SKS makes Microfinancing easier

GROWING FAST: Leading venture capitalists like Sequoia that has invested Rs 50 crore in SKS.

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Mumbai: Six lakh women borrowers spread across more than 7, 000 villages in 11 states of India have Vikram Akula’s SKS Microfanance to thank for a new life.

SKS is now one of the fastest growing Microfinance institutions in the world.

The company grew by 160 per cent with a 99 per cent on-time repayment rate last year, which can be the envy of many mainstream banks.

Now this model is attracting leading venture capitalists including Sequoia that has invested Rs 50 crore in SKS.

“SKS is unique because we use three things to overcome the problem of scaling. Number one is using for profit model to access capital. Number two is to use business practises from fortune 500 companies to scale extremely fast and to use technology. These three things have helped us a new generation MFI to have the fastest growth rates,” says Akula who is the founder and CEO of SKS Microfinance.

The new capital will go towards providing financial services to over five million poor families by 2010.

However, the market is still largely unexplored because research shows $55 billion will be needed to pull India's 400 million rural poor from below the poverty line.

“We are focussed on long term strategic value that SKS will basically create with a fantastic brand, strong set of people and set of products and services that they will be able to sell into the rural markets of India,” says operating partner, Sequoia Capital India, Mohit Bhatnagar.

“Established markets never took poor people seriously. They neglected the obvious business opportunity. The larger banks and some of the larger institutions have not gone into this business systematically. This creates an opportunity for an entrepreneur like Vikram and acompany like SKS,” adds Director, Unitus Equity Fund, Chris Brookfield.

Akula has won a string of national and international awards for making easy finance available to the rural poor.

And his next goal is to bring down the borrowing cost for the rural poor from the average 25 per cent that his company charges to a manageable 18 per cent in the next couple of years.