In August 2010, investors rushed to buy shares in a company that lent tiny sums to poor women. Three months later, the same company was fighting for survival.
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Indian Economy · IndEco0194
Vikram Akula
SKS Microfinance’s Rise and the Andhra Pradesh Crisis
Dec 1997
Akula returns to India and founds Swayam Krishi Sangam (SKS) as a non-profit microfinance body.
Aug 2010
SKS Microfinance lists on the BSE in India’s first microfinance IPO, oversubscribed nearly 14 times.
15 Oct 2010
Andhra Pradesh‘s microfinance Ordinance takes effect, freezing lending and recovery sector-wide.
Nov 2011
Akula resigns as SKS Microfinance’s Executive Chairman, after a large quarterly loss.
From IPO High To Resignation In 15 Months
SKS Microfinance’s record IPO in August 2010 was India’s biggest microfinance success story. Just 15 months later, its founder had resigned, and the company was fighting to recover ₹1,400 crore in frozen loans.
Must Know
- Vikram Akula was born on 7 November 1968, in Ryakal village, Medak district, in present-day Telangana.
- He grew up in the United States. He studied at Tufts University, Yale University, and the University of Chicago, completing a PhD there in 2004.
- In December 1997, he returned to India and founded Swayam Krishi Sangam (SKS), initially as a non-profit microfinance organisation.
- In 2005, SKS converted into a for-profit company, SKS Microfinance, giving small loans mainly to poor rural women. This made it an NBFC-MFI, the private, for-profit channel of Indian microfinance — distinct from NABARD’s bank-linked SHG model.
- Under Akula, SKS grew to a peak of 7.3 million active borrowers by 2010-11. Over its history, it disbursed more than $5 billion in loans.
Good to Know
- In August 2010, SKS Microfinance held India’s first microfinance IPO, on the Bombay Stock Exchange. It raised about $350 million (₹1,650 crore), and was oversubscribed nearly 14 times.
- Soon after, a crisis hit India’s microfinance sector, centred on Andhra Pradesh, its largest market. The state government cited widespread borrower distress, including reported suicides, as grounds for tighter regulation.
- The Andhra Pradesh government responded with an Ordinance, effective 15 October 2010. It required microfinance lenders to register with the state, capped multiple loans to the same borrower, and penalised coercive loan recovery.
- The Ordinance froze lending and recovery across the sector. SKS Microfinance alone could not recover an estimated ₹1,400 crore in loans, and its share price fell sharply from its September 2010 peak.
- In November 2011, Akula resigned as SKS Microfinance’s Executive Chairman, after the company reported a large quarterly loss. He remained a consultant to the company until March 2012.
Test Yourself
Great to Know
- In 2006, TIME magazine named Akula one of its 100 Most Influential People in the World, for his work in microfinance.
- The same year, he received the Schwab Social Entrepreneur of the Year award, and an EY Entrepreneur of the Year award in India.
- He wrote a book about SKS’s rise, “A Fistful of Rice: My Unexpected Quest to End Poverty Through Profitability,” published by Harvard Business Press in 2010.
- In 2014, Akula founded Vaya Finserv, a company that provides financial services to low-income groups on behalf of partner banks, marking his return to the microfinance sector.
- Akula’s career reflects a broader debate in Indian development policy: whether market-driven, for-profit models can serve the poor responsibly, or whether they risk the same predatory pressures as informal moneylending.
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