SKS Microfinance Limited is an Indian commercial microfinance company regulated by the Reserve Bank of India . SKS's mission is to “provide financial services to the poor.” The company operates in 19 of 28 Indian states. Initially, as a non-profit, the company was founded in 1998 by Vikram Shark , who resigned from the post of Executive Director in 2011. The company's goal is to provide loans to the poor in remote Indian villages, thereby protecting the poor from local lenders with high interest rates. In 2012, the Associated Press published its journalistic investigation, which accused the company of a series of suicides of their creditors. SKS has denied the allegations against it [2] .
| SKS Microfinance Ltd. | |
|---|---|
 | |
| Type of | Private company |
| Exchange listing | BSE : SKSM |
| Base | 1998 |
| Founders | Vikram Shark |
| Location | Hyderabad , Telangana ,  India |
| Key figures | M.R. Rao ( CEO and Director of Management) Raj Dilly (President) |
| Turnover | ▲ 5.2 billion rupees (2014) [1] |
| Operating profit | ▲ 2.9 billion rupees (2014) [1] |
| Net profit | ▲ 698.5 million rupees (2014) [1] |
| Number of employees | > 20 thousand |
| Site | sksindia.com |
Content
Principle of Operation
SKS Microfinance uses the Joint Liability Group model. Its essence lies in the fact that for each woman taking a loan, four more are charged, who also take loans (the essence of the model is reflected in the company logo). According to the company, 5 members in the group are enough to pay loans on time: four people can put pressure on the insolvent participant or they can afford to pay his fee [3] . Group lending proved to be good in situations of adverse selection and moral hazard in connection with asymmetric information [4] . The “social security” that customers receive does not require the security of their assets (which the poor often do not have).
Public offerings
On July 28, 2010, SKS Microfinance made its debut on the Bombay Stock Exchange . SKS Chairman and Founder, Vikram Shark, argued that an initial public offering (IPO) was made to finance growth, allowing the firm to reach more poor people.
Nobel laureate Muhammad Yunus , the founder of the microfinance concept, expressed doubt that Shark will be able to combine SKS social mission with the requirements of traditional business - maximizing profits. The main responsibility of a public company is to make a profit for shareholders, while the main responsibility of a microfinance organization is to serve the poor. Yunus predicted that SKS would ultimately put the interests of its shareholders above the interests of the poor:
By offering an IPO , you are kind of telling investors that they have an exciting opportunity to make money on poor people. This idea disgusts me. Microfinance aims to help the poor and save their money, rather than redirect them to the rich
Original textBy offering an IPO, you are sending a message to the people buying the IPO there is an exciting chance of making money out of poor people. This is an idea that is repulsive to me. Microfinance is in the direction of helping the poor retain their money rather than redirecting it in the direction of rich people- Muhammad Yunus [5]
Meeting in 2010 at the Clinton Global Initiative , as part of the discussion, Shark and Yunus discussed SKS's listing. The founder of SKS insisted that this was the only way for the organization to raise sufficient funds to provide microloans to people in need around the world. Yunus objected to Akula, saying that a microfinance organization, in the first place, could have been transferred to the banking sector. This, he said, would allow the organization, taking deposits from the population, to remain self-supporting, like Grameen Bank [6] .
Connection with Suicides
The company was implicated in a scandal involving the suicides of the poor in India. An independent journalistic investigation by the Associated Press published in 2012 accused SKS Microfinance of at least 7 suicides of insolvent people. According to the Associated Press report, more than 200 poor, debt-ridden residents of Andhra Pradesh committed suicide at the end of 2010. The blame for these deaths on the media lies with microfinance companies, which put serious pressure on borrowers, many of which cannot bear it [2] .
Notes
- ↑ 1 2 3 SKS Microfinance Ltd. (eng.) . NDTV Profit. Date of treatment May 1, 2015.
- ↑ 1 2 Erika Kinetz. AP IMPACT: Lender's own probe links it to suicides . Associated Press (February 24, 2012). Date of treatment May 1, 2015.
- ↑ Our Approach: Methodology . SKS Microfinance. Date of treatment May 1, 2015. Archived on May 13, 2012.
- ↑ Prabal Roy Chowdhury. Group-lending with sequential financing, joint liability and social capital . - New Delhi: Indian Statistical Institute, Delhi Planning Unit, 2004 .-- 32 p.
- ↑ Erika Kinetz. SKS launches India's first microfinance IPO Bloomberg Business (July 28, 2010). Date of treatment May 1, 2015. Archived June 23, 2015.
- ↑ Special Session: Profiting from the Poor? A Discussion on Microfinance IPOs ( link unavailable) . Clinton Global Iniciative. Date of treatment May 1, 2015. Archived July 11, 2015.
Links
- Official site
- SKS Microfinance Ltd. on the Bombay Stock Exchange