MICROCAPITAL BRIEF: Internal Documents Collected by Associated Press Implicate SKS Microfinance Staff in Borrower Suicides in Andhra Pradesh, India

Data collected by the Associated Press, a US-based news agency, reportedly implies that top officials of Indian microlender SKS Microfinance have had information implicating company employees in some of the approximately 200 suicides that were reported among poor and debt-ridden residents of the Andhra Pradesh region of India in late 2010. The data includes internal documents, videotaped testimony, and personal interviews with current and former employees of SKS and families of the dead [1].

The reports indicate that over-indebted borrowers were harassed and humiliated, forced to pawn off precious valuables, and in some cases were physically harassed. Some observers have raised the concern that the structure of the microfinance system is encouraging over-indebtedness and causing poor borrowers to take extreme measures. In one case, a woman died after drinking pesticides when an SKS loan agent reportedly told her to prostitute her daughters to pay off her debt. She had INR 150,000 (USD 3,000) in loans, and income of INR 600 (USD 12) per week. SKS publicly denies these accusations [1].

In the quarter ending December 31, 2011, SKS and net losses of INR 4.28 billion (USD 85.3 million). In the quarter ending December 31, 2010, SKS had a net profit of INR 342 million (USD 6.9 million) [2].

By Natalie Baer, Research Associate

About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998. It delivers microfinance products through a group-lending model to impoverished women in India as a for-profit, non-banking finance company. SKS converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Its equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. SKS currently trades on the Bombay Stock Exchange. According to 2010 data from the US-based nonprofit data provider Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 1.2 billion, a gross loan portfolio of USD 1.2 billion, approximately 6.6 million borrowers, return on assets (ROA) of 6.3 percent and return on equity (ROE) of 22.4 percent.

Sources and Additional Resources:

[1] AP IMPACT: Lender’s own probe links it to suicides http://www.google.com/hostednews/ap/article/ALeqM5gDjptsjS04qJ7t9gznWHrYZPY-3A?docId=5056de875ffb4d24a29ab958dda94dd6

[2] MicroCapital story, February 21, 2012, “MICROCAPITAL BRIEF: SKS Suffers $85m Loss as Norway’s Government Pension Fund – Global Buys 1% Stake” https://www.microcapital.org/microcapital-brief-sks-suffers-85m-loss-as-norways-government-pension-fund-global-buys-1-stake/

MicroCapital story, November 15, 2010, “MICROCAPITAL BRIEF: India’s Microfinance Industry on Brink of “Collapse” Due to Credit Freeze in State of Andhra Pradesh” https://www.microcapital.org/microcapital-brief-indias-microfinance-industry-on-brink-of-collapse-due-to-credit-freeze-in-state-of-andhra-pradesh/

MicroCapital story, July 8, 2011, “MICROCAPITAL BRIEF: Microfinance Institutions in India Continue to Struggle for Funding After Loan Recast, Adoption of Malegam Proposals” https://www.microcapital.org/microcapital-brief-microfinance-institutions-in-india-continue-to-struggle-for-funding-after-loan-recast-adoption-of-malegam-proposals/

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