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Microfinance Revolution in India
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SAN FRANCISCO, October 22, 2008 - Despite the financial opportunities they provide to poor families, microfinance operations face many challenges, said Dr. Vikram Akula, founder and CEO of SKS Microfinance, one of the fastest growing microfinance institutions in the world. According to Akula, the most serious of the challenges are “the 3 C’s”: capital, capacity, and cost. Access to capital is limited for microfinance organizations because most are non-profit or non-governmental organizations; they raise money for philanthropy, not for profit. Most microfinance operations are very small, serving 10,000 clients or less, and cannot achieve economies of scale. As a result, operating costs are typically high, creating formidable barriers to expansion.

Dr. Vikram Akula, founder and CEO of SKS Microfinance.

Despite these challenges, SKS has provided nearly $1 billion in unsecured loans to over 3 million women in poor regions of India, with a remarkable 99% on-time repayment rate. SKS's growth last year was nearly 170 percent. It now has 1,413 branches in 18 states across India and aims to reach 8 million members by 2010. As a for-profit business that yields respectable returns to investors, the group has attracted equity from premier venture capitalists including Vinod Khosla, Sequoia, and SVB India Capital Partners. SKS has also excelled in the use of innovative technologies. It pioneered the use of smart cards at the village level and is working with VISA International on a pilot project to develop and deploy wireless point of sale terminals to automate field operations and greatly reduce transaction costs. Because of its focus on standardization and automation, SKS has become known as the “Starbucks of Microfinance.” Despite many additional challenges, including political stability, local corruption, and hostility from loan sharks the informal credit market, the SKS example has shown that even the poorest of the poor are credit-worthy, and that making loans to them can be profit-making, not simply philanthropic. In 2006, Time magazine named Akula one of the world’s 100 most influential people for his work. In 2008, he was honored as the Schwab “Social Entrepreneur of the Year” and as a Young Global Leader at the World Economic Forum. For more information about Akula and SKS, visit www.SKSIndia.com Reported by Adam Collardey, Asia Society Northern California

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