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SKS MICRO FINANCE

Synopsis
• Micro finance and its attributes

• Brief Introduction-SKS
• Valuation- Branch & Subscriber

• RBI Circular & Andhra Pradesh MFI Act
• Financial statement Review

and insurance. including credit. NO security (even if people own land they usually don’t have the title to it) NO credit history • • • • . savings. The term may also include a broader range of services. to non traditional borrowers such as the poor in rural or undeveloped areas. • • Finance that is provided to unemployed or low-income people or groups.What is Micro finance? A means of extending credit. The provision of small loans (microcredit) to poor people to help them engage in productive activities or grow very small businesses. usually in the form of small loans with no collateral. Microfinance is provided for the people who do not qualify for the banking system. Microcredit is the extension of very small loans to those in poverty designed to encourage entrepreneurship.

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• The origin of Grameen Bank can be traced back to 1976 . launched an action research project to examine the possibility of designing a credit delivery system and to provide banking services targeted at the rural poor.Professor Muhammad Yunus Head of the Rural Economics Program at the University of Chittagong. The Grameen Bank Project (Grameen means "rural" or "village" in Bangla language) came into operation • • .

more income". into virtuous circle of "low income. • Eliminate the exploitation of the poor by money lenders. • Create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh •Bring the needy. low saving & low investment". •Reverse the age-old vicious circle of "low income.Objectives: • Extend banking facilities to poor men and women. investment. more investment. more income. mostly the women from the poorest households. within the fold of an organizational format which they can understand and manage by themselves. . more savings. injection of credit.

cyclones and man-made events like war. unemployment. Personal Emergencies: sickness. homebuilding. theft.Why do poor people need financial services?  Life cycle Needs: weddings. old age. injury. childbirth. widowhood. . etc. harassment or death. education. Investment Opportunities: expanding a business. funerals. floods. buying land or equipment. improving housing. Disasters: fires.

low income low income more income more investment more savings injection of credit investment low investment low saving more income .

Chairman. *Focus Drought-prone Deccan region (South India) and poor women *Vikram K. Founder and Ex. Akula. SKS Microfinance. India. Page 10 Page 3 17 16 15 14 13 12 11 9 8 7 6 5 4 .SKS Micro Finanace Empowering the Poor to Become Economically Self-Reliant *SKS denotes -: Swayam Krishi Sangam (Self Cultivation Society) *Mission To empower the poorest of the poor to become self-reliant by providing financial services in a sustainable manner.

when he joined McKinsey & Company in Chicago as a management consultant.Inception of SKS (Video) •Vikram started his development career in 1990 as a community organizer of women’s self-help groups for the Deccan Development Society. Vikram led on a government-funded action-research project that provided micro-credit to poor farmers for food security. As a Fuo lbright Scholar in India in 1994-95. where he wrote articles on poverty and development. •After extensive research based on field work and graduate study. • One Poor Woman questioned Akula “Am I not poor too? Do I not deserve the chance to get my family out of Poverty?” this led him to return to SKS when it converted it to a Profit company and led it from serving just thousands of poor women borrowers In one state in India to 7 millions across the country by 2010. Vikram founded SKS Microfinance as a non-profit in late 1997 Till 2004. a non-profit working in rural Andhra Pradesh. . India. •He then joined the World Watch Institute in Washington DC as a researcher.

Compulsory Group Training -Centre Meeting .Projection Meeting .Village Selection .Group Formation .Joint Liability Model -Model Description .

Social Entrepreneur of the Year in India (2006) . .The Ernst & Young Entrepreneur of the Year in India (Business Transformation in 2010. Start-up in 2006) .In 2006.Vikram -Receiver of Several Awards .The World Economic Forum’s Young Global Leader award (2008) . Vikram was named by TIME Magazine as one of the world’s 100 most influential people and was also featured on the front page of Wall Street Journal .The Echoing Green Public Service Entrepreneur Fellowship (1998-2002).

