Hardika Shah of Kinara Capital: “Stay true to your mission and find others who believe in it.

Stay true to your mission and find others who believe in it.Have a clear plan of what you are building and find the right partners who will align with you, it is better than to pivot your idea for short-term gains. As part of my series about “individuals and organizations making an important social impact”, […]

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Stay true to your mission and find others who believe in it.
Have a clear plan of what you are building and find the right partners who will align with you, it is better than to pivot your idea for short-term gains.

As part of my series about “individuals and organizations making an important social impact”, I had the pleasure of interviewing Hardika Shah.

Hardika Shah is the Founder & CEO of Kinara Capital, a leading socially responsible company propelling financial inclusion of small business entrepreneurs in India. Recognized for her passion and innovative approach, Hardika made a switch from her career in management consulting in Silicon Valley to move to India and launch Kinara Capital. Now ranked among Asia’s Top 100 high-growth companies, Kinara Capital has disrupted the small business lending model in India and was named ‘Bank of the Year-Asia’ by the IFC/World Bank for its inventive work that has touched a million lives. kinaracapital.com

Thank you so much for doing this with us! Can you tell us a story about what brought you to this specific career path?

I grew up in Bombay and saw a lot of struggle and hustle in my life early on. This was especially true with my mother and other family members who had strong entrepreneurial leanings, but were often limited by the lack of support to scale their business ideas. At age 17, I boarded a flight to the U.S. for my undergraduate studies and my parents made that possible by selling their home, which was their only asset at that point. For them to make this sacrifice and to send away their daughter for an educational opportunity was practically unheard of for most middle-class families in India in the 1980’s. Their determination fueled mine and gave me a springboard to study the then emerging field of computer science.

After college, I built my career in management consulting with Accenture and the work took me around the globe from Australia to Japan to Singapore and several other countries. Years later, life came full circle and I was at the helm of building Accenture’s delivery center for Microsoft in India during the 2000’s tech boom. That’s when I reconnected with old friends and family, and saw that despite the massive expansion in India and the emergence of a wealthier middle-class, the small business entrepreneur continued to be ignored.

Someone with aspirations of opening their own grocery store, or a small manufacturing company, or a salon or a catering service, was still facing the same challenges that my family had many years earlier.

I began spending time to understand the situation and complexities and got involved in pro-bono mentoring to help social entrepreneurs through programs via Miller Center at Santa Clara University and Stanford University. After some years, I pursued my MBA to explore new possibilities and business school was the genesis of the Kinara model. Right after business school, I ran a pilot in India with my own version of risk-assessment methodologies for collateral-free loans. I was motivated to figure out how the credit gap inequity can be tackled with a sustainable impact approach.

The success of that pilot inspired me to return to India after having been away for over two decades. So, I left behind my life in Palo Alto and moved to Bangalore in 2011 to build Kinara Capital. There was uncertainty and newness to everything and we did run Kinara Capital out of my home office for the first couple of years.

Today, I am proud to share that we have delivered nearly 60,000 collateral-free loans in India, which in turn, has led to an additional income generation of 100 million USD for the small business entrepreneurs and our work has supported 250,000 jobs in urban, semi-urban and some rural areas of India.

Can you share the most interesting story that happened to you since you began leading Kinara Capital?

There’s never a dull moment in entrepreneurial life. There are many interesting stories and macro challenges that no one could have predicted, such as a vast economy like India going through demonetization overnight and how COVID-19 disrupted the world and our business screeched to a halt overnight. I guess the one that will forever stay with me is around the appointment of my CFO, Aiswarya Ravi. Seeing how few women hold founder/CEO positions, I had resolved early on to build a very inclusive work culture at Kinara.

A couple of years into Kinara’s journey, I identified our then VP of Finance as having the right acumen and ambition to become our CFO. She had more than proven herself as part of the company and Kinara was already profitable. However, I was quite taken aback with the type of pushback that I received from a couple of incoming investors when I proposed this as part of our business plan. It was like I was in some scene from one of the Mad Men episodes.

The main reason against pressuring me to not promote her into the CFO role was that she was too young, aka she may take time off to have children and will not be able to focus. And, that the ‘risk’ would be lower if both the CEO and CFO were not women. It would be ‘safer’ if a senior man with traditional banking experience was appointed as the CFO, so that we as a company would be taken more seriously. I am surprised that they didn’t add in the requirements that the man should also be supremely macho with a big mustache at that point.

I wish I could have just laughed it off as a ridiculous suggestion but the pressure was intense. I was just a couple of years into building the company, so it took a lot of strength to stand my ground on this point. And, five years on, here we have it — a woman CFO who has gone on to help raise more than 200 million USD for the company in less than 5 years and helped us stay above water during many external events, including COVID-19, with her careful planning. And yes, she did become a mother too in this time, without compromising on her ambitions.

