An article in the Financial Times titled, “Microfinancing Spreads Beyond India’s Grassroots,” discusses recent concerns raised by some microfinance experts surrounding the increase in microlending by profit-oriented companies in India.

The article claims that while Indian microlending originally began as a grassroots, nonprofit effort, it is now dominated by for-profit organizations.

“Many of these companies are suffering serious capital constraints, so they and their equity fund investors are closely watching SKS’s forthcoming initial public offering, hoping to follow in its footsteps…. [The World Bank] has warned that rapid expansion and heated market competition could come at the risk of sound credit management – which could lead to regulatory intervention that may choke the industry.”

By Stefanie Rubin, Research Associate

About SKS Microfinance

SKS Microfinance is an Indian microlender that delivers microfinance products through a group lending model to impoverished women in India. It is a for-profit non-banking finance company which converted to a public limited company in May 2009. Equity investors include Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. Its total assets as of March 31, 2009, were USD 596 million with 3.5 million active borrowers, and it reported return on assets of 3.68 percent and return on equity of 18.72 percent.

Additional Resources:

Source Article: The Financial Times: “Microfinancing spreads beyond India’s grassroots,” http://www.ft.com/cms/s/0/30f1632e-9418-11df-a3fe-00144feab49a.html

MICROCAPITAL BRIEF: Microloan Default Risk Rises in India as SKS Microfinance Plans Initial Public Offering (IPO): http://www.microcapital.org/microcapital-brief-microloan-default-risk-rises-in-india-as-sks-microfinance-plans-initial-public-offering-ipo/

MICROCAPITAL BRIEF: India’s SKS Microfinance Sets Price for Pending IPO, Offers Discount to Retail Investors: http://www.microcapital.org/microcapital-brief-india%E2%80%99s-sks-microfinance-sets-price-for-pending-ipo-offers-discount-to-retail-investors/

MicroCapital Universe: SKS Microfinance: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS…

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