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September 24, 2009

"SKS struggling with balance between social & commercial goals"

Forbes India has an article, accompanied by an interview with founder Vikram Akula, on how SKS Microfinance is struggling to strike a balance between its soscial and commercial goals.
Ever since private capital began to course through its veins, the culture at SKS too has started transforming. With Akula often visiting the US, the second-rung leadership which ran the company brought in lot more changes. Somos Krishnan, who spent nearly a year and half at the MFI, recalls how the informal mojo gave way to the stifling air of buttoned-down formality. “We often had debates about whether self-congratulatory emails on reaching certain milestones (number of clients) were the best ways to motivate employees.”

...“Professor Yunus believes microfinance should be a social business — you get social capital and you return no profit. Grameen Bank reaches 7 million clients and that’s amazing. On the other hand, it took Professor Yunus took 35 years to do that… Can you imagine how many generations it will take to reach 150 million poor households in India if we took that approach? We have to scale more rapidly, and only commercial capital will meet our huge funding requirements. The only way to get that is to be not only profitable but extremely profitable,” he says.

...An IPO by SKS will set crucial benchmarks for the microfinance industry. Rival Share Microfin is also considering an IPO in the next two years. This year, the company has received an equity infusion of Rs. 250 crore from investors. Udaia Kumar, managing director of Share Microfin believes investors are here to stay. “There is great need for organised forms of banking which cater to the bottom of the pyramid.”

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at