Financing kiranas PDF Print E-mail
Saturday, 26 November 2011 00:00
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Although SKS Microfinance has maintained a studied silence over the exit of its promoter Vikram Akula, it does appear the idea is to break free from the controversies associated with Akula as well as the fact that the existing model has probably run its course. While there is no evidence that SKS was scalping its customers—if it was as easy as borrowing from banks at 12% and lending at 25%, the banks would have got into the business themselves—there is little doubt that Akula’s stunningly successful IPO, which was over-subscribed 14 times and created 700 crorepati employees, played a crucial role in the events that followed. This, in an industry that was supposed to be serving the poor, is what made politicians, such as in Andhra Pradesh, want to ban what they called exploitative lending. MFIs lent at lower rates than moneylenders and filled in a vacuum in rural lending, but the perception-damage was so high that even RBI’s Malegam Committee recommended capping of MFI interest rates. A high-profile fight with SKS’s CEO Suresh Gurnani also sullied SKS’s image.

The post-Akula SKS has interesting plans that include financing kiranas (it has lent R500 crore to kiranas with an average loan of R10,000) and even getting into micro-housing loans, health insurance and perhaps acting as a banking correspondent—there is talk of introducing micro-ATMs in kirana shops in villages. While some of these had started even while Akula was in SKS—there is talk of how he wasn’t fully convinced of the new model—the idea seems to one of building upon SKS’s network of borrowers. Indeed, the ICICI Foundation that Nachiket Mor started boasts of a sturdy back-end model that allows the sale of various products to villagers from money market mutual funds to even insurance products. Whether that works or not, Akula joins a long list of promoters who are forced to exit after taking the business to a certain size.


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