MICROFINANCE

REVOLUTION IN INDIA

Presented By:-

Abhradip Paul
Overview
• In a country where mainstream banking system still eludes the poor,
Vikram Akula built a successful enterprise — SKS Microfinance — by
making finance available to the poor. Today, SKS is the fastest-growing
microfinance institution in the world. Recently it raised Rs 366
crore through largest private equity deal in the history of the microfinance
sector.

• More importantly, SKS was one of the first to show that private capital
could be harnessed to nurture sustainable livelihoods in villages.
A brief Profile of Vikram
Akula
• Age: 41
• WHO: Founder of SKS Microfinance. The
man who took the benefit of banking to
4.7 million poor families. Named by TIME
as one of the world’s 100 most influential
people.
• His Legacy: Showed microfinance can
attract private capital and build large
scale.
• His Big Moment: SKS is on the verge of
becoming the largest MFI in the world,
overtaking Grameen Bank with 8 million
customers, promoted by Nobel Prize
winner Muhammad Yunus.
• Next Milestone: Looking at a big bang
IPO in the first quarter of 2010; to
become the first Indian MFI to do a public
listing.
 The Eureka moment before he
initiated SKS
Microfinance?
 In 1990 he spent time with Deccan Development Society, an NGO in AP to
understand complexities of poverty.

 There he worked on an alternative Public Distribution system(PDS) which

had a microfinance component to it.

 While working once he met a poor woman who requested him to bring
the PDS to her village. As he refused the woman asked him “Do I not
deserve the chance to get my family out of poverty”.That means she
wanted a opportunity as she was merely asking for a loan.

 This made him realize that he had to think differently to tackle rural
poverty.
Generation of Idea

He learned that poor are quick to adapt which he put to good
use while designing his product.
In view of that he decided to have a standard loan product to
be pitched to the poor abandoning flexibility and choices like
COKE.

.
Research process for idea implementation:

 To implement his ideas he needs a scalable model for Indian

condition. As he was a quick learner he was keen on combining
professional American approach to problem solving with Indian
idealism.
 He went to University of Chicago to pursue a PhD in
Microfinance for that and he scaled up his project on 3
constraints-
1. Lack of Capital
2. Capacity constraints
3. High cost of delivering micro-loans.
FINDINGS OF RESEARCH:

 After thorough analysis he gave 3 principles to tackle these

constraints. These are-
1. Use of Profit model to overcome capital constraints

2. Leveraging best practices from industry to overcome

capacity constraints.
3. Using technology to automate processes.
 SETTING UP of MFI named SKS:
 Armed with his amazing findings Akula returned to India and set up
SKS Microfinance in the year 1998 with Rs. 20lakhs as donation.
The growth was slow and painful but today after 10 years it became
the the largest microfinance institutions in India with 4 million borrowers,
1354 branches in about 60,000 villages. Total loan disbursed is around
6,640 crore with repayment rate of 99%.
TURNING POINT OF SKS in 2004-First
steps towards profit:
What started as a small NGO called Swayam Krishi Sangam saw its big
transformation to a profit-motivated MFI in 2004, interestingly, while the founder was
away.
In 2004 suddenly he left SKS to his compatriot and Joined the consultancy firm
Mckinsey in the US.
While Akula was at Mckinsey capitalist Vinod Khosla and few others promised to
invest in SKS provided Akula has to be back at the helm.
Akula agreed to come back. His homecoming created microfinance history in
India: Private investors pumped in $3 million into the company in March 2006.
In his absence SKS grew robustly under Sitaram Rao, a senior colleague now
Director of SKS board.
The one who returned from McKinsey was a clear visionary who knew how to
build a large company. It gave him a hard edge. So it means the Scorching pace at
SKS can be attributed to that one accident in the life of SKS and Akula-the 2004
separation.
DEVELOPMENT OF SKS :
Akula managed to turn SKS into a highly profitable venture drawing
on his phenomenal skill.
 He took loan officers in huge number and for the middle level
management he hired fresh graduates of IRMA and other B-school and
gave them responsibility of entire state. He also experimented with top
management and has attracted talent from Goldman Sachs, Barclays,
Cognizant Tech and so on. All these steps helped SKS to grow leaps
and bounce as well as reaching new heights.
The Akula who returned from the US was also a man in a hurry. The
story goes that Akula hired full-time staff to fill out award applications
on his behalf. Akula denies this saying his staff filled out only two
applications while he has won several recognitions: Schwab Social
Entrepreneur of the Year (India), Ernst & Young Start Up Entrepreneur
of the Year (India), Young Global Leader by the World Economic Forum
to name a few.
Media across the world loved him. He was featured on CNN, the front
page of the Wall Street Journal, and TIME magazine’s list of the
world’s 100 most influential people. Business Week named SKS one of
the top five emerging and influential companies in the world in 2009
along with social networking site Facebook and online community for
classified ads Craigslist.

Growth reached heady pace. In 2007 and 2008, SKS grew in

excess of 200 per cent. By all reckoning, Akula seemed to
have served the purpose of his return. It was then the company
began the hunt for a different sort of leadership for the surge
into the next level.
SKS is one of the
fastest-growing MFIs
in the world, with a
Annual Growth of 188 %
SECTOR AND THOUGHT
LEADERSHIP:

􀂾 Number one MFI in the country –ranked by

Microfinance Information Exchange Market.
􀂾 Largest NBFC with a distribution network of over 5
million members in rural India across 19 states.
􀂾 SKS has led the greatest financial inclusion story
in retail insurance by enrolling 17 lakhmembers in just
10 months.
􀂾 First MFI to conduct mass customer contact and
feedback programs in the country.
􀂾 First MFI to have ISO certification for its 340 plus
strong Internal Audit Department.
􀂾 First Microfinance company in the country to issue
rated bonds and securitized portfolio.
􀂾 First ever Commercial Papers issuance in the
global MFI history.
􀂾 First MFI to have state-of-the-art ERP solutions
implementation with data backup and networked
offices.
STUNNING DECISION OF AKULA:

Vikram Akula, the poster boy of Indian microfinance stepped

down as CEO of SKS Microfinance in Nov 2008. Vikram
Akula chose to hand over the mantle of the company to
Suresh Gurumani, the former director of Consumer Banking
at Barclays Bank. He took up the mentoring role as
Chairerson.

what made Akula relinquish his position after bagging the largest private
equity deal in the history of the microfinance sector??
AKULA’s answer- “The reason for the change is to allow me to focus
on new strategy initiative. We are primarily doing micro-credit and a
little of insurance. The whole range of new financial services the
poor need, they need insurance products, products for savings and
also new technologies.”