SKS Microfinance Chairman Vikram Akula resigns

Akula's decision is said to have been voluntary, and he will remain at the company as a consultant until March 2012 while independent board member P.H. Ravikumar, formerly CEO of India's National Commodity & Derivatives Exchange, transitions into the top role. Akula, who signed a non-compete agreement with SKS, stated that he will become involved in a "mobile banking initiative" unrelated to SKS in his next role.

SKS is considered one of the world's first microfinance institutions (MFIs), and was the darling of the MFI world when it launched its $350 million IPO in August 2010. It continues to remain the only listed MFI in India.

Akula launched SKS in 1997 in Andhra Pradesh, which has since become the world's leading microlending region, targeting small-scale loans to women. It fell from grace last year after news surfaced that a spate borrowers in Andhra Pradesh commit suicide, allegedly after being hounded by their lenders - one whom was said to be a borrower from SKS. The event led Indian regulators to introduce measures to curb over-aggressive debt collecting procedures by MFIs.

The scandal had a marked effect on India's microfinance sector, stymieing investment into the space. SKS - which raised $350 million in its August 2010 IPO - saw its share value drop nearly 80%. Reports earlier this month found that SKS' loan book decreased from approximately INR50 billion ($956.8 million) in September 2010 to INR34.5 billion in June. Loans to residents of Andhra Pradesh account for 37.5% of SKS' portfolio, a rise from 26% last year. The New York Times reported that about 90% of borrowers in the region stopped repaying loans late last year.

The events prompted SKS' board earlier this month to approve a motion to raise an additional INR9 billion through a share sale to private institutional investors, and gave approval to raise its authorized capital from INR950 million to INR1.35 billion. The capital will be used to write off loans at the quarter's end and grow its own loan book.

SKS has not been alone in financial struggles, given that investors have largely strayed away from the sector. However, in early August, news of IFC's interest in Bandhan sparked interest among observers keen to determine if capital would begin to flow back into the sector.

This case was bolstered this week, as Belgium-based private equity investor Incofin bought an approximate 25% stake in MFI and non-banking finance company (NBFC) Arman Financial Services, The Business Standard reported Thursday. The transaction is valued at INR15 million.

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• Topics
• South Asia
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• India
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• regulation