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December 17, 2008

What Next for SKS?

Business Today has an article profiling the journey of SKS Microfinance thus far and looks at the challenges ahead for the VC-backed microfinance company.
In just under 10 years, Vikram Akula has built SKS into one of the biggest brands in rural India. A survey that pitted SKS versus two big financial brands—ING and LIC—showed that borrowers preferred SKS in overwhelming numbers. Even those who weren’t borrowers opted for SKS because of its reputation. “There’s no one else that people trust,” explains Akula. “Everyone interested in rural India has to come to us. If they don’t, they’re out of the game.”

...SKS and Akula do have admirers in the industry, including Vijay Mahajan, Chairman of BASIX and a guru of India’s rural economic development. Mahajan feels that Akula has made an invaluable contribution to Indian Microfinance. “He has taught the sector what is scale and sustainability while ensuring social impact,” he says. Also, attracting capital is not easy, especially in today’s severe downturn and perhaps the only hope for microfinance organisations— and, therefore, a large segment of India’s poor—is to adopt a for-profit model which invariably involves establishing a large client base before more complex services delivery.

...Manpower is the lifeblood of SKS. The company is adding 3,00,000 new clients monthly, which means opening up 100 new branches a month as well—in addition to the several million customers that SKS needs to monitor and service. This is a gargantuan task, requiring an assembly line approach to recruitment, training and placement of personnel, not unlike the highly standardised distribution process of Coke or McDonald’s. Each loan officer that is recruited and trained, reports to a branch manager who in turn reports to a regional manager and so on. SKS has also recruited around 90 management graduates for senior positions who are all put through the same rigors as prospective loan officers and branch managers. For SKS to be able to be operationally efficient, it needs to manage its retention rates—currently 30 per cent amongst loan officers—and ensure that quality of staff doesn’t take a dip in its frantic efforts to scale up.




Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in