When Hardika Shah revisited India in 2010, after graduating from Haas, she was on a mission to understand why microfinance was not meeting the needs of small businesses.
“I spent three months meeting all types of businesses, bankers, financiers, intermediaries, and anyone else who wanted to opine on the problem,” she says.
She discovered that though small businesses contribute 45 percent of the GDP, they struggled to access debt at a fair market price. The average microfinance loan of $200 is not sufficient for a small business, which typically needs 20 to 30 times that amount to grow. Larger lenders consider the investment too risky, forcing entrepreneurs to use loan sharks.
Shah’s solution: Kinara Capital, a for-profit company she founded in 2011 dedicated to serving that “missing middle” in India by providing collateral-free loans from $2,000 to $20,000 to small-business owners.
“In a way, the biggest advantage was being unencumbered by past experiences as I had never worked in the financial services sector in India” says Shah. “A combination of idealism and bullishness allowed me to find new ways to approach the small business lending gap.”
Shah developed an innovative assessment model that minimizes lending risk by financing various players in a supply chain, assessing the business owner, and considering potential social impact. To date, Kinara operates in 12 offices in four states in India, has financed over 2,500 loans with a portfolio of some $7 million, and has impacted 10,000 lives by creating new jobs.
As Kinara continues to grow, Shah draws confidence and inspiration from her Berkeley Haas community. “Seventy percent of the seed capital came from my classmates,” she says. “If they believe I can do this, then I should believe I can do this too.” —MR
Founder and CEO, Kinara Capital,