Kinara Capital

Providing unsecured business loans to micro and small businesses, empowering entrepreneurs to build sustainable businesses, & creating new jobs

There are 30 million small businesses in India and less than 5% have access to commercial capital. Small business owners with revenues of USD$5-20K per month in struggle to access affordable capital and tailored products for their growing business needs especially if they do not have land/property collateral to pledge.

Informal lending through local money-lenders is readily available but unaffordable as the annualized interest rates charged can be as high as 80%-100%.

Traditional banks are generally unwilling to service make small ticket loans of less than $50,000 to these micro and small enterprises due to the perceived risk of such businesses especially without some form of collateral. Additionally, the bank process is cumbersome, lengthy and often highly reliant on bank manager relationships, not always easy to develop for an entrepreneur with basic education.

Microfinance institutions have been able to successfully provide small, uncollateralized loans to individuals and community groups however, based on regulations in place, microfinance loans are capped at USD $2,000 making them unsuitable for financing the growth and expansion of a small business.

Kinara's solution is differentiated in the marketplace because:
(1) We exclusively focus on the middle segment of small businesses that do NOT have land/property collateral to pledge
(2) We support their growth with flexible products and flexible tenures from equipment financing to working capital, business development, etc.
(3) We make quick decisions by using technology to capture data and analyze data to enable us to disburse loans in 5-7 days on average

Unlike banks with loan approvals that require deep local bank manager relationships and lengthy application process, our approach is to take the process to the customer with quick turnaround (5-7 days).
We are willing to use hypothecated machinery assets as security. We provide flexible products such as short-term working capital and receivables financing loans which are new to market.

We have developed a proprietary psychometric test administered via mobile technology and integrated into our underwriting process that is integral to our customer screening process, which evaluates the customer on 5 key parameters, including willingness to pay.

We have an Android based loan underwriting system. Our field team captures the customer information at source by wading through all the paper invoices, bills, bank statements, salary registers, etc. Our technology aggregates this data to produce a cash based P&L and balance sheet and generates a composite risk score across 39 different parameters. Additionally, the customers take a local language based custom psychometric test to ascertain their willingness to pay. The underwriting decision is distributed and reduces our decision time on average from lead to sanction to 5 days.

New Equity Raise: Launch a capital raise process to target $20M in new infusion to continue to grow the business.
Expand to new geographies: Add 30 new cities to setup sales officesnin our existing states + 2 new states
Invest in data science technology for better underwriting and reduction of defaults: we can do better using predictive data models and building machine learning algorithms to identify key anomalies at the point of underwriting to reduce the risk of future default

In the next 5 years, we plan to grow our loan book to $500M, servicing over 300,000 customers and bringing them into the fold of a formal finance economy. This means over half a million workers will remain employed and 100K new workers will gain employment.

1. The 'network effect': Partnering with organizations and access pre-screened, qualified borrowers who are part of partner's ecosystem - suppliers, sub-contractors, production units, franchisees etc, enabling us to source borrowers through trusted relationships, integrate them into existing processes, build a trust eco-system, lower the risk for default & reduce our customer acquisition costs.

2. Unique interplay of technology and rigorous credit procedures that assesses the borrower based on psychometric testing and running full cash analysis of their businesses. We have streamlined the data collection and underwriting process by creating an end-to-end paperless solution that is fast, accurate and self-learning.

Kinara has disbursed over 20,000 loans thus far. With this reach, we have created 10K+ new jobs and sustained 50K+ existing jobs at the bottom of the pyramid by adequately financing small businesses. Over 30% of these jobs have gone to first time job seekers and ~20% to women workers. All these jobs earn on average USD$80-$100 a month. Additionally, with enabling capital access for small businesses, on average, business revenues have increased by ~30% and the business owner incomes by 25%.

The best evidence of our work is through the voice of our customers. Find some examples here: http://kinaracapital.com/home/customer-testimonials/

Hardika Shah-founder & CEO, previously worked for Accenture ~2 decades & managed large teams and budgets to deliver client value globally. For 8+ years, she supported social businesses as a mentor and advisor at Santa Clara University, Stanford University and her alma maters Haas School of Business and Columbia Business Schools.

She gave up a senior management position at Accenture in San Francisco to move to India to launch Kinara. In 2013, Hardika was inducted as an Ashoka Fellow. She won the Live Audience Award for Financial Inclusion held by Wall Street Journal in 2017.

Our ability to scale will be based on ramping up our partnership model to generate more referrals from partners and customers and investing in technology to be more self-learning and algorithm driven. The former will increase the number of leads and the latter will enable us to underwrite and disburse loans faster. Both these strategic thrusts will create a low cost/high scalable model to increase our reach and impact. We earn by charging interest and processing fees to our customers. Our cost of capital is approximately 12-13% and our interest yield is around 26%. This spread of 13-14% is used for covering our operating costs and credit costs. In 2016, we have turned profitable. In March 2018 our total top line was $10M with a healthy post tax profit of $750K. A combination of equity, debt, managing operating costs by investing in technology and reducing credit costs by investing in people will be our winning formula for long term sustainability.

Fintech as an alternative method to acquire customers and service them is becoming mainstream world-wide. Fintech companies are also popping up in India. However, all of them are chasing the internet savvy, social media focused, educated, English speaking, customers. My customers do not have a facebook or twitter account and they speak little to no English. I want Solve's support to develop a local language app integrated with Whatsapp that can reach out to more customers in my target segment building awareness of our ability to support them and to increase our reach and impact.

One of our biggest challenges is finding & motivating resources to provide excellent customer service. We will need to invest in behavioral economics training that goes beyond the core of loan processing and management.

Another challenges is to ensure we stay relevant to our customers as our geographic reach spans multiple sectors and sub-sectors, which requires an internal product development team to focus on innovation.

We need to invest in technology to find ways to initiate, educate, connect and support our target customers in their growth to build long term customer value.