Microfinance industry loses its most visible face

Many will recall a much-hyped IPO (initial public offering) that hit the Indian markets in August last year. It had a quite a few renowned names on its list of investors- George Soros' Quantum (M) Ltd, venture capitalist Vinod Khosla and Infosys founder N R Narayana Murthy. Then things turned sour, the stock tanked and the rest is now history. Any guesses which stock we are talking about? In case you have forgotten, the company was SKS Microfinance, a Mumbai-based micro financing institution and the only listed company in the sector. From a high of Rs 1,151 after the listing, the stock has lost about 90% of its market capitalisation since then. The company faced severe headwinds after the state of Andhra Pradesh laid restrictions on collections and also capped lending rates. As a result, the company reported a loss of Rs 3.85 bn in 2QFY12, against a net profit of Rs 805.5 m in the corresponding quarter of the previous fiscal. And now, the founder and chairman of SKS Microfinance, Mr Vkiram Akula has announced his resignation. This again raises the old question: Should the microfinance industry be run for profit or should it be a social service run by non-governmental organisations (NGOs)? Akula's resignation is sure to add more fuel to the fire of this all important argument.