Growing up in a middle-class family in Mumbai, I saw a lot of jugaad from early on in my life. Many people with entrepreneurial leanings were always stuck with no access to formal lending. The efforts they made on their own were frequently stunted because of the lack of working capital.
Despite India embracing an open economy years ago, every time I visited India, I still saw the same jugaad by entrepreneurs who were piecing personal loans together to somehow catch a break.
There was a dissonance between the theory and practice of financial inclusion because most banks and lending companies place the burden of mitigating risk unfairly on the borrower. This automatically excludes small businesses in the informal sector, even if those businesses are legitimate and profitable. Small businesses in India create a ripple in the economy with new job creation and income generation that impacts multiple lives.
I recognized two important factors to address if one is serious about expanding financial inclusion. First, remove the burden of needing property collateral, and second, improve the turnaround time of loan disbursement so that small business owners can take a timely decision for their growth.
If you believe in driving social impact via financial inclusion, you must find a way to shoulder the risk alongside the borrower.
Based on this hypothesis, I ran a lending pilot for small businesses in India seeking financing under ₹10 lakh. The success of this pilot led to a life changing decision for me. In 2011, I wrapped up my life and moved from Palo Alto to Bengaluru, giving up a 20-year career in management consulting.
Today, Kinara Capital is successfully driving last mile financial inclusion by combining data-driven insights with in-person customer service. I do mean real financial inclusion by shouldering risk.
Hardika Shah is Founder and CEO, Kinara Capital
There was one moment when fate turned their way, a moment that they can look back upon and say, that was when it started. Capturing click moments.