Vikram Akula, chairman of SKS Microfinance, a for-profit microfinance institution (MFI) in India, has stated that the recommendations released by the “Malegam Committee” of the Reserve Bank of India (RBI) in response to unrest in microfinance in the Indian state of Andhra Pradesh, would give a boost to the microfinance sector by further encouraging bank lending to MFIs. Mr Akula also stated that the proposed microloan interest rate cap of 24 percent would not impact SKS Microfinance as its lending rate falls below the cap, but that it would impact smaller institutions that are yet to achieve efficiencies of scale. He viewed this recommendation as a measure to encourage consolidation within the sector.
Since the implementation of the Andhra Pradesh Microfinance Institutions Act by the state government in October 2010, SKS Microfinance has disbursed fewer loans. Compared to the same period in 2009, disbursements have fallen by approximately 22 percent for the quarter ending December 2010 [1]. Mr Akula stated that, if the state government failed to recognize the role of RBI as the sole regulator of microfinance, SKS Microfinance might consider further cutting down its operations in the region.
According to 2010 data from the US-based nonprofit data provider Microfinance Information Exchange (MIX), SKS Microfinance reported total assets of USD 1.2 billion, a gross loan portfolio of USD 1.2 billion, approximately 6.6 million borrowers, return on assets (ROA) of 6.3 percent and return on equity (ROE) of 22.4 percent.
By Medha Ravi, Research Associate
About Reserve Bank of India:
Established in 1935, the Reserve Bank of India undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. RBI consists of twenty-two regional offices.
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 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. According to 2010 data from the US-based nonprofit data provider Microfinance Information Exchange (MIX), SKS Microfinance reported total assets of USD 1.2 billion, a gross loan portfolio of USD 1.2 billion, approximately 6.6 million borrowers, return on assets (ROA) of 6.3 percent and return on equity (ROE) of 22.4 percent.
Source and Resources:
[1] Reuters news article, “SKS chairman sees healthy growth if RBI sole regulator”, http://www.reuters.com/article/2011/02/03/idINIndia-54635220110203
The Financial Express news article, “Malegam proposals a big boost for MFIs: SKS”, http://www.financialexpress.com/news/malegam-proposals-a-big-boost-for-mfis-sks/747856/
MicroCapital.org story, February 10, 2011, “MICROCAPITAL BRIEF: SKS Microfinance of India Increases Loan Loss Provision, Reports 38% Fall in Quarterly Net Profit”, https://www.microcapital.org/microcapital-brief-sks-microfinance-of-india-increases-loan-loss-provision-reports-38-fall-in-quarterly-net-profit/
MicroCapital.org story, February 8, 2011, “MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Relaxes Rules in Effort to Ease Microfinance Institution (MFI) Liquidity Crunch”, https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-relaxes-rules-in-effort-to-ease-microfinance-institution-mfi-liquidity-crunch/
MicroCapital’s Microfinance Universe Profile: Reserve Bank of India, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29
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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