Akula Vikram K.
Organization: SKS Microfinance
Year Founded: 1998
Country: India
Website: www.sksindia.com
Video Video Interview SKS Microfinance empowers India’s poor, especially in rural areas, to become economically self-reliant through access to financial services. Focus: Microfinance, Technology Geographic Area of Impact: India Model: Social Business Number of Direct Beneficiaries: 5.3 million (2009) Percentage Earned Revenue: 100% Recognition: Schwab Fellow of the World Economic Forum, SEOY 2006 India Background The commercial banking sector in India has traditionally avoided lending to the poor, deeming them risky and unprofitable due to lack of collateral and the high transaction costs of small loans. This has led hundreds of millions to either turn to exploitative moneylenders who charge as much as 72% interest or to suffer without capital. The Grameen Bank model of group lending has largely overcome the risk problem by demonstrating that group guarantors can ensure high repayment. However, high transaction costs have long remained a challenge to growth. To date, most Indian microfinance institutions have not been able to significantly scale their operations and reach a large population group across different states. Innovation and Activities SKS Microfinance applies global business best practices to the field of microfinance. It was launched to address a fundamental flaw in microfinance, namely, the inability to scale to large numbers. SKS has overcome this challenge by applying three innovative principles: using a profit-oriented model to overcome capital constraints; leveraging best practices for scaling from the business world to overcome capacity constraint; and using technology to automate processes and lower costs. SKS’ commercial model has led to sustained growth rates of more than 128% and attracted major equity investments from premier venture capitalists, including Vinod Khosla, founder of Sun Microsystems, and Sequoia Capital. This, in turn, has led to the ability to leverage debt from banks. As of November 2009, SKS had US$ 641 million worth of outstanding loans to more than 5.3 million poor women. Since inception, it has disbursed more than US$ 2 billion in microloans. SKS also provides emergency loans at no interest and offers loan insurance at 2% of the loan amount to members. In 2008 it launched micro-insurance services with Indian partner Bajaj Allianz. From training field agents to streamlining data entry, SKS has created standardized operations that can be widely scaled. SKS also automates microfinance through technology in the back office and the field. Rather than relying on paper collection sheets and manually entering data in ledgers, SKS created its own automated Management Information System (MIS). Its user-friendly technology allows field staff with just a high school education to manage the system independently. Subsequently, a loan officer can handle as many as 1,000 customers with a portfolio of 3 to 5 million rupees – a standard unheard of in microfinance. The Entrepreneur Vikram Akula was born in Hyderabad and moved to the US when he was three years old. He witnessed India’s poverty on numerous family visits to India and made a promise to himself to do something to eradicate poverty. After college, he returned to India and worked as a community organizer with an Indian non-profit. During this time, he realized the most important initiative for the poor was economic development. Feeling that the microfinance sector was not scaling rapidly enough, he launched SKS. Vikram is a former management consultant with McKinsey & Company and has over a decade of work and research experience in microfinance. He holds a BA from Tufts and an MA from Yale. His PhD dissertation from the University of Chicago focused on the impact of microfinance. In 2006, Vikram was named by TIME Magazine as one of the world’s 100 most influential people. SKS Microfinance is a recipient of the Grameen Foundation USA Excellence Award, CGAP Pro-Poor Innovation Award, and Digital Partners SEL Award.
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