Author: Sunderasan, Srinivasan
Source: Richard Ivey School of Business
Company Name: SKS Microfinance
Number of pages: 12
In August 2010, SKS Microfinance (SKS) had become India’s (and South Asia’s) first stock-market listed and publicly traded microfinance institution (MFI). A share in the company was offered at INR 985 and it commenced trading at INR 1,036, a small premium to start with but eventually reaching INR 1,404 within a month. Unfortunately, that was the extent of the good news as far as the company and its shareholders were concerned. Things then began to unravel rapidly. The initial public offer (IPO) 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 ended their lives 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 effectively curbing microfinance lending and recovery operations, and, by May 2011, the Reserve Bank of India, the country’s banking regulator, had issued a notification placing caps on interest rates, margins and specifying minimum tenures for relatively larger loan sizes. Was this the end of the road for the microfinance movement in India?