SKS Microfinance: The Sour Taste of Success
(7 pages of text)
In August 2010, SKS Microfinance became India’s (and South Asia’s) first publicly traded microfinance institution with a stock exchange listing. A share in the company was offered at INR 985 and it commenced trading at INR 1,036, reaching INR 1,404 within a month. However, that was the extent of the good news as far as the company and its shareholders were concerned. Things began to unravel rapidly. The initial public offering of shares was seen as the initiation of a conflict between the interests of the company’s shareholders and the poor rural borrowers it was expected to serve. Further, the company fired an arguably successful chief executive officer due to “inter-personal issues” within days from the end of the post-listing 40-day silent period. Matters were aggravated when 30 women who happened to be microfinance borrowers committed suicide within a span of 45 days, 13 of whom were reported to have been SKS members. The provincial government in the state of Andhra Pradesh, the hub of microfinance activity in the country, brought out an ordinance that effectively curbed microfinance lending and recovery operations. By May 2011, the Reserve Bank of India, the country’s banking regulator, had issued a notification placing caps on interest rates and margins and specifying minimum tenures for relatively larger loan sizes. Was this the end of the microfinance movement in India?
- To engage students in a discussion on the definition of a “for-profit social enterprise” and to provide students with a snapshot of the complexity involved in running “social businesses” in rural areas in developing countries.
- To enable students to appreciate the contradictions and tensions in dealing with sections of the population that could eventually influence electoral outcomes, and the consequent need for sensitivity and restraint.
- To enable students to understand the salience of image management and the value that could be potentially derived from maintaining a low profile (“understated elegance”) or, conversely, the pitfalls of deliberately attracting public attention.
- To bring out the importance of drawing a line between a founder’s personal aspirations and a company’s professional needs.
Finance and Insurance
India, Large, 2011
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