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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Though there have been attempts by governments of developing countries to find alternatives for financing the rural poor through the state-run banks, it is observed thatmost of such attempts have been disastrous. However, organisations extendingmicrocredit without collateral have successfully emerged as an alternative to the government channels of aiding the rural poor.ACCION International, a not-for-profit organisation, was the first to makemicrocredit available in Brazil in 1973.However, themost notablemicrocredit institutionwasGrameenBank that started providing microcredit to women in small help groups in 1976 TheGrameenModel [Exhibit III] of providingmicrocreditwas successful and led to development of otherMFIs around theworld.According toTheMicrocredit SummitCampaign “as of December 31st 2004, 3,164microcredit institutions have reported reaching 92,270,289 clients, 66,614,871 of whom were among the poorest when they took their first loan. Assuming five persons per family, the 66.6million poorest clients reached by the end of 2004 affected some 333million family members.” India [Exhibit IV] has the largest number of poor people in the world and has seen a steady growth ofMFIs.

According to The Economist, “demand for loans frompoor but creditworthy people in India could amount to $40 billion, 40 times the current supply.” According to BASIX, “India is perhaps the largest emerging market for microfinance.” Though there has been a steady growth of the Indianmicrofinance sector since the 1990s, it has been observed that noMFI in India has reached the scale of the well-known BangladeshiMFIs. The sector in India is characterised by a wide diversity ofmethodologies and legal formalities. The Indian government has revamped the regulations to increase the popularity of microlending by allowing rural organisations to act as agents for banks and there have been demands to bring sustainability to themicrofinancing sector.Ashok Sharma, a director of theAsian DevelopmentBank, said, “After so many years, there is a bit of donor fatigue and everyone wantsmicrofinance institutions to stand up on their own feet.” According to BASIX, “very few Indian MFIs have achieved sustainability yet.”

There has been an active involvement of different service providers [ExhibitV]who use differentways [ExhibitsVI andVII] ofworkingwith groups.SomeMFIs are using theSelfHelpGroup (SHGs) while some are replicating the GrameenModel. SomeMFIs are employing the individual banking approachwhile some are partnering at the local level to provide support to specific economic sectors like fishing, handlooms, and dairy.SKSwas one such provider ofmicrocredit thatwas promoted by Akula.

Vikram Akula: The Driving Force Behind SKS

Akula's family had migrated from India to the US when he was three years old. Son of a surgeon, Akula grew up in Schenectady, upstate NewYork. His first realisation of the poverty in India was at the age of seven, when he was on a visit to his aunt's house at Hyderabad, India. He said, “A street hawker came in to sell us pots. She was dressed in a torn saree and had a son ofmy age, who was also dressed in rags.As children tend to do, wemade eye contact and sort ofmade a connection. I distinctly remember this woman dropping a fewgrains of rice on the floor and kneeling down to press her finger into each and every grain and pick up those single grains one-by one. It was then that I realised what povertywas.” Next, while visitingHyderabad at the age of 10 years to attend a family wedding celebration, hewas haunted bymemories of “local boys his age scraping the leftover rice and gravy off abandoned dinner plates.”Akula said, “It was extremely jarring to see this in the summer, then in the fall go back to a suburb in upstate New York.”He finished graduate school at Yale University in 1995 and returned to India as a community organiser for government-and charity-backed microfinance institutions in India,wherein he developed the resolve to do something significant to eradicate poverty in India.Akula said, “Iwas overwhelmed to see the contrast between Indian villages and theUS.” He also worked with McKinsey & Company in Chicago for a year before quitting the job and returning to India. Commenting on his decision to quit and return to India, he said, “It was not hard to make the decision as I love India. But I miss the high-energy work culture that I experienced in Chicago. I have tried to replicate some of that culture here.” The work in India exposed Akula to the importance of small loans in the life of the poor villagers and the problems associated with the standard model.

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