MICROCAPITAL BRIEF: Indian Microfinance Sector Cautious on Branch Expansion, Hiring

Indian microfinance institutions (MFIs) reportedly are still cautious on expanding operations and hiring despite an improving business environment. The industry scaled down existing operations, recruitment and branches after the downturn in Andhra Pradesh, which has been blamed for the default of approximately 9.2 million of 32 million Indian microfinance clients since 2010. India-based MFI Grameen Financial Services Private Limited (Grameen Koota), for example, has limited expansions to existing regions and hiring only to refilling vacant positions. Indian MFI SKS Microfinance has reduced its staff by 31 per cent to 17,845 from 25,735 since December 2011” [1] [2].

For the year 2010, 93 microfinance institutions (MFIs) in India report to the US-based nonprofit Microfinance Information Exchange (MIX) an aggregate gross loan portfolio of USD 5.2 billion outstanding to approximately 31.7 million borrowers and total aggregate deposits of USD 300 million.

By Brendan Millan, Research Associate

About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998. It delivers gold loans and group microloans to impoverished women inIndiaas a for-profit, non-banking finance company. SKS converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Its 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. SKS currently trades on the Bombay Stock Exchange. According to 2011 data from the US-based nonprofit Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66.1 percent and return on equity (ROE) of -152 percent. SKS has raised approximately INR 918 crore (USD 181 million) through securitization deals since January 2012.

About Grameen Financial Services Private Limited (GFSPL): GFSPL, popularly known as Grameen Koota, was founded inIndiain 1999 as a project under the nongovernmental organization T Muniswamappa Trust and today is an independent non-banking financial company (NBFC). GFSPL operates in the Maharashtra, Karnataka and Tamil Nadu states and offers products and services such as housing microfinance, vocational training loans, workshops and educational centers. According to 2010 data from the US-based nonprofit Microfinance Information Exchange (MIX), GFSPL reports total assets of USD 65 million, a gross loan portfolio of USD 56.4 million and approximately 353,000 active borrowers.

Sources and Resources:

[1] The Hindu Business Line: “MFIs still shying away from hiring field staff” by g. Naga Sridhar and Anjana Chandramouly. http://www.thehindubusinessline.com/industry-and-economy/banking/article3258883.ece

[2] Business Standard: “At 9.3 mn, a Third of MFI Borrowers are Defaulters.”, http://business-standard.com/india/news/at-93-mnthirdmfi-borrowersdefaulters/468617/

MicroCapital story, March 27, 2012, “9.2m Microfinance Borrowers in India Have Defaulted Since 2010”, http://www.microcapital.org/microcapital-brief-9-2m-microfinance-borrowers-in-india-have-defaulted-since-2010/

MicroCapital story, March 13, 2012, “Small Industries Development Bank of India (SIDBI) Requires SKS Microfinance to Lend Only Outside Andhra Pradesh”http://www.microcapital.org/microcapital-brief-small-industries-development-bank-of-india-sidbi-requires-sks-microfinance-to-lend-only-outside-andhra-pradesh/

MicroCapital story, February 28, 2012, “76 Criminal Cases Pending Over Alleged Role of Microlenders in Borrower Suicides in India’s Andhra Pradesh” http://www.microcapital.org/microcapital-brief-76-criminal-cases-pending-over-alleged-role-of-microlenders-in-borrower-suicides-in-indias-andhra-pradesh/

MicroCapital story, February 27, 2012, “Internal Documents Collected by Associated Press Implicate SKS Microfinance Staff in Borrower Suicides in Andhra Pradesh, India”http://www.microcapital.org/microcapital-brief-internal-documents-collected-by-associated-press-implicate-sks-microfinance-staff-in-borrower-suicides-in-andhra-pradesh-india/

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

MicroCapital Universe Profile: Grameen Financial Services Private Limited (GFSPL), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Grameen+Financial+Services+Private+Limited

Browse the MicroCapital Universe and add your entry to the wiki at: http://www.microcapital.org/microfinanceuniverse/

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