SKS Microfinance IPO Controversies

‘I Believe In The Wisdom Of Teams’ – Vikram Akula Interview in Business World

This February, Vikram Akula courted controversy when he sold a part of his less than 5 per cent stake in SKS Microfinance to Hong Kong hedge fund Tree Line Asia.Vikram Akula spoke to BWs Snigdha Sengupta at his Hyderabad headquarters on why SKS is still very much in his control. Excerpts:

Q:As founder-promoter, how did you end up owning less than 5 per cent of your company in the first place ?

A:One needs to put the shareholding in the context of the unique origins of SKS. We started as a non-profit entity and converted into a non-banking financial company (NBFC) in 2005. When that happened, the NBFC paid a premium to take over the portfolio.

Normally, that would go as sweat equity to the promoter. In my case, since SKS’s value was created in the non-profit by the borrowers, I felt that the right thing to do would be to take that sweat equity and give it to the trusts (SKS Mutual Benefit Trusts).

As a result, the trusts, on behalf of the borrowers, now own 15.1 per cent of the company. I was given a set of stock options in 2005. Today, those options are 3.8 per cent of the company.

Read the rest of the Interview on BWorld

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Sks Microfinance Ipo

Confessions of a Micro-Financier – Extracts from Mr. Akula’s doctoral thesis submitted to the University of Chicago

Microfinance doesn’t help the very poor.

While the argument that all the attention the microlending industry attracts sometimes diverts funds from reaching programs that need it more is not new, India Real Time was surprised to see it outlined by Vikram Akula, the founder of SKS Microfinance Ltd.

Back in 2004, when SKS was almost unknown, Mr. Akula submitted his 183-page doctoral thesis to the University of Chicago. It outlined the problems and the potential of the microfinance industry. It said that many organizations got it all wrong and ended up ignoring the very poor for the “middle and upper” poor.

Read the rest on the Wall Street Journal

‘SKS IPO proceeds will go to non-profit work’  – Unitus chairman Joseph Grenny answers all the uncomfortable questions regarding the exit from SKS Microfinance.

Why was the non-profit operations shuttered so abruptly ? 

First, let’s clear up one of the most prevalent misconceptions currently making its way through the rumour mill: Unitus is not ceasing its non-profit operations – we are only shifting away from micro-credit banking. Our overarching mission was never exclusively tied to micro-lending, but rather to the larger vision of poverty alleviation and empowerment of the working poor in India and elsewhere. Accordingly, our goal was to demonstrate the commercial viability of micro-credit in the hope of increasing access to the lifeblood of capital for untold millions of working poor. Now that a large and growing contingent of commercial lenders have entered the field, alongside non-profit players such as Grameen, ACCION and Opportunity International, it is time for Unitus to shift our energy and talent to other high-impact poverty-alleviation activities.

Unitus and its subsidiaries may make about $70-80 million from the SKS IPO. What would have happened to the money if the non-profit was still continuing? And what happens now that Unitus is exiting micro-credit?

As I mentioned above, there will be a non-profit Unitus going forward. All the money coming to Unitus – and its board members – will go to non-profit, poverty-alleviation activities.

Read the rest on the Economic Times

Goodbye, microfinance

Microfinance is slated to join the ranks of flintstones, the crossbow , gas lamps, the pigeon post and the floppy disk — all excellent in their own time but rendered obsolete by the march of technology.

What made microfinance tick? One, failure of formal finance to reach out to the majority , particularly in rural areas. This left the rural lending field to the moneylender, the landlord, the trader or some other ‘informal’ , usually expensive, source of credit. So, when microfinance came up with a loan that was cheap when compared to the informal sources of credit, it found ready takers.

Read the rest on the Economic Times

Should microfinance institutions go public ?

This week Indian markets and banks and corporates were rocked by a new moral debate. The SKS IPO raised several questions about private profit and public benefit and the links between the two.For years microfinance conjured up the image of hard working, sincere social workers. Will the profit culture of the stock markets fit the clientele of the Micro Finance Institutions ?

Two insiders of this industry, Ramesh Ramanathan chairman of Janalakshmi financial services and Vijay Mahajan the founder promoter of microfinance institution Basix join to debate the issue in an exclusive interview with CNBC-TV18.

Read the Transcripts of the Interview on Moneycontrol

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