SKS Microfinance: Managing Growth and Continuity of a Social Enterprise

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Case Details:

Case Code : LDEN073
Case Length : 25 Pages
Period : 2009-2010
Pub Date : 2011
Teaching Note : Available
Organization : SKS Microfinance.
Industry : Microfinance
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The conventional view of microfinance is that it is a social business and there should be no profit and no loss. We have a very different view at SKS. Our view is that if you have to tap into $55 billion (the annual credit requirement in India considering there are 150 million poor households that need credit), you are not going to get from social investors but from commercial capital markets and by being profitable and we’re now a for-profit finance company and our goal is to be profitable."¹

- Vikram Akula, Chairman and Founder of SKS Microfinance, in 2008.

Introduction

In April 2010, SKS Microfinance Ltd. (SKS), the leading Microfinance Institution (MFI) in India, announced that it planned to raise about US$350 million by selling 6.8 million equity shares through an Initial Public Offering (IPO). The decision sparked a hot debate on the subject of profit vs. altruism in the case of MFIs. This was because MFIs are considered as "social enterprises" which provide financial support in the form of small loans to the millions of poor people in the developing countries. One of the vehement critics of SKS's decision was Muhammad Yunus (Yunus), the Nobel Laureate who founded the Grameen Bank. Yunus strongly opposed SKS's decision saying it was a "mission drift" from doing social good.

But Vikram Akula (Akula), the 41-year-old Indian-American founder of SKS, maintained that he firmly believed that a for-profit model in microfinance was essential in India to reach out to the 150 million poor as quickly as possible.

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1] Vikram Akula, "God of Small Credit," Business Today, January 13, 2008.


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