Gender roles and gender biases are strong in India at many levels and there is overall less participation of women in the formal workforce, whether educated or not. Even fewer women are found in senior executive roles. Over time, I have grown to be very proud of how seriously we take inclusivity and that we now have a women-majority management team, which is very rare to find in financial services, whether in India or anywhere else. We also have opened the workplace for the inclusion of women across all roles including in the field, as well as to the LGBTQ+ community and to individuals with disabilities.

I believe that change begins at the top and one must first create the opportunity for others to even have a chance to deliver. Too many are complaining about the “not enough women/minority/etc. qualified people are available”, but the real question needs to be, how many leaders are making the space for them?

Can you share a story about a mistake you made when you were first starting? Can you tell us the key lesson/or lessons you learned from that mistake?

Kinara is my first time taking the plunge into the entrepreneurial icy water! I was fortunate that most of my initial seed round came from my friends and some of my business school classmates who believed in my vision. When I was starting out, I felt the need to ‘pitch hard’ to any and every investor with whom I could get an audience and I must have talked to over 80–100 investors from all different walks of life. The investing space is a bit of a jungle and the mistake that I made was pitching too broadly in trying to get that first break.

There is a pitch fatigue that sets in and you are at the risk of doubting your own vision. I was very confident about my business plan from the start; however, the more investors you meet, the more opinions and biases they will bring in and sometimes you may end up with contradictory feedback. For instance, one said “expand your target geo or customer group” and another on the same day said, “narrow your focus on the market.” That’s when I realized that I needed to calibrate my approach altogether so I don’t waver from my goals.

Looking back, the lesson that I have learned is that more pitch meetings will not yield more investments. It is important to save your time (and theirs) to spend more time doing the homework and less time pitching everyone under the sun. Unless there is a connection with the geography, the sector, the customer segment, the investment size, etc. that you are serving, it is unlikely that the investor you are pitching to is the right partner for you. Mission alignment is critical for long term success.

Can you describe how you or your organization is making a significant social impact?

We have helped over 35,000+ small business entrepreneurs in India, many of whom are repeat customers. 90% of Kinara’s customer base is new to formal credit, which means that this is the first time they were able to access a business loan to grow their business. Our theory of change is simple: if small businesses can access credit at market rates, they can increase business revenues, create jobs at the bottom of the pyramid and earn additional income for the entrepreneurs. In our work so far, we have seen our customers’ business revenues increase by 15%, entrepreneur income increase by 25%, and 70,000 new jobs being created, of which 35% went to women who now have the option to earn a basic livelihood. Plus, more than 180,000 existing jobs were supported. The income generation and job creation has helped local economies thrive.

In India, there is a huge credit gap between informal and formal lending for small businesses, which is estimated at 380 billion USD by the World Bank. Kinara Capital addresses this ‘missing middle’ with fast and flexible, collateral-free loans. Our data-driven decisioning allows for quick eligibility and approval while our fully digital processes speed up loan disbursements and we can digitally disburse within 24-hours.

With 110+ branches across 90+ cities in India and our own in-house call center, we offer personalized support to our customers and communicate with them in their preferred languages. In addition, we provide an upfront discount to women-owned businesses and have committed to disbursing 15 million USD this year in loans to women entrepreneurs.

Can you tell us a story about a particular individual or individuals that were impacted or helped by your cause?

With over 35,000 customers, many interesting stories exist. Pre-COVID, I frequently took the time to visit different Kinara branch locations in all of the 6 states that we operate in and meet with different types of customers. There are so many endearing stories of small business entrepreneurs who have overcome many odds to change their lives. Many are aspirational in how they want to achieve a better quality of life for their families, because the majority of our customers do not have a college degree.

One story that just embodied the human resilience is of an entrepreneur who was a child laborer himself once. And, another entrepreneur who never thought he could afford to send his children to a good school. Over time, his business grew exponentially, so much so that his daughter is attending medical school today, which he said was even beyond his dreams when he first began his entrepreneurial journey. I really never have to go too far to find inspirational stories that keep me motivated every day.

Are there 3 things the community/society/politicians can do to help you address the root of the problem you are trying to solve?

Certainly, a concerted effort across government, communities and social impact minded people can move the economy forward substantially. We at Kinara are only one part of the solution. Much can be done and here are some thoughts from nearly a decade of being involved in financial inclusion.

Improve Infrastructure to improve productivity — When the roads or electricity connections or public transport don’t work as they should, it impacts both personal and business productivity. Working without power or Internet cuts is crucial for small businesses to stay competitive. Local governments must invest in urban planning, address pollution issues and improve conditions that speed up transport of goods, especially in semi-urban areas.

Ease of doing business must be simplified — Many small businesses in India remain informal and this is because the costs of doing business as a formal company are higher. On the other hand, an informal small business cannot access credit to grow their business and inevitably, they mostly remain very small and rely on money lenders for working capital.

