Small Industries Development Bank of India (SIDBI), a governmental loan wholesaler to microfinance institutions (MFIs) in India, has reportedly required that SKS Microfinance Limited (SKS), an Indian MFI, use proceeds of a recent SIDBI loan for on-lending outside of the state of Andhra Pradesh [1]. SKS obtained a three-year term loan of INR 1 billion (USD 20.1 million) from SIDBI as was covered by MicroCapital on March 7. According to a condition of the loan, SKS must use the resources outside Andhra Pradesh and particularly in states with low microfinance penetration [1].
SKS, whose business had been concentrated in the state of Andhra Pradesh, has been struggling since the Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act of 2010 prohibited MFIs from collecting weekly loan installments payments from borrowers among other restrictions [2]. SKS’ collection efficiency plummeted to 25 percent in Andhra Pradesh, while collection outside Andhra Pradesh remained at 95 percent [1]. Currently 54 percent of SKS’ gross loan portfolio is in accounts in three Indian states: Andhra Pradesh (30 percent),West Bengal (12.6 percent) and Karnataka (11.6 percent) [1]. According to 2011 data from the US-based nonprofit data provider Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66 percent and return on equity (ROE) of -152 percent.
By Courtney Snelling, Research Associate
About SKS Microfinance Limited: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998. It delivers microfinance products through a group-lending model to impoverished women inIndiaas 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 2011 data from the US-based nonprofit data provider Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66 percent and return on equity (ROE) of -152 percent.
About Small Industries Development Bank of India (SIDBI): The Small Industries Development Bank of India (SIDBI) was established by the Indian Parliament in 1990. SIDBI offers products and services in areas including direct finance, international finance, government subsidy and fixed deposits. Its clients include institutions, investors and entrepreneurs. SIDBI is an active participant in the Indian microfinance sector, where it provides credit and capacity building grants to large- and medium-scale microfinance institutions (MFIs). As of September 30, 2010, SIDBI reported total assets of INR 480 billion (USD 9.75 billion).
Sources and Additional Resources:
[1] Economictimes.indiatimes.com, “Sidbi lends Rs 100 crore to SKS Microfinance with strings attached”, http://articles.economictimes.indiatimes.com/2012-03-07/news/31132239_1_…
[2] Livemint.com, “Sidbi gives Rs.100 crore loan to SKS”, http://www.livemint.com/2012/02/01225052/Sidbi-gives-100-crore-loan-to.h…
[3] TheHinduBusinessLine.com, “SKS Micro’s business outside AP suffers”, http://www.thehindubusinessline.com/industry-and-economy/banking/article…
MicroCapital.org Brief, March 7, 2012, “MICROCAPITAL BRIEF: SKS Microfinance Borrows $20m from Small Industries Development Bank of India (SIDBI), Focuses Efforts Outside Andhra Pradesh”, https://www.microcapital.org/microcapital-brief-sks-microfinance-borrows-…
MicroCapital.org Brief, January 23, 2012, “MICROCAPITAL BRIEF: SKS Microfinance to Further Downsize Workforce Cap Return on Assets at 3 percent”, https://www.microcapital.org/microcapital-brief-sks-microfinance-to-furth…
MicroCapital.org Brief, 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-n…
MicroCapital.org Brief, December 20, 2011, “MICROCAPITAL BRIEF: Stymied by Local Regulation, Microfinance Institutions (MFIs) based in India’s Andhra Pradesh Expand Into Northern States”, https://www.microcapital.org/microcapital-brief-stymied-by-local-regulati…
MicroCapital Universe Profile: SKS Microfinance Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS…
MicroCapital Universe Profile: Small Industries Development Bank of India (SIDBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Sma…
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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