SKS Microfinance has recently filed to raise up to USD 250 million in an initial public offering (IPO), as initially reported by MicroCapital on March 9, 2010. The pending IPO, to be offered on the Bombay Stock Exchange and the National Stock Exchange of India, would be the first public offering for an Indian microlender and is resulting in debate about the future of funding microfinance institutions.
There are several factors which could contribute to the commercial viability of microfinance. First, the industry has been experiencing significant growth and profitability. In India, microlending increased at an estimated 45 percent for the fiscal year ended March 2010. For private equity investors, the investment opportunity could appear attractive due to the high demand for microfinance products, growth in the industry and high interest rates and repayment rates for microloans.
However, the potential pressure by public investors to focus on profitability has been a source of conflict. Motivation for profits by investors, it has been argued, can encourage the exploitation of poor communities through higher interest rates or the bypassing of impoverished borrowers in order to seek customers that are perceived to be more profitable.
By Jennifer Shevock, Research Associate
About SKS Microfinance:
SKS Microfinance is an Indian microlender and delivers microfinance products through a group lending model to impoverished women in India. It is a for-profit non-banking finance company which converted to a public limited company in May 2009. Equity investors include Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. Its total assets as of March 31, 2009, were USD 596 million with 3.5 million active borrowers, and it reported return on assets of 3.68 percent and return on equity of 18.72 percent.
Sources and Additional Resources:
“The Start of a Megatrend” May 31, 2010. http://www.thesundaily.com/article.cfm?id=47335
MICROCAPITAL BRIEF: “Initial Public Offering (IPO) of India-based Microfinance Institution (MFI) SKS Microfinance Raises Questions about Ethics within the Industry” April 13, 2010. https://www.microcapital.org/microcapital-brief-initial-public-offering-ipo-of-india-based-microfinance-institution-mfi-sks-microfinance-raises-questions-about-ethics-within-the-industry/
MICROCAPITAL BRIEF: “MICROCAPITAL BRIEF: SKS Microfinance, a Microfinance Institution (MFI) Based in India, Expected to File for Initial Public Offering (IPO) in Next Four Weeks
” March 9, 2010. https://www.microcapital.org/microcapital-brief-sks-microfinance-a-microfinance-institution-mfi-based-in-india-expected-to-file-for-initial-public-offering-ipo-in-next-four-weeks/#more-4531
MICROCAPITAL STORY: “SKS Microfinance Plans for India’s First Microfinance Institution’s (MFI) Initial Public Offering (IPO), Managed by Citigroup, Credit Suisse and Kotak Mahindra Capital”
October 12, 2009. https://www.microcapital.org/microcapitalorg-story-sks-microfinance-plans-for-india%E2%80%99s-first-microfinance-institution%E2%80%99s-mfi-initial-public-offering-ipo-managed-by-citigroup-credit-suisse-and-kotak-mahindra/#more-3815
MICROCAPITAL STORY: https://www.microcapital.org/microcapital-story-sks-microfinance-raises-754m-in-equity-capital-in-transaction-led-by-sandstone-capital/
“A Microfinance IPO in India” May 6, 2010. http://www.businessweek.com/magazine/content/10_20/b4178016201790.htm
MICROCAPITAL UNIVERSE: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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