Equalize regulations for last-mile delivery — Regulations are increasingly stringent for non-banking financial companies (NBFCs) like Kinara even when they are focused on last-mile financial inclusion of the underserved business owners. For example, post-COVID, the government relief funds earmarked for micro-small-medium enterprises (MSMEs) were given to the banks to on-lend via intermediaries like Kinara Capital. For most MSMEs, last-mile NBFCs are their first and often only access to credit, especially without property collateral. However, less than half of the emergency funds were allocated to NBFCs, which put the small business entrepreneur at a disadvantage in trying to get back to business. For swift economic growth, the government must insist banks to on-lend to NBFCs that are focused on small business lending.

The benefits of helping small business entrepreneurs are undebatable given their impact on the economy. In India, the MSME sector contributes to over 30% of the country’s GDP and over 45% of all the country’s exports. They are considered the backbone of the economy because the MSME sector in India is the second largest employer providing jobs to over 120 million people. Yet, these small business owners are largely underserved by traditional banks.

How do you define “Leadership”? Can you explain what you mean or give an example?

Leadership to me means allowing different opinions and voices to be heard, even if, and especially if, they disagree with you. I frequently have spirited discussions with my team and I like that we have built a culture wherein even newcomers at Kinara are not afraid to share their points of view. This allows for various viewpoints to come to the forefront so that the team can co-create a better outcome. Another important element of leadership is to practice the “campsite rule” of leaving each person a little better than when they first joined. Essentially it is the responsibility of the leader to help others learn and grow in their professional journey.

What are your “5 things I Have Learned from being an Entrepreneur” and why.

5 things that I have learned as a social impact entrepreneur are:

Stay true to your mission and find others who believe in it. 
Have a clear plan of what you are building and find the right partners who will align with you, it is better than to pivot your idea for short-term gains.

Focus on always doing right by your customer. 
Social Impact work often focuses on marginalized or underrepresented communities. It is important to deliver a product that adds value to them by spending time to understand their on-the-ground realities.

Go beyond your business. 
Invest time to help aspiring entrepreneurs, even if they have a similar idea. We need many players to affect large-scale social change.

Trust your gut. 
As a business, or even as a first-time entrepreneur, you are often pioneering new solutions. There will always be many opinions coming your way, but it is important to separate that from your vision.

Never eat lunch alone. 
Take the opportunity to know different people in the ecosystem, including your team members, partners and customers. There is so much that they can express over a relaxed conversation that will help you design new solutions.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

It may sound cliché, but “Pay It Forward” is a motto that we should all live by and try to render small acts of kindness towards people, community or animals. There is no better way to get your daily dose of inspiration than knowing you are helping others in need. For many years now, my morning routine includes taking care of many stray dogs in the neighborhood here in Bangalore, feeding them and transporting them to the vet for shots, for spay/neuter services, or for extended care with injuries and even surgeries at times — there is Pepita, Lola, Darpok, Chow Chow, Charlie, Toffee, and I ended up adopting Churro last year after finding her as a frail puppy with a broken leg outside the local grocery store. For years now, some of my family and I have given each other donations made towards rescues and wildlife — we have ‘virtually adopted’ dogs, donkeys, monkeys, orangutans, crows, and snakes. Taking care of animals and supporting conservation in any way is an idea that I would love to trigger because the wellbeing of animals is directly correlated to people’s wellbeing.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

Well, I lived in Chicago and had the opportunity to watch the reigning Bulls three-peat feat so I have long followed Michael Jordan. One of my favorite quotes from him is:

“Sometimes, things may not go your way, but the effort should be there every single night.”

This holds 100% true for anyone choosing the entrepreneur life because you can never treat it like a 9-to-5 job and shortcuts are not an option. There are more down days than up days. There are more roadblocks than shooting stars. The probabilities of what “may not go your way” are far more than what might. But in the end, every day, every minute of every day, as an entrepreneur, you have to put in the effort, you have to push hard and you have to be unafraid to fail so that you can come back the next morning and do it all over again.

Is there a person in the world, or in the U.S. with whom you would like to have a private breakfast or lunch with, and why? He or she might just see this, especially if we tag them. 🙂

I would love to meet Gloria Steinem. She is the epitome of boldness. Here is a person who has stayed true to her mission decade after decade and uplifted many others along the way. Very rarely can a person influence so many generations. I am fascinated by the depth and breadth of her experience and what she has accomplished for gender equality. She also has a very interesting India connection having spent time there in the 1950’s. Certainly, it would be a dream to meet her. As it stands, the World Economic Forum predicts that economic gender parity is more than 200 years away, so many more generations must continue to strive for gender equality and basic human rights.

How can our readers follow you on social media?

On Twitter, my handle is @Hardika100 or you can look me up on LinkedIn. And, the Twitter handle for the company is @KinaraCapital. You can also find Kinara Capital on LinkedIn, Facebook, Instagram and YouTube.

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