Interview with Vikram Akula, SKS Microfinance

There is an interview with Vikram Akula in Business Standard, dated 22nd February 2008. I cannot however locate the online URL to provide a link here. I will mention just the key points here.

On his model being a replica of Grameen Bank: Yes, it is, except for the difference that SKS works on for-profit and expects to make a profit. Yunus' Grameen model talks of no-profit, no-loss.

On the interest rate being high: SKS charges on an average 26% diminishing interest. This breaks into 11% their own borrowing cost, 9% staff costs, 3% amenities and office costs, 2% loan-loss provision, between 1-2% profit.Wherever they have reached size, they have reduced the interest rates - for example in Andhra Pradesh and Karnataka to 24%. Their eventual goal is to reduce this to 21% if further efficiencies are achieved.

FMCG: In addition to offering loans, they are negotiating with FMCG product companies to offer FMCG goods at cheaper prices to their existing loan customers. Current customer base of SKS is around 1.7 million people. Targeted by March 2008 - 2 million, and by March 2009 - 4 million.

Investment in Gold: SKS is offering fixed price gold coins, which can be paid for by a weekly investment of Rs. 10-15. Once the investment is complete, the investor gets a certificate for the weight of gold, at market price, which can be traded any time for the current market price of gold.

Education: SKS is teaming up with education provider and infrastructure provider to set up schools. SKS will finance the families. Infrastructure provider will set up school buildings. Education provider will provide the teaching. The cost of the education is expected to be Rs. 250 per child per month (which will be borrowed from SKS and paid to the providers). They expect to start with 20-30 schools in May 2008, and extend this to over 300 schools.

SKS Microfinance gets third round of investment

US based Silicon Valley Bank and Columbia Pacific have together invested Rs. 147 crore (around US$ 36.75 million) in SKS Microfinance in December 2007. In the earlier round of investment made in October 2007, a clutch of investors, including Sequoia Capital, Unitus Equity Fund and Vinod Khosla had invested Rs. 50 crore (US$ 12.5 million).

The Economic Times article

Citibank to buy SKS loans

SKS Microfinance is one of the fastest growing microfinance institution in India, which is getting decent funding from venture capitalists. It has just closed a deal with Citibank, where Citibank will buy the SKS portfolio of Rs. 180 crores (roughly USD 44 million), while SKS will service the microloans. Grameen Foundation will provide limited guarantees.

News

Story on SKS Microfinance

On Seattle Times: Making a profit while helping the poor

Sequoia Invests $11.5 Million in SKS Microfinance

SKS Microfinance, a leading Microfinance entity in India has received significant venture funding (US$11.5 million - INR 50.6 crores) from Sequoia Capital.

For details of the story, go to CNBC, or company's PR.

Is ICICI Bank providing microfinance directly?

An article in BusinessWeek Online seems to indicate that a whole bunch of commercial banks in India are directly into microcredit, providing loans as low as $130 (Rs. 6,000) to rural people.

Mor signed off on a one-year, $130 loan that will allow the family to buy a buffalo and sell its milk. And written into this loan contract is a most unusual clause. If the animal isn't milking, the family gets a moratorium on its monthly loan repayment. "The client would need to find other money to service the loan or even sell the buffalo to pay us, which would be counterproductive for both of us," explains Mor, deputy managing director at ICICI.

I think this may at best be a publicity stunt. I can't see Nachiket Mor signing a $130 loan with any of his customers except for a photo op. To my knowledge, ICICI Bank is only lending through other microfinance institutions. To quote from The Wall Street Journal article found at Echoing Green site,

ICICI Bank Ltd., India's largest private-sector bank in capital, has gone so far as to give Mr. Akula an open line of credit. The bank says its more than $10 million in loans to SKS have been low-risk and give it a slightly higher return on capital than it gets from its corporate borrowers. "This could be bigger than any other business that we have got," says Nachiket Mor, executive director at ICICI Bank in Mumbai, the city formerly known as Bombay. ICICI Bank teams up with about 100 microfinance institutions, through which it plans to hand out loans and sell insurance.

With the exception of The State Bank of India, I can't see any of the Indian banks or foreign banks based in India going into the rural areas. We really need models like SKS Microfinance come up across the country.

Interview with Vikram Akula of SKS Microfinance

The Tribune (12th August 2006) has a detailed interview of Vikram Akula, CEO of SKS Microfinance.

SKS is headquartered in Hyderabad and operates in 5 states of India. It operates on a model similar to that of Grameen Bank of Bangladesh. It started as a non-profit organization and then became a NBFC (Non-banking finance corporation). It has received venture funding from several people, notably from Vinod Khosla, SIDBI and Unitus.

SKS has branches in India as follows:

• 44 branches in 7 districts in Telengana region of Andhra Pradesh
• 19 branches in 5 districts in North-Eastern Karnataka
• 10 branches in 3 districts of Maharashtra (bordering AP)
• 10 branches in 4 districts of Orissa (bordering AP)
• 3 branches in 3 districts of Madhya Pradesh

They have currently priovided loans worth Rs. 320 crores to over 2.6 lakh customers. They have close to 98% repayment rate.

Read the detailed interview here.