MSME lenders U GRO Capital, Kinara Capital to co-originate Rs 100 crore loans to small businesses

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Updated: October 13, 2021 12:52 PM

Credit and Finance for MSMEs: Through this partnership, the two companies are looking to disburse 3,000-4,000 loans to MSMEs in the next eight-12 months.

The RBI back in 2018 had issued guidelines on co-origination of loans by banks and NBFCs to help former in priority sector lending enabled by NBFCs' reach.

Credit and Finance for MSMEs: MSME lenders U GRO Capital and Kinara Capital on Wednesday announced a strategic co-origination tie-up to provide collateral-free loans to small businesses. Through this partnership, the two companies are looking to disburse around Rs 100 crore in the next eight-12 months to MSMEs across the manufacturing, trading, and services sectors. The Reserve Bank of India (RBI) back in 2018 had issued guidelines on co-origination of loans by banks and non-banking and financial companies (NBFCs) to help former in priority sector lending enabled by NBFCs’ reach.

“We focus on sub Rs 10 lakh small ticket lending market which means our average ticket size is about Rs 3-4 lakh. Through this tie-up, we are looking to lend around 3,000-4,000 loans in the next eight-12 months. Most of the MSMEs we lend to are into machine and auto components manufacturing, food production, textiles, they are wholesalers, retailers, construction material suppliers, etc. Our customer profile is typically first-generation entrepreneur doing Rs 5-6 lakh monthly turnover,” Hardika Shah, Founder and CEO, Kinara Capital told Financial Express Online. The loans would range from Rs 1 lakh to Rs 30 lakhs with 12-60 months of tenure.

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The co-origination partnership will leverage U GRO’s analytical data-driven decisions and integration through APIs with the smart technology platform of Kinara Capital, a company release said. U GRO also does co-lending with banks and financial institutions and has signed over 15 co-origination partnerships with multiple partners so far. “It is our belief that co-origination with fintech is one of the most effective routes to achieve the financial inclusion of MSMEs, which has prompted us to design our technology platform ‘Gro X-stream’, allowing essential collaborations like this to fructify,” said Shachindra Nath, Executive Chairman and Managing Director, U GRO.

Under the tie-up, MSMEs would have to apply for loans with Kinara Capital for the process to begin online, by phone, or in-person with a Kinara representative. Once the application is approved, the loan sanction documents will include the names of both U GRO Capital and Kinara Capital. The customer support will be managed by Kinara Capital.

Moreover, Kinara Capital will underwrite the loans under this tie-up and would share the applications with U GRO. “Once we do that, they (U GRO) can underwrite in their own way and inform us whether they will participate or not. If they don’t participate, we would still go ahead and do that (lend) on our balance sheet,” Shah added. The annual net non-performing asset (NPA) of Kinara Capital is around 1-1.5 per cent.

As per the central bank, the co-origination model “should entail joint contribution of credit at the facility level, by both lenders” and “It should also involve sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives.”

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