MICROCAPITAL BRIEF: SKS Microfinance Announces Interest Rate Slash in India

SKS Microfinance, a for-profit microfinance institution (MFI) in India, has announced a universal cut in “effective” interest rates charged to microfinance borrowers from 26.7 percent to 24.6 percent.

In addition to these cuts, SKS also announced it will no longer charge processing fees, credit shield fees and card fees. However, waiving these charges will mean that SKS will no longer cover unpaid loans or funeral expenses in the event of the death of the borrower.

The rate reduction comes in response to public and government pressure resulting from the recent turmoil in India’s microfinance industry, particularly in the state of Andhra Pradesh, where SKS has a large presence [1,2,3].

By John Howard-Smith, Research Associate

About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI), launched in 1998, 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 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, 2010, SKS Microfinance reported to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, total assets of USD 897 million, a gross loan portfolio of USD 653 million, return on assets of 4.96 percent, return on equity of 21.56 percent and 5.79 million active borrowers.

[1] SKS Microfinance Press Release: “SKS Microfinance Limited announces an effective interest rate of 24.55% (all inclusive) across the country. Credit Shield charge, loan processing fee and card fee waived.”, http://www.sksindia.com/downloads/sks_announces_an_effective_interest_rate_24-55_percent.pdf

[2] Rupee Times: “SKS microfinance slashes interest rates across India”, http://www.rupeetimes.com/news/home_loans/sks_microfinance_slashes_interest_rates_across_india_4768.html

[3] Wall Street Journal: “SKS Microfinance Cuts Lending Rates”, http://online.wsj.com/article/SB10001424052748704428004576074891979583036.html

MicroCapital.org story, December 20, 2010: “MICROCAPITAL BRIEF: ACCESS Development Services of India Releases “State of the Sector Report 2010? Questioning Role of Microfinance Institutions (MFIs) as Responsible Lenders”, https://www.microcapital.org/microcapital-brief-access-development-services-of-india-releases-state-of-the-sector-report-2010-questioning-role-of-microfinance-institutions-mfis-as-responsible-lenders/

MicroCapital.org story, December 17, 2010: “MICROCAPITAL BRIEF: Local Government in Indian State of Andhra Pradesh Considers Additional Microfinance Regulation, Requires Disclosure of Operational Procedures, https://www.microcapital.org/microcapital-brief-local-government-in-indian-state-of-andhra-pradesh-considers-additional-microfinance-regulation-requires-disclosure-of-operational-procedures/

MicroCapital.org story, November 8, 2010: “MICROCAPITAL BRIEF: Five Indian Microfinance Institutions (MFIs) Agree to Cut Interest Rates to 24%”, https://www.microcapital.org/microcapital-brief-five-indian-microfinance-institutions-mfis-agree-to-cut-interest-rates-to-24/

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

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

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