The AP MFI Act and the AP Microfinance crisis Andhra Pradesh is stated to have a unique leadership position in the Indian microfinance industry. it is expedient to make provisions for protecting the interests of the SHGs. •For achieving greater transparency with respect to such transactions •To protect the interests of Self-Help Groups (SHG) in AP “Whereas these SHGs are being exploited by private Micro Finance Institutions (MFIs) through usurious interest rates and coercive means of recovery resulting in their impoverishment & in some cases leading to suicides. The Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act. the Government of AP introduced the AP MFI Act •For regulating money-lending transactions by MFIs. 2011. as evidenced by the presence of the four largest MFIs in India in the state – accounts for over 40% of all loans by MFIs across India. 2010 On January 1. by regulating the money lending transactions by the money lending MFIs and to achieve greater transparency in such transactions in the State of Andhra Pradesh” .

0 % •No effective way by which the MFIs could enforce repayments •5 million poor women in 18 states across India will lose access to finance •Financial Inclusion agenda will suffer •Indian private & public sector banks will suffer substantial losses •Thousands of people employed in microfinance sector will lose jobs .The AP MFI Act and the AP Microfinance crisis Allegations by the AP Government •Private sector MFIs charge usurious interest rates •MFI employ coercive collection practices •MFI clients being pushed to commit suicide Impact of the AP MFI Act •An immediate impact on the recoveries of MFIs •Recovery rates that were as high as 99.0 % plummeted to as low as 10.

•Of the 3.The AP MFI Act and the AP Microfinance crisis Client Outreach: •Rural development is a key priority for the Government of India.2 crores clients of MFIs. rural clients constitute 52 % .

The AP MFI Act and the AP Microfinance crisis The main reasons for non-repayment of loans and alternative sources of funding after the exit of MFIs post the Andhra Pradesh crisis are set forth below: .

Below are the effective interest rates that borrowers agreed to pay to the moneylenders (Source: SOS 2011 report) .The AP MFI Act and the AP Microfinance crisis Top three reasons why borrowers preferred MFIs were : •Timely loans •Convenient Installments •Low Interest Rates.

•Banks restricted their lending to MFIs and stopped fresh disbursements.The AP MFI Act and the AP Microfinance crisis Situation after the AP microfinance crisis •MFIs have tried to continue with their businesses in other states to the extent banks allowed them to draw from the already sanctioned limits. •Rating agencies scaled down their ratings across the sector. •MFIs have since scaled down their operations and reduced both customers and loans outstanding in a bid to contain risks and maintain repayments to banks. .

represents a 7. 2 crore ($450.5 fold increase for an industry with historical repayment rates of 98% and higher.A limit on loans of Rs 25.The AP MFI Act and the AP Microfinance crisis The Malegam Committee Recomendations The RBI is responsible for regulating non-banking financial companies (“NBFCs”).4M). •Increased capital requirement . not the state governments.000) to Rs.An increase in the minimum capital requirement from Rs.The report recommends much higher provisioning norms than are currently in place. •A cap on interest rates and margins •Provisioning norms .15 crore ($3.000 to borrowers with household income of less than Rs 50.. .000. •Loan limits . the RBI set up the Malegam Committee to study the issue and make recommendations. As a step toward resolving the jurisdictional breach caused by the AP government’s purported regulation of NBFCs.

• The RBI issued directions titled “the Non-Banking Financial Company -Micro Finance Institutions (Reserve Bank) Directions. other state governments could start enacting their own legislations to regulate MFIs creating plurality of regulation which may leave scope for regulatory arbitrage. when the RBI decided to maintain the eligibility of MFIs for Priority Sector Lending (PSL). 2011. the RBI exercised its power to regulate NBFCs • The RBI. 2011” dated December 02. 2011 • Again on August 03.Reserve Bank of India Directions & Notifications for NBFC-MFIs • Anticipating that pursuant to the enactment of the AP MFI Act. 2012. . • Many aspects of the NBFC-MFI directions are similar to the conditions introduced earlier on May 3. through NBFC-MFI directions. pursuant to its decision to accept the recommendations of the Malegam Committee. brought NBFC-MFIs under a separate regulatory framework. RBI made certain modifications in the directions issued earlier.

