Interview with:


CEO, Northern Arc

As the CEO of the Indian financial institution, Northern Arc Capital, Kshama Fernandes leads an organization that helps financial institutions, underbanked businesses and underserved individuals across the country to raise funding in a sustainable manner.


In barely a decade, Northern Arc has used its pioneering structuring and risk management approach to help transform the lives of millions. Through her work at Northern Arc and in her personal capacity, Kshama has been tireless in her efforts to broaden financial inclusion across the sub-continent, and to empower women and the girls in particular.

Corona has, for now at least, changed everything. But it is in such times of crisis that ‘actors’ like Kshama and Northern Arc stand out. So we were keen to focus in this interview on Kshama’s take on, and response to, the Corona crisis. Asked how the Corona crisis is affecting Northern Arc, Kshama’s first words are not about her own company. “The situation facing those at the bottom of the pyramid is very concerning. Our economy has come to a grinding halt.” Northern Arc has been in conversations with their clients – embattled Non Bank Finance Companies (NBFCs) small corporates and SMEs, who are severely affected because they serve the most vulnerable borrowers and clients in India. “With no income, these clients are obviously under enormous pressure. So since the crisis broke out, we have been providing moratoriums on instalments due to us, and thinking of how else might we help.”

In the first weeks of the crisis alone, Northern Arc systematically evaluated hundreds of NBFC clients across the country, plus other retail borrowers on their platform, to assess how many of them needed moratoriums. The answer? “Almost all of them! No well-run NBFC carries cash reserves to cover more than 2-3 months of operations. With complete shutdown, many have problems not just servicing loans but meeting operating expenses.” Kshama stresses that the evaluations have to be done very judiciously. “Northern Arc after all is also an NBFC that borrows from the market. We must ensure that our own liquidity and financial position remains strong so we can repay our lenders in a timely manner.”

“The situation facing those at the bottom of the pyramid is very concerning.”

Safe pair of hands

As fortune would have it, Northern Arc completed a large equity raise in December 2019. As a result, they are currently leveraged to about two times net worth, in contrast with their usual level of 3.5 to four times. This obviously puts them in a stronger position to help others, and themselves, ride the crisis. “It means we can put client payments on hold and even lend in limited ways to NBFCs that we believe are otherwise financially sound and just need an uplift of liquidity.”

Northern Arc was the first to introduce structured finance to the Indian market, and is widely seen by Development Financial Institutions as a safe pair of hands and an efficient way to enable the transmission of credit where it is required the most. “Operating in India over the last decade,” she laughs, “we have also become fairly expert at dealing with crises!”

Kshama and her colleagues have therefore been busy talking to DFIs, investors, foundations, charities and other institutions around the world who are keen to help people in these difficult times. “One challenge is that most organizations want to do their own thing by intervening directly. This may not be the most effective way to help, especially in times of crisis. Reinventing the wheel is expensive, time-consuming, and highly inefficient in terms of human resources and capital for every dollar deployed. So we have been working towards aligning efforts by bringing investors to the same table, and by developing financing structures that will enable us to build economies of scale and efficiencies in a timely manner.”


“When this crisis is over, many people will ask themselves - is this relentless, insatiable craving for materialism really what I want to pursue for the rest of my life?”

Bouncing back

Looking further ahead, Kshama is surprisingly positive about the long-term impact of the Corona crisis on India’s most disadvantaged. “I know how resilient people here are. There may not have been anything quite like this crisis before, but in recent years alone Indians have faced cyclones, storms, demonetisation, financial crises… the ability of people at the bottom of the pyramid to weather such events and bounce back is absolutely remarkable. How exactly will they do it this time around, I don’t know. I’m confident however that they will, and probably faster than we expect. I only hope we don’t take the marginalised and the excluded for granted and lose precious time in reaching out to them.”

As for Northern Arc’s own prospects, Kshama believes the reputation it has built in India and globally is now getting noticed. “And that’s a big opportunity for us. With DFIs and other institutions currently unable to carry out due diligence and surveillance, they must increasingly look to trusted partners.”

Culture shift

In the wake of Corona, Kshama expects a culture shift in how many service-based industries operate, including the financial sector. “Some companies are already talking about 75% of employees permanently working from home. That’s a big shift. It means fewer office buildings, far less commuting… we will quickly evolve mechanisms for home-working that ensure efficiency, good communication and social interaction.”

She also believes the crisis will bring about a more fundamental change in people’s behaviour, both in India and globally. “Currently we’re not travelling, not eating out, not buying things we don’t really need, like new clothes every season... There is really so little we need to survive! When this crisis is over, many people will ask themselves - is this relentless, insatiable craving for materialism really what I want to pursue for the rest of my life?”

While she feels this may lead to a slowdown in some economies, Kshama also sees opportunities arising from such a downturn in consumerism. “I think we will see a lot more thought going into redesigning businesses to provide the best financial and non-financial return for the time and capital employed. It could generate a big positive shift, with people being more considerate and sensitive to the world around them in their decision making. This can only be good for mankind and for everything we choose to touch, or not touch!

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