Letters: The curious case of microfinance

Things seem quite murky and opaque with SKS Microfinance, one of the largest microfinance institutions (MFIs). The CEO has been summarily dismissed and founder Vikram Akula has again made it to the headlines. SKS has clarified through the press its own version of the entire matter, which is not straightforward. It repeatedly talks about “the directors present, or otherwise participating in the meeting”. This indicates that the board meeting was not physically attended by all the directors, as corporate governance would demand, when such an important decision as removing the managing director and CEO of the company was being taken.

What is more interesting, though paradoxical, is what Akula says in an interview to one of the leading financial weeklies in August this year: “I have never had control over the company in the conventional sense of the term... I want SKS to be able to put as much money in the hands of as many poor women as possible. In doing that, at every stage, I have tried to bring in people who are smarter than me. I am not a banker. So, I brought in people who were. Suresh Gurumani, the CEO, came from Barclays… I can now focus on the things that I am good at, which are strategy, products and expansion. The style is not dictatorial. We all debate and then we reach a consensus. I believe in the wisdom of teams.” Why then the volte-face?

The financial markets have been quite wary of the way some MFIs are proliferating and some people have even predicted a big bubble in the not-so-distant future. It is no longer a secret that many poor people have taken loans from a number of MFIs and are in a grave debt trap. MFI managements do not appear to be too concerned about that as long as they get their pie. Some of them are hoping to become commercial banks, with the new policy of the Reserve Bank of India to offer banking licences. Caution, therefore, is the buzzword.

S Ravindranath, New Delhi