While most microfinance institutions in India and even globally do not have even a total of 100,000 clients, SKS Microfinance last year was adding 100,000 new clients each week. But the scene has changed dramatically for the worse since then. In an interview to E. Kumar Sharma, Founder and Chairman of SKS Microfinance, Vikram Akula, says: "We have stopped acquiring new clients. Our focus is on our existing clients and bridging the gap created by other MFIs." Edited excerpts:
Q. You must be disappointed with SKS Microfinance's fourth quarter results. Who is to blame?
A. It is a disappointment. But we are hopeful because it is really externally driven and does not in any way reflect any fundamental flaw in our model. SKS has now moved the Supreme Court (on the Andhra Pradesh ordinance putting restrictions on MFIs).
Q. Is it only external factors?
A. Look at our performance in the other 18 states of the country, where we do not face political challenges. Out of a total of 379 districts where we operate, we have an average repayment rate of 96 per cent everywhere, except for the 23 districts of Andhra Pradesh. That is why we feel this is a one-off problem and not a systemic issue.
Q. Why have you said the next two quarters will be painful?
A. By October 15, our total portfolio will be one-year-old (the ordinance was passed last October). Every single outstanding amount will become due and we will get a clear picture of the repayment [scenario] for the one-year loans (a typical MFI loan has to be repaid in 50 weeks).
Q. You talk of giving gold loans. But that is not what your loan officers are trained for. Will you re-orient your staff or seek outside help?
A. We will be looking at outside recruitment for this. There will be a separate branch and separate staff co-located with our existing staff.
Q. What sort of pressures do an IPO put on growth strategy in a sector like yours?
A. None. If at all, the IPO has helped us. We are sitting on cash and capital that is extremely important to survive today. Because of the IPO, we are in a strong position with about Rs 550 crore in cash or liquid assets and a net worth of Rs 1,800 crore.
Q. What is your outlook for the short to medium term?
A. The short term will be challenging, the medium term will see stability; in the long term, we'll get back to our robust commercial operations.
Full transcript of the interview at www.businesstoday.in/akula