Reserve Bank of India Directions & Notifications for NBFC-MFIs • Capital Requirements : • All registered NBFCs shall maintain Net Owned Funds (NOF) at Rs.2 crore • Qualifying Assets: • NBFC-MFIs are required to maintain not less than 85 per cent of their net assets as Qualifying Assets (only the assets originated on or after January 1. 2012 and at Rs. The remaining 30 per cent can be for other purposes such as housing repairs. 2014.5 crore except those in the North Eastern Region of the country which will require NOF of Rs. the minimum NOF is to be maintained at Rs.2 crore by March 31. medical and other emergencies. . 2014 • In North Eastern Region. • All new companies desiring NBFC-MFI registration will need a minimum NOF of Rs. 2012) • The aggregate amount of loans given for income generation is not less than 70 per cent of the total loans extended. 2013 and at Rs. education.1 crore by March 31.5 crore by March 31.3 crore by March 31.

for urban and semi-urban households).000/. total indebtedness (not to exceed Rs. conditionalities relating to annual household income levels (Rs. 50. • An SHG or JLG or individual cannot borrow from more than 2 MFIs. • It has also been decided that the cap on margins as defined by Malegam Committee may not exceed 10 per cent for large MFIs (loans portfolios exceeding Rs. • Ensuring Compliance with Conditionalities : • Lending MFIs will have to ensure compliance with.100 crore) and 12 per cent for the others .20.000/-) • Pricing of Credit : • The interest rate cap on loans given by MFIs was fixed at 26 % • To allow for operational flexibility.for rural and Rs. 60..Reserve Bank of India Directions & Notifications for NBFC-MFIs • Multiple Lending : • A borrower can be the member of only one SHG or one JLG or borrow as an individual. among others. within the prescribed cap. He can thus borrow from NBFC-MFIs as a member of a SHG or a member of a JLG or borrow in his individual capacity.000/. 1. NBFC-MFIs will ensure that the average interest rate on loans during a financial year does not exceed the average borrowing cost during that financial year plus the margin.

SKS Microfinance employees embezzle Rs 15. The services of employees involved have been terminated and the company has written off over Rs 14 crore.13. July 29’ 2012 . SKS had hinted earlier that it could be Mumbai.2.SKS Micro seeks shareholders' nod for moving to Mumbai SKS Microfinance Ltd has sought shareholders’ approval for shifting the registered office from Andhra Pradesh to Maharashtra. Loans given to non-existent borrowers – Rs. . The Hyderabad-based company has served a postal ballot notice to the shareholders in this regard.In the News… July 25’ 2012 . according to a disclosure to the Bombay Stock Exchange.8 cr Its employees have cheated the company to the tune of Rs 15.3 Cr.8 crore in the last financial year. Cash embezzlement .Rs. Though it only mentions Maharashtra as the proposed location for new registered office.5 Cr.

1. which restricts the frequency for loan repayments. . RBI's relaxations pertain to capital requirement and also provides MFIs with more operational flexibility.128 crore on the AP portfolio cleansed the balance sheet.39 crore in the quarter ended June 30.SKS Microfinance soars over 16 percent Shares of SKS Microfinance on Monday soared over 16 per cent as the company’s net loss narrowed down to Rs. The Reserve Bank of India has relaxed rules for microfinance institutions with loans in Andhra Pradesh to enable them adjust to the state's microfinance law. The write-off of Rs.In the News… Aug 04’ 2012 .

.1.The ISSUE : Andhra Pradesh was India’s largest microfinance market accounting 30 percent of borrower accounts and loan outstanding of microfinance institutions. 2010 ? Answer: •Company registered a 11 percent quarter-on-quarter non-Andhra Pradesh portfolio growth to Rs. •High collection efficiencies in 17 non-Andhra Pradesh states with the collection figure for the quarter ending March 2012 standing at 95 percent.320 crore in Q4-FY12. Note: If similar ordinance is adopted by other states MFI’s will be adversely affected. reversing the declining trend over the previous five quarters. Will there be a contagion effect following the promulgation of the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Ordinance.

