Kinara Capital, a fintech lending firm, has received INR 70 crore in investment from Invest in Visions GmbH (IIV). The European Union has classed Kinara as an ESG, which means that investing in the firm could have environmental, social, and governance implications.
Kinara Capital, situated in Bengaluru, was founded in 2011 by Hardika Shah and offers unsecured collateral-free loans to MSMEs in the range of INR 1 lakh to INR 30 lakhs.
According to the company, it has given more than INR 2,400 crore through 65,000 loans, resulting in the creation of 250,000 jobs. The Hervikas initiative, run by the startup, provides women entrepreneurs with low-interest unsecured loans.
Gaja Capital, GAWA Capital, Michael & Susan Dell Foundation, and Patamar Capital had previously raised INR 100 Cr ($14.2 Mn) in 2019 from private equity and impact investors, including Gaja Capital, GAWA Capital, Michael & Susan Dell Foundation, and Patamar Capital. The company raised INR 22 crore from the same investors later in 2020.
Edda Schröder launched Invest in Visions GmbH in 2006 to give institutional and private investors with access to impact investments. The company's microfinance fund provides non-securitized loans to microfinance institutions all around the world. With an average remaining duration of 22.7 months, the average loan size is roughly EUR 4.9 million (INR 42.8 crore).
The borrowed capital is used by these microfinance institutions to give loans to SMEs. Following the repayment of these loans, the microfinance institutions return the cash to IIV, together with interest, producing profits for its investors.
In India, the microfinance industry is expected to serve 10% of households in need of a credit line. According to an Intellecap analysis, India's microfinance market is worth between 58 and 77 billion rupees. If loan sizes range from $100 to $250, this translates to an annual credit demand of $5.7 billion to $19.1 billion.
Because of the high interest rates imposed by lenders, microfinance is a lucrative business. Rates are substantially higher than the eight to twelve percent paid by middle-class borrowers, averaging around 24 percent. There are also relatively few problematic loans, possibly as few as one or two percent.
Drip Capital, a San Francisco and Mumbai-based fintech startup, announced a $175 million financing earlier today to expand its business in South Asia and Latin America. SMBs can also get working financing through Drip Capital.
