Source: Kinara website
Bangalore-based micro, small, and medium enterprises (MSME) lending company Kinara Capital (Kinara), has raised about Rs 5.4 crore ($1million) in a series A round led by Sorenson Impact Foundation.
The other investors are John Ayliffe of 1to4 Foundation, Halloran Philanthropies and Kinara Capital Holdings, (a special purpose vehicle constituted in Singapore). Two of the investors, Halloran Philanthropies and John Ayliffe, were part of an earlier seed round of over Rs 2.7 crore ($500,000) that included the Unitus Impact Fund and private investors based in the US. “Majority of the capital raised will go towards funding small businesses; we also plan on building our operational resources and expanding our current team of four to 10 by the year end. This is a recognition of our model and the social impact we have created,” said Hardika Shah, Kinara’s founder-CEO. “
Kinara provides debt capital in the range of Rs1 lakh to Rs10 lakh with credit products such as short-term working capital loans and receivables discounting. Kinara plans on increasing its portfolio by 5x, from the current loan book of Rs 1.5 crore, to over Rs 5 crore by next year. “This will mean supporting the potential creation of at least 1000 new jobs and impacting 10,000 lives by funding 400-500 loans,” added Shah. Social impact metrics that Kinara tracks, and reports to its investors, include new jobs created, increase in business income and increase in entrepreneur income.
Typically, MSMEs find it difficult to procure debt from banks because sub-10 lakh loans are too little for them to lend. Micro-finance institutions shy away, because the Rs 1 lakh to 10 lakh amount, is too high an amount. Kinara’s loans are at 22 per cent to 26 per cent reducing interest per annum The company, so far, has supported 60 entrepreneurs, with zero defaults. To grow beyond Karnataka, Kinara has plans to open its first field office outside Karnataka. “Depending on the needs of the businesses and the thrust of our supply chain relationships, we might open a second field office next year, possibly in Coimbatore,” remarks Shah.
The Indian government has a specific agenda to develop MSMEs and has constituted a separate ministry to promote them. According to government website, there are over 26 million MSMEs, with 59.7 million employees. The sector accounts for about 45 per cent of the manufacturing output and around 40 per cent of the total exports.