Could you share your journey in the fintech industry and the foundation of Kinara Capital? What was your aim when you started the company?

My aim in founding Kinara Capital was to drive financial inclusion of small business entrepreneurs in the micro-small-medium enterprise (MSME) sector in India, and I am proud to share that we have not once wavered from this mission. We have disbursed over 1,00,000 business loans to date, with manufacturing MSMEs constituting more than half of our portfolio today.

After many years of working internationally in management consulting, I observed on a visit to India that, despite India's economic liberalisation, small business entrepreneurs continued to grapple with access to formal credit. To see this years later, hit a nerve for me as I was exposed to entrepreneurship very early in life as my mother ran a few small businesses, and I had seen the struggle upfront.

While studying at Columbia Business School, I decided to focus on finding a solution and built risk assessment methodologies that would address the common challenges that MSME entrepreneurs face: difficulty pledging property collateral, cumbersome processes, and a lack of personalised customer support. With a blended approach, Kinara set out to address these unique challenges by combining tech-enabled processes with a feet-on-the-street presence. The use of AI and ML has made us confident in extending business loans without property collateral to MSMEs, who can easily purchase machinery, raw materials, or other business expansion goals.

I wanted to create a sustainable solution that would bridge the MSME credit gap and help small business entrepreneurs realise their untapped potential. Kinara Capital, I believe we have done just that.

What role, according to you, do our MSMEs play in the growth of the manufacturing sector?

India holds the second largest MSME network in the world, with 30–40 per cent of the country's manufacturing output stemming from MSMEs. MSMEs are undoubtedly a significant driving force in the growth of the manufacturing sector and of the country. Referred to as the backbone of our economy, the sector accounted for over 43 per cent of the exports in FY 2022.

Beyond their contribution to the exchequer, they play a pivotal role in the social and economic empowerment of society. MSMEs are one of the largest employment generators. Out of the 11.10 crore jobs that the MSME sector creates, over 32 per are by MSMEs in the manufacturing space. They are a key lever in driving the transition from an agrarian economy to an industrialised economy, which, in turn, is a critical factor in enabling India to reach its 30 trillion-dollar economy by the centenary of our independence.

Kinara recently disbursed Rs 1,100 crore to boost MSME growth in Karnataka; what further disbursements can we expect? And do you aim to widen your focus to other states as well?

Karnataka is where Kinara Capital was founded, and we are still headquartered in Bangalore. However, we serve MSMEs in 100+ cities across Karnataka, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, and Maharashtra. In FY23, we nearly doubled in size, and we are planning on reaching Rs 6,000 crores in AUM and serving 2,00,000 MSMEs by 2025.

Our primary focus will be to broaden our reach in our current regions, where we see a lot of growth, especially in Tier 2 and Tier 3 cities in India. In addition, we are looking at expanding our reach via colending and other strategic partnerships that could take us into new territories, especially in the manufacturing sector. In addition, we also plan on supporting women entrepreneurs with our HerVikas discounted business loans program.

What are the factors triggering challenges for MSMEs today? And how are you working to address them?

MSMEs face a host of challenges, and the most significant of them is access to formal credit. In fact, out of the 63 million MSMEs in India, only 15 per cent have ever availed credit from formal sources. The overall credit gap in the MSME sector is over 500 billion dollars. The main reasons for the poor penetration of formal business credit are the traditional approach to assessing creditworthiness, wherein property collateral is a mandatory requirement to avail a loan. The majority of MSMEs work out of rented locations and have limited or no property collateral at their disposal to pledge for a loan, keeping them away from the realm of formal finance.

At Kinara Capital, we transformed this approach and mainstreamed the concept of collateral-free business loans. We did so with a specialised risk-assessment methodology that could assess creditworthiness based on a multitude of variables and not based on collateral. Leveraging AI and ML, we have removed human bias from the loan decision-making process. Our techenabled processes coupled with doorstep customer service allow us to complete all parts of the verification process, and we can take an applicant from loan inquiry to loan decisioning within 24-hours. The speed at which we can deliver is a game changer for MSMEs.

What unique financial products or strategies do you provide to address the specific needs of MSMEs in the manufacturing sector?

When we started out, our focus was on serving manufacturing MSMEs exclusively before expanding into the trading and services sectors. We certainly understand their unique challenges and have tailored our financial products to meet their requirements.

Apart from providing business loans without property collateral and doing so with a fast and friendly service, our customers appreciate that we offer them a lot of flexibility. For example, our Machinery Purchase business loan can be used to purchase new or used machinery, and we leave this decision up to the business owner. Further, our Working Capital business loans can be used towards machinery repairs, hiring seasonal help, or the purchase of raw materials.

There are a lot of ways that MSMEs can get a step ahead of the competition with a business loan from Kinara Capital.

How do you see the role of technology evolving in the financial services industry, and what role does technology play in Kinara Capital's operations?

Technology is integral to both our external and internal operations, right from loan origination, assessment, disbursement, and managing EMI payments. Financial technology is changing several aspects and, no doubt, making access to services much faster. Embedded finance is evolving now, and this will open up more opportunities for different types of companies to partner together to offer credit at the point of interaction with the customer.

What steps are you taking to make your services more people-friendly and easy to use by those who are not well-versed in technologies?

One of the key differentiators that sets Kinara Capital apart is our deep understanding of the sector. Most of our customers are in the early stages of their digital journey, so we provide them with omnichannel customer service. Our myKinara App is multilingual, and the eligibility checking process requires no uploads, addressing one of the biggest pain points for those new to technology and likely only having access to a mobile phone instead of a computer. To make the process further easier, we have over 1,000 field officers who can guide the MSMEs in their preferred local language throughout their loan journey, making the process convenient for them.

As the number of women entrepreneurs in India increases, what hurdles do you think our women are facing with financing, and how are you addressing them?

Irrespective of the type of business, access to formal capital is a major stumbling block for all women entrepreneurs in India. According to a report by Tracxn, women-funded start-ups accounted for only 18 per cent of all funded companies in India. The scenario gets much worse when it comes to the MSME sector. The credit gap faced by women-owned MSMEs is estimated to be over Rs 1.4 lakh crore. Systemic biases, coupled with a lack of collateral, make it nearly impossible for MSME women entrepreneurs to get formal credit.

At Kinara Capital, we have pledged Rs 700 crore in disbursement only for women entrepreneurs via our HerVikas programme, which provides discounted business loans. Further, through our omnichannel customer support, we provide doorstep customer service, and with our myKinara App, we enable women entrepreneurs to start the process at their convenience. Additionally, we offer free business development workshops with our Grow with Kinara initiative, where we deliver information in vernacular languages.

As the CEO of a company dedicated to aiding MSMEs, what is your vision for the MSMEs, and how do you aim to see them develop in the coming years?

Around the world, MSMEs from all countries contribute to 50 per cent of the global GDP; my vision for India's MSMEs is to do the same for the world's fastest-growing major economy. As India propels forward to becoming the 3rd largest economy in the world, MSMEs must be supported so they can thrive as engines of economic growth and job creation.

As a woman leader in a primarily male-dominated sector, what message would you like to give to other women aspiring to be leaders of tomorrow?

You have to be the change. If you are choosing to become an entrepreneur or a leader in another capacity, then you must usher in a new era of inclusivity. That starts by not placating the dominant gender around you and instead by building a culture of inclusivity. The world around you is mostly male dominated; however, much has changed in the last couple of decades, and you must lead because you need to be a part of the change for the next few decades to come.