India’s rapidly growing microenterprise sector is critical to the country’s economy and socio-economic future. In fact, micro, small, and medium enterprises (MSMEs)—which include nano entrepreneurs who typically run small retail shops—contribute nearly 30% to India’s GDP and employ almost one-third of the nation’s workforce.
Unfortunately, due to high perceived risk, large banking institutions are hesitant to support nano entrepreneurs with the credit they need to sustain and grow. Many nano entrepreneurs turn to small, local moneylenders who charge ultra-high interest rates. These rates keep entrepreneurs trapped in a debt spiral as they struggle to pull themselves and their employees out of poverty.
Kaleidofin is working to break this cycle. The financial technology company developed a suite of tailored solutions to support individuals, nano entrepreneurs, and microenterprises that have limited or no banking support or access.
How it Helps
Because nano entrepreneurs’ businesses are largely informal and unregistered, they usually cannot provide the collateral and income history banks require. This prevents them from accessing credit, savings, investment, insurance, and other financial services.
Financial industry executives Puneet Gupta and Sucharita Mukherjee decided to address this problem. In 2017, they launched Kaleidofin with a goal-based savings product to help clients in low-income, underserved segments build capital for things like home improvement and their children’s education. Known as an “ecosystem intervention,” Kaleidofin’s model is designed to fill the estimated $380 billion credit gap and unlock credit for microenterprises and nano entrepreneurs so they can scale their businesses.
Since then, the company has developed a diverse suite of products. This includes an AI-based credit scoring solution called KiScore using alternative data points on this segment of customers. By topping up the credit score with an underwriting product made available to other non-banking financial companies, Kaleidofin is enabling access to credit for micro enterprises that have limited collateral, credit history, or formal cashflow statements that can help in their credit assessment.
Nano entrepreneurs typically have fewer than 20 employees yet remain a critical source of jobs throughout India. By supporting these businesses, Kaleidofin helps MSME owners and their employees increase their income, grow their organizations, and contribute even more to India’s economy.