SKS Microfinance is reportedly scaling up its non-core businesses of financing Samgam stores, which are retail grocery stores owned by poor women, and increasing its gold lending operations in efforts to diversify its revenue stream. In the Samgam scheme, SKS Microfinance stores lend to Samgam stores and connects them with wholesale suppliers such as Hydera bad-based Metro Cash and Carry India Private Limited. SKS Microfinance receives some commission from the suppliers. Mr M R Rao, managing director and chief executive officer of SKS Microfinance, said, “We are scaling up our pilot on the ‘Samgam’ stores scheme and expanding it to Bangalore. Subsequently, this may be extended to all other States later.” SKS is also considering increasing the number of its branches that offer gold loans. Mr Rao added, “The number of [gold loan] branches is being increased from the present five to 20 as there is huge demand-supply gap in rural micro credit.”

In light of the Regulation of Money Lending Act and the “cumbersome” loan application process of the state government, SKS has stopped fresh lending in AP. Mr Rao reportedly argued that the Andhra Pradesh (AP) downturn would not permanently damage the company as, “The business in other States is going on and recoveries are good. Our net worth is high due to the Initial Public Offer, and the AP exposure in total portfolio is only 20 percent.”

As of June 30, 2011, SKS reported a total outstanding portfolio of INR 3,450 crore (USD 755 million) and an outstanding portfolio in AP of INR 1,257 crore (USD 275 million).

By Carol Kim, Research Associate

About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998 and delivers microfinance products through a group-lending model to impoverished women in India. It is a for-profit, non-banking finance company that converted to a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. As of March 31, 2011, SKS reported to the US-based nonprofit data provider Microfinance Information Exchange (MIX) total assets of USD 952 million, a gross loan portfolio of USD 925 million, return on assets (ROA) of 2.4 percent, return on equity (ROE) of 7.93 percent and approximately 6.2 million borrowers.

Sources and Additional Resources:

Business Line: “SKS Microfinance to scale up non-core business”, August 2011, http://www.thehindubusinessline.com/industry-and-economy/banking/article2340209.ece

SKS Microfinance: http://www.sksindia.com/new_initiatives.php

MicroCapital.org: “MICROCAPITAL BRIEF: Indian Microfinance Institution SKS Reports Quarterly Loss, Looks to Raise $200m Through Private Placements”, August 1, 2011, http://www.microcapital.org/microcapital-brief-indian-microfinance-institution-sks-reports-quarterly-loss-looks-to-raise-200m-through-private-placements/

MicroCapital.org: “MICROCAPITAL BRIEF: SKS Microfinance Reconsidering Business Strategy to Rebuild Reputation”, June 14, 2011, http://www.microcapital.org/microcapital-brief-sks-microfinance-reconsidering-business-strategy-to-rebuild-reputation/

MicroCapital’s Universe Profile: SKS Microfinance, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance

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