Vikram Akula's SKS Microfinance Pvt. Ltd.: The Making of a Successful Microfinance Institution

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Vikram Akula's SKS Microfinance Pvt. Ltd.: The Making of a Successful Microfinance Institution

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SKS claims that it, “provides the opportunity for all stakeholders to own a piece of the company and participate in its governance.This includesclients,management,employees andinvestors”41 [Exhibit IX]. SKS has received equity investment fromvarious entrepreneurs and banks. In its first round of equity investment inMarch 2006, SKS received INR 110million ($2.5million)42 from Vinod Khosla43 (Khosla) and other social venture capitalists, SIDBI and SKS' borrower community.44 This dealwas the largest ever investment in amicrofinance institution in India.Commenting on the deal, Khosla said, “I am impressedwith the people and processes at SKSand amconfident that this investmentwill enable themto serve evenmore poor families throughout the country.”45 Other notable investors in SKS were Ravi Reddy (Reddy) and his wife Pratibha Reddy, SandeepTungare (Tungare)46 and Unitus.47 Out of this investment, Khosla contributed INR 21 million ($470,000), while Ravi and Sandeep together contributed INR 21million ($470,000) and Unitus Equity Fund (UEF) invested INR 21 million ($470,000). Reddy, who had supported SKS since its inception, said, “SKS is on the cutting edge ofmicrofinance, deploying state-of-the-art technologies to reduce operational and transaction costs.

This approachwill enable SKS to serve its clientsmore effectively and achieve its ambitious goals.”⁴⁸ SKS borrowers increased their investments in the company from INR 20 million ($450,000) to INR 65 million ($ 1.5 million) and SIDBI expanded its investment from INR 5 million ($112,000) to INR 10 million ($225,000).⁴⁹ Akula said, “We are delighted to have these world-class investors join SKS. They bring deep knowledge of how to scale companies and SKS will benefit tremendously fromthe skills and experience they have.”⁵⁰ It is observed that the purpose of the equity investment was to enable SKS access commercial debt and increase its reach from200,000 clients to 700,000 clients by 2006-2007.⁵¹

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41] http://www.sksindia.com/financialhistory/ownership.htm
42] “Vinod Khosla Leads Historic Rs. 11 crores ($2.5 million) Investment in SKS Microfinance”, http://www.sksindia.com/06march28.htm, March 28th 2006
43] Vinod Khosla was a co-founder of Daisy Systems and founding Chief Executive Officer of Sun Microsystems where he pioneered open systems and commercial RISC processors. He serves on the boards of Agami, eASIC, Indian School of Business, Infinera, Kovio, Metricstream, Spatial Photonics, Xsigo and Zettacore.
44] “Vinod Khosla Leads Historic Rs. 11 crores ($2.5 million) Investment in SKS Microfinance”, op.cit.
45] Ibid.
46] Ravi Reddy and Sundeep Tungare are the Co-Founders of ThinkSystems and Vistaar Technologies
47] Unitus is a non-profit organisation for reduction of global poverty and a microfinance accelerator.
48] “Vinod Khosla Leads Historic Rs. 11 crores ($2.5 million) Investment in SKS Microfinance”, op.cit.
49] Ibid.
50] Ibid.
51] Ibid.