THE “MISSING MIDDLE”
There are 171 banks operating in India with 76,000 branches and over 12,000 NBFCs (non-banking financial companies). There are 26 million small enterprises in India employing 60M+ people. Only about 5% of these enterprises have access to the capital they require. Lending to MSMEs has repeatedly been emphasized as priority sector lending by the Reserve Bank of India. However, the credit gap is not getting better, as traditional banks are struggling to serve this market. These small and growing enterprises are in dire need of capital. In fact a report released by Intellecap for the International Finance Corporation (IFC), part of the World Bank Group, estimates that the debt gap for micro & small enterprises in India is about $198 billion, growing at 11% per year. Click here for a copy of the report.
Traditional banks are generally unwilling to make small ticket loans to these micro and small enterprises due to the perceived risk of such businesses especially without some form of collateral. Microfinance institutions have been able to successfully provide small uncollateralized loans to individuals and community groups however, based on regulations in place, microfinance loans are capped at Rs 50,000 ($1000) making them unsuitable for financing the growth and expansion of a small business. Additionally, the group lending approach of microfinance does not scale to higher ticket loan sizes. Whilst informal lending through local money lenders is readily available, the annualized interest rates charged can be as high as 80%-100%.
There is a large funding gap between microfinance and commercial capital that can be filled by a formalized lending process to micro and small enterprises and it is this “missing middle” market that Kinara Capital seeks to address through its innovative business models and products.
OUR TARGET CUSTOMER
Kinara Capital, a brand of Visage Holdings and Finance Private Limited (NBFC) is a Bangalore based social business that provides loans in the range of Rs.1 lac to Rs.10 lacs to micro and small enterprises with turnover of less than Rs.2 Crores, filling the gap between microfinance and commercial capital.