The Indian Supreme Court has issued an interim order allowing Indian microfinance institution (MFI) SKS Microfinance to operate in the state of Andhra Pradesh without securing no-objection certificates from the state government. The order relates to the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Ordinance of 2010, which required all MFIs to obtain such certificates from the state government and any co-borrowers of the self-help group receiving the loan. The Supreme Court order also allows SKS to recover loans on a weekly basis, rather than the monthly basis mandated by the ordinance. Other aspects of the 2010 law will still stand, however, such as that the interest payable on a loan must not exceed its principal and SKS being prohibited from using collections methods deemed coercive.
The order came about as a result of a petition filed by SKS to appeal the 2010 Andhra Pradesh law, which has been credited with triggering a major slowdown in microfinance operations in the region. The order is restricted to SKS only as it is the filer of the petition.
As of September 30, 2012, SKS reported total assets of USD 354 million and a gross loan portfolio of USD 250 million disbursed to approximately 3.9 million borrowers. As of March 2012, SKS reported return on assets (ROA) of -45.8 percent and return on equity (ROE) of -111 percent. SKS does not accept deposits.
By Nicole Boyd, Research Associate
About SKS Microfinance
SKS Microfinance is a for-profit microfinance institution (MFI) that was launched in 1998. SKS converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. It since diversified into offering gold loans and microinsurance services. As of September 30, 2012, SKS reported total assets of USD 354 million and a gross loan portfolio of USD 250 million disbursed to approximately 3.9 million borrowers. As of March 2012, SKS reported return on assets (ROA) of -45.8 percent and return on equity (ROE) of -111 percent. SKS does not accept deposits. SKS trades on the Bombay Stock Exchange and India’s National Stock Exchange.
Sources and Additional Resources:
Business Standard. “SC interim order provides relief to SKS Microfinance,” http://www.business-standard.com/article/finance/sc-interim-order-provides-relief-to-sks-microfinance-113031800439_1.html
MicroCapital. February 27, 2013, “MICROCAPITAL BRIEF: SKS Microfinance May Challenge Andhra Pradesh Ruling in Supreme Court,” https://www.microcapital.org/microcapital-brief-sks-microfinance-may-challenge-andhra-pradesh-ruling-in-supreme-court/
MicroCapital story, February 20, 2013, “MICROCAPITAL BRIEF: High Court of Indian State Andhra Pradesh Upholds Microfinance State Law, Rejecting Microlenders’ Petition,” https://www.microcapital.org/microcapital-brief-high-court-of-indian-state-of-andhra-pradesh-upholds-microfinance-state-law-rejecting-microlenders-petitions/
MicroCapital story, February 12, 2013, “MICROCAPITAL BRIEF: Microfinance institutions (MFIs) in India’s Andhra Pradesh Face Difficulties Even After Loan Restructuring, “Survival of MFIs” Said to Hang on Court Decision Regarding State Law,” https://www.microcapital.org/microcapital-brief-microfinance-institutions-mfis-in-indias-andhra-pradesh-face-difficulties-even-after-loan-restructuring-survival-of-mfis-said-to-hang-on-court-decision-regar/
MicroCapital. May 23, 2013. “MICROCAPITAL BRIEF: Supreme Court Schedules Hearing on Petition Filed by SKS Microfinance Against Over Regulation of Moneylending Act of India’s State of Andhra Pradesh,” https://www.microcapital.org/microcapital-brief-supreme-court-schedules-hearing-on-petition-files-by-sks-microfinance-against-over-regulation-of-moneylending-act-of-indias-state-of-andhra-pradesh/
MicroCapital story, October 11, 2011, “MICROCAPITAL BRIEF: Supreme Court of India Sends SKS Back to Andhra Pradesh High Court to Challenge Microfinance (Regulation of Moneylending) Act of 2010,” https://www.microcapital.org/microcapital-brief-supreme-court-of-india-sends-sks-back-to-andhra-pradesh-high-court-to-challenge-microfinance-regulation-of-moneylending-act-of-2010/
MicroCapital. May 10, 2011. “MICROFINANCE PAPER WRAP-UP: Microfinance in India – A Crisis at the Bottom of the Pyramid; Published by Legatum Ventures,” https://www.microcapital.org/microfinance-paper-wrap-up-microfinance-in-india-a-crisis-at-the-bottom-of-the-pyramid-published-by-legatum-ventures/
December 21, 2010. “MICROCAPITAL BRIEF: Microfinance Experts Say ‘Microcredit Is Not The Enemy,’” https://www.microcapital.org/microcapital-brief-microfinance-experts-say-microcredit-is-not-the-enemy/
MicroCapital Universe Profile: SKS Microfinance https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
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