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-no cost loans to modest companies. Through this partnership, the two corporations are searching to disburse about Rs one hundred 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 recommendations on co-origination of loans by banks and non-banking and monetary corporations (NBFCs) to support former in priority sector lending enabled by NBFCs’ attain.
“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 TheSpuzz Online. The loans would variety 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 information-driven choices and integration by means of APIs with the intelligent technologies platform of Kinara Capital, a organization release stated. U GRO also does co-lending with banks and monetary institutions and has signed more than 15 co-origination partnerships with several 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,” stated 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 approach to start on the web, by phone, or in-individual with a Kinara representative. Once the application is authorized, the loan sanction documents will include things like the names of each U GRO Capital and Kinara Capital. The consumer assistance will be managed by Kinara Capital.
Moreover, Kinara Capital will underwrite the loans beneath 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 about 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.”