Of the Rich, for the Poor

Former McKinsey highflier Vikram Akula wants to redefine how microfinance works.

The country’s largest and most lionised microfinance firm, SKS, founded by former McKinsey & Co highflier Vikram Akula, goes public this week. Priced in a band of Rs 850–985 per share, the company plans to raise nearly Rs 1,500 crore from the market. That is a relatively modest sum as far as IPO cash mop-ups go, but the buzz around the offer shows why microfinance is the new ‘in thing’. In the run up to its IPO, Akula was at pains to explain why an organisation making small-ticket loans to the impoverished should go public and open itself to shareholder demands of high profitability.  Even the pioneer of microfinance, Bangladesh’s  Muhammad Yunus, believes such lending should not be subject to market forces. But Akula counters that a new generation of microfinance has shown that a commercial approach can actually help raise significantly more capital and put more money in the hands of more poor women. 

“In so doing, we actually think there is no conflict between the social and the commercial.” SKS’s average lending rate for the poor is close to 28 per cent—double the rate you pay for a personal loan, but it can be argued that it caters to people untouched by organised financial institutions, and its loans come at terms far more comfortable than those demanded by village sahukars. According to Akula, the ultimate mission of microfinance is to help the poor access financials tools that aid their quest for income and help them out of poverty.  In this case, though, it’s perhaps SKS’s wealthy investors who stand to make the biggest gains. Think 28 per cent.

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