Posts Tagged ‘SKS’

India microfinance crisis by the numbers

November 16th, 2010

Finally a reporter who actually attempts to explain the objective facts on the current microfinance crisis in the Indian state of Andhra Pradesh.

Microfinance by the Numbers by Eric Bellman

Here are a few highlights:

  • Default rates by borrowers were ~2% before the politicians intervened and now have risen to 50% since they instructed borrowers not to repay their loans
  • On a per capita basis, there are 5-10x fewer suicides amongst microcredit borrowers than the general Indian population
  • Upon closer investigation, it appears that loan sharks, landlords and even family members are more to blame for the suicides than the microcredit companies
  • The interest rate for microcredit loans (24-30%) is the same as the local rate for credit cards (30%) which has never been controversial
  • Even though government schemes like self-help groups offer heavily subsidized 3% loans to women, why is there so much demand for microcredit (hint: loans insufficient, not available or require bribes)

Net: If the government continues this harassment of MFIs and imposes unreasonable regulations, the current microcredit borrowers will no longer have access to these financial services and will either have to go without, or more likely be back as clients of the local loan shark at 150-300% interest rate plus their well-known collection techniques.

SKS Microfinance IPO Report

September 30th, 2010

CGAP (part of The World Bank) has recently produced an analysis of SKS Microfinance IPO in India. This is the first IPO of an Indian MFI.  The IPO was 13 times oversubscribed … that is, 13 times more demand than availability of IPO shares.  SKS priced at the high end of their range with valuation of US$1.5B and sold 11% new stock raising US$155M.  In the first 5 weeks of trading, the stock rose 42%.

This article summarizes a lot of good historical and current data about SKS and also outlines some of the key issues that a successful IPO raises for SKS and the microfinance industry overall.

SKS and Grameen Bank Founders meet up

September 26th, 2010

Vikram Akula, Founder and Chairman of SKS Microfinance of India and Muhammad Yunus, founder of Grameen Bank of Bangladesk, Nobel Peace Prize recipient and author meet for an interview at Clinton Global Initiative this week.  I met Vikram in Hyderabad back in 2005 just as they were transforming from a non-profit to a commercial entity and Unitus Equity Fund was the catalytic investor. Recently, SKS Microfinance floated a successful IPO on the Indian stock market.

This discussion clearly lays out the contrasting perspectives of Vikram and Yunus on their approaches to microfinance.  This is largely about what qualifies as a social business (my perspective) and how best to approach bringing financial services to the world’s poorest.

Overall, if you’ve read my previous posts on Yunus, you’ll know that I am a huge fan on the innovations that he has brought (and continues to bring) to microfinance.  You’ll also note that I am greatly disappointed in his unwillingness to face the realities of the slow growth of microfinance access outside of Bangladesh and how different models are needed in order to accelerate the day when poverty is something we only see in museums (Yunus’ vision.)

In this discussion, he suggests that we should “go slow” with expanding microfinance access until governments create the same banking regulations as in Bangladesh.  This is a luxury the poor do not want and don’t deserve.

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Please share your thoughts in comments.

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