Old Penny Black is small and neat (5)
I believe the answer is:
Here is my best explanation:
'small and neat' is the definition.
(I've seen this before)
'old penny black' is the subsidiary indication.
'old penny' becomes 'd'.
'black' becomes 'inky' ('inky' can be similar in meaning to 'black'**).
'is' is the link.
(Other definitions for dinky that I've seen before include "Neat and dainty", "Attractively small", "Small, neat and cute", "Cute" and "Dainty (colloq.)".)