Saturday, October 16, 2010

Microfinance shenanigans

Microfinance institutions exist only because commercal banks have abdicated their responsiblity to extend productive loans to the economically poor. Insistence on collateral security makes bank loans non est for the underprivileged. MFIs utilise this opportunity to make predatory loans to weaker sections of society.

Dr.Vikram Akola, the controversial executive chairman of SKS Microfinance has now claimed that his company is ready to cut lending rates by 2% from the present 26%  SKS has come under spotlight on account of its hugely successful IPO and subsequent dubious ouster of its CEO, Suresh Gurumani. Unable to bear the strong-arm methods adopted by SKS and similar MFIs, more than 25 penurious persons have committed suicide in Andhra Pradesh in the recent past.

N.R.Narayana Murthy's venture capital fund, Catamaran has invested in SKS Microfinance. He has so far abstained from commenting on alleged corporate malpractices in SKS. Vikram Akola claims that Gurumani was sacked due to inter-personal issues between Gurumani and other members of the Board. His refusal to clarify what these issues are has rendered the ouster episode intriguing. Suresh Gurumani was earlier associated with the Standard Chartered Bank and Barclay's Bank. Akola was working for Mckinsey for some time. His book "A Fistful of Rice: My unexpected quest to end poverty through profitability" wll soon be published by Harvard Business Press.

In the meanwhile, Malini M.Byanna, the former wife of Vikram Akula has alleged that the latter had misused SKS corporate resources to terrorise her. If the allegations are true, corporate governance has received yet another mortal blow. Is Vikram Akula a Ramalinga Raju in the making ?

1 comment:

Anonymous said...

I agree that MFIs thrive only because our commercial banks have failed to provide meaningful assistance to the poor. Even now it is not too late. GOI and RBI should introspect what they can do to retrieve the situation. We do not know how much our economy is losing every day in not enabling the talented poor to contribute to society.