reduced rates.
” The last two years, ₹125 crore was disbursed in the form of 2,000 HerVikas business loans to support women entrepreneurs. In addition, the company has agreed to pay another ₹200 crores in fiscal year 22-23 to facilitate and encourage female entrepreneurship. Kinara has supported over 6,000 women on their professional journey,” Shah added.
Kinara Capital loan repayment journey
Hardika Shah has led Kinara Capital through various challenges such as demonetization, GST, IL&FS liquidity crisis and the current Covid-19 pandemic which has hit small business owners. For example, during the pandemic, Kinara granted a 100% loan moratorium and provided ECLG loans to help its existing customers restart their businesses.
Kinara offers both a fully digital process with its myKinara app and home-based customer service with its 110+ branches, serving small business entrepreneurs in over 90 cities across India. The company also offers a user-friendly vernacular app called myKinara for small business entrepreneurs.
Being in the unsecured lending business for over a decade, she learned one important thing about the business. It is to be empathetic. If a loan repayment rebounds, Shah says Kinara Capital has taken a collaborative approach with its client in terms of loan recovery.
So far, Kinara Capital spanned 110 offices across cities in Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Telangana and Pondicherry Territory.
The company disbursed approximately 70,000 loans for an amount of ₹3,000 crore to 40,000-45,000 MSMEs since its launch in 2011 with almost ₹1,300 crore AUM in March 2022. Shah aims to raise the AUM to ₹5,000 crores in the next two or three years. In addition, 50% of the company’s management team are women. This year, Kinara Capital closed a new fundraising ₹380 crore led by Nuveen. NBFC aims to disburse ₹10,000 crore loans to MSME businesses over the next three years.
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