• RBI .Recent Amendment's /Notifications • As per the Microfinance Institutions ( Development & Regulation) bill.NBFC Guidelines 2012 creating a separate category of NBFC – MFI. • RBI clarification on eligibility requirements for priority sector loans to MFI as a separate category. The law on approval by parliament and on enactment will govern financial institutions. . 2012 in Parliament which will make RBI of India the regulator of the sector .

00% 55.00% 25.00% Provisions and write-offs Total expenditure Profit before tax Tax expense 1.50 94.90% -61.40% 100.360.1 1.80% 63.80% Profit after tax -1.30% -38.10 -1.175.7 36.00% -42. in Crore 1.20% Particulars Income from operations Other income Gross revenue Employee benefit expenses Finance costs Other expenses Rs.4 Depreciation and amortization 10 2.70% -11.2 1.70 36.80% -20.1 151.1 1.Income Statement 2011-12 Per cent to Revenue 435.70% 396.1 200.30% -280.60% 86.50% 4.9 59.30% 7.3 349.9 248.40% 32.50% -874.30% 7.796.3 261.30% 42.10% 111.50 326.50 1. in Crore Rs.269.00% 2010-11 Per cent to Revenue 92.80% 236.80% .60 -288.70% 100.60% 7.50% 380.098.60 170.80% -1318.10% -62.173.6 472.50% 13.10% 16.5 170.40% Increase/ Decrease -62.323.70% 27.50% 13.3 92.60% -37.3 18.6 8.

194 FY09 FY10 FY11 FY12 . of Employees No. of Members (in Lakh) 73.79 FY08 FY09 FY10 FY11 FY12 6818 FY08 No. of Employees 21.814 22.029 307 1.8 53. of district No. of district 378 329 FY08 FY09 FY10 FY11 FY12 FY08 FY09 FY10 FY11 FY12 No. of Members (in Lakh) No. of Branches 2.5 39.Operational Highlights No.1 67.733 16.5 18.461 219 341 No.154 12. of Branches No.353 770 1.379 2.

in Crore) 5.823 -1. in Crore) 1.132 5. in Crore) 170 151 122 75 554 472 170 28 FY09 FY10 FY11 FY12 FY08 FY08 FY09 FY10 FY11 FY12 Profit after tax (Rs. in Crore) Profit after tax (Rs. in Crore) Total revenue (Rs. in Crore) Incremental borrowings* (Rs.762 1.270 959 Operating and other expenses (Rs.361 FY08 FY09 FY10 FY11 FY12 . in Crore) Operating and other expenses (Rs. in Crore) 174 FY10 Incremental borrowings* (Rs.Operational Highlight Total revenue (Rs.338 17 FY08 80 FY09 112 FY11 FY12 3479 3.

111 7. in Crore) 7.30% FY11 FY12 FY09 -118.90% -46.70% Disbursements for the year (Rs.321 4. in Crore)* Gross loan portfolio (Rs. in Crore) Disbursements for the year (Rs.485 2.456 4.50% 7.69% FY08 18.737 1.30% 21.90% FY09 Return on average asset Return on average asset 4.50% FY10 FY11 FY12 2.669 1051 1680 FY08 FY09 FY10 FY11 FY12 FY08 FY09 FY10 FY11 FY12 .Financial Highlights Return on average equity Return on average equity 11.90% FY10 2.831 Gross loan portfolio (Rs.33% FY08 3.618 2. in Crore)* 4.

39% 38. in Crore) 348 288 194 200 117 57 52 Provision and write-offs (Rs.99% 35. in Crore) Financial expenses (Rs.73% FY08 FY09 FY10 FY11 FY12 .39% 28.Financial Highlights Financial expenses (Rs.32% 24. in Crore) Provision and write-offs (Rs. in Crore) 236 4 FY08 FY09 FY10 FY11 FY12 FY08 13 FY09 FY10 FY11 FY12 Capital adequacy ratio Capital adequacy ratio 45.

Review of annual report 2011 -12 .