A recent Business Standard article discusses the evolution of Indian microfinance institutions (MFI) SKS Microfinance, which had an initial public offering (IPO) in 2011. The article details the for-profit company’s genesis and how it came to be one of India’s fastest growing micro lenders. In recent years, SKS has faced significant criticism over its rapid growth strategy, which critics say, takes advantage of the poor and only offers them new loans to pay back older debts. The company’s founder, Vikram Akula, has since stepped down and is transitioning to a career in mobile banking.

Vikram Akula was the golden boy of microfinance when he launched his company SKS. How did things go so horribly wrong?

The story of Vikram Akula is almost like a classic Greek tragedy with epic peaks, troughs and betrayals that could easily make up a Hollywood movie. Akula remains a controversial character, whose very name incites admiration and criticism in equal measure. Some say that he gave birth to the microfinance industry as we know it in India. Others say that his model of lending, pioneered by his company SKS Microfinance, gave birth to an almost unquenchable thirst for profit, driven by a business model that has no place in ameliorating the state of the poor in India. Regardless of how people feel, one thing remains clear: Microfinance will never be the same without him.

Around a week ago, SKS reported that Vikram Akula stepped down as Chairman of SKS in order to pursue a career in mobile banking. However, all indications suggest that there was something entirely different going on in the company. The seed of dissent at SKS became public, when last year Akula sacked CEO Suresh Gurumani, who was brought in SKS to give it a corporate identity. It is believed, Gurumani wanted to deviate from the traditional MFI model, and replicate a modern-day technology-driven retail banking structure in SKS.


  • The year 2010 saw the highest Private Equity Investments in microfinance with 22 deals worth Rs 632 crore. However, post-October 2010, there have been only five private equity deals worth Rs 180.6 crore
  • Indian MFIs witnessed an extraordinarily high growth rate from 2004-2009 of 91 per cent in number of clients and 107 per cent in terms of the outstanding portfolio size. In a later report, MFIN stated that the total amount of new lending for November 2010-March period was Rs  2 crore as compared to about Rs 3,000 crore in the same period a year earlier
  • Recovery dropped from 100 per cent prior to October 2010 to less than 5 per cent in the last one year in Andhra Pradesh

To understand what was happening in SKS recently, one has to take a peek at data from Bombay Stock Exchange which reveals that as of September 2011, Indian promoters held just 11.55 per cent stake in the company, while foreign promoters held a 25.29 per cent stake. The public held 63.16 per cent. In other words, promoters have, in effect, little control over SKS on Monday. Data from SKS website shows that Akula has no shareholding as a promoter in SKS but still wanted to steer the ship that he had built from scratch. “The company was making huge losses, and investors were not getting returns as promised. They obviously didn’t like Akula’s intervention in running SKS, even when his stake was negligible, while he felt that the company’s achievements were to his credits and its failures were someone else’s fault,” said an industry insider who prefers to remain anonymous.

Ultimately, the institutional investors whom Akula inducted into SKS with much fanfare, proved to be the Frankenstein’s monster that ousted him. Sources say that Paresh Patel is the CEO of Sandstone Capital and Sumir Chadha, Managing Director of WestBridge formerly Sequoia Capital, both of whom are SKS board members, were the most vociferous against Akula in the last board meeting. (Both Patel and Chanda could not be reached for comments.) “The company needs a strategic redirection, and we will announce the plans soon,” said Dilli Raj, Chief finance officer, SKS, as an explanation.

But the sharpest critic of Akula is his ex-wife and co-founder of SKS, Malini Byanna who has accused him of a whole host of questionable practices related to SKS. Akula refused to talk to Business Standard, except to say, “I am legally advised that I am not in a position to discuss, comment on, or respond to your queries. Consequently, I regret my inability to respond to your questions beyond saying “I am unable to comment.”

How could a ‘golden boy’ of a promising industry purportedly offering succour to the masses in the form of loans that sidestepped usurious moneylenders who held rural India to ransom, fall from grace so quickly?

It was 1995, when, Akula, a Fullbright scholor, and a researcher in poverty, travelled to remote villages in a motorbike meeting with borrowers, disbursing micro loans, and collecting repayments for the non-pro·t organisation, Deccan Development Society. In his book, A Fistful of Rice, Akula describes himself as an “idealist student” then, taken aback by poverty in India. “The degree of poverty in these remote Indian villages was unlike anything I’d ever seen in the United States. Children with spindly legs and hungry eyes played in the mud alongside mangy stray dogs and farm animals…But I felt like I was really making a difference, really helping to end poverty in India.” he says in his book. In fact, Akula’s upbringing validates his perception about deprivation, though more than a decade of MFI profusion, and hungry eyes and spindly legs have not vanished. Having grown up in New York, and educated at Tufts, Yale and University of Chicago, Akula was better suited as an academic who coined the term “goat economics” or profit-oriented MFI model.