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Vikram Akula and his SKS
Trinayan Bhuyan firstname.lastname@example.org
Social Business: a new kind of business
± Creating business models revolving around lowcost products and services to resolve social problems ± Social business is for more-than-profit combine revenue-generating business with a social-value-generating structure ± Can be two kinds
Creating services for poor Owned by poor
SBs (social businesses) . thus encourages investments PMBs (profit max. businesses) vs.PROFIT MAKING VS SOCIAL OBJECTIVES: there are scope for conflict. Still Profits IS MUST because: ± Promotes R&D. . hence the best way is to deal with the HYBRID . create goods & services for consumers ± Must recover full costs ± Profits are important YET objective is to create social benefit and not limited to personal gains . innovation. new technologies ± Increases efficiency ± Enables penetration to new geographical areas and serve deeper layers of low-income people ± Helps recover costs and pay back investors. are SIMILAR in some ways ± Employ workers.
SELCO (Social Entrepreneur of the Year Award 2007) ± Other examples Education (Same Language Subtitling. Janarth . SKS Microfinance (Social Entrepreneur of the Year Award 2006) Kava (peer-to-peer micro-lending website) ** not founded in India ± Energy Solar Electrification .education solutions for children of migrant laborers) Many more .Harish Hande.Social Business Some Examples ± Banking and finance is the biggest beneficiary of technology-enabled social startups Muhammad Yunus. Grameen Bank (Nobel Peace Prize 2006) ** not founded in India Vikram Akula.
In India.Role of SHGs Microfinance is providing financial services to the poor such as loans. savings. 10 or 20 cents monthly per member) into a fund from which they can borrow as and when necessary Such a group is linked with a bank where they maintain a group account. Self Help Groups (SHGs) form the basic constituent unit of the microfinance ± ± ± ± SHG is a group of a few individuals usually poor women (group of 5 to 20) They pool their savings (as low as Rs.Microfinance . relying on selfmonitoring and peer pressure within the group for repayment of these loans. Over time the bank begins to lend to the group as a unit. without collateral. money transfer services and micro insurance. The group is eligible for bank-loan after atleast 6 months of inter-loan repayments Maximum loan amount is a multiple (usually 4:1) of the total funds in group account starts with lower multiples (1:1 to 2:1) .
Key Challenges High Cost-to-Serve ± ± ± ± Accounts are low in value but large in volume High transactions costs (as frequent transactions) Low levels of automation Intense supervision requirements to maintain high recovery rates (trade-off between supervision cost min. 2004] . and recovery max) Very small scale figure shows SHGs linked to banks are in handful of States (mostly in South India AP) [Chakrabarti.Microfinance . Georgia Tech.
it should be able to satisfy the entry-level capital requirements of Rs. Borrowing from foreign institutions is hard due to the credit rating requirements imposed by RBI. 20 million. Many of the MFIs are registered as not-for-profit entities that make it an unattractive choice for investors Low profitability of MFIs because of reasons mentioned above is also a barrier to raise equity capital Regulatory/policy Issues ± ± If the NGO earns a substantial part of its income from lending activity. deposit mobilisation is not possible at least for the first 3 years. If an MFI opts to become an NBFC. MFIs were dependent on donor grants. but grants are limited in size and availability and are becoming harder to access as the pool of global MFIs grows. till a satisfactory credit rating is obtained. there has been strong advocacy for bringing down the capital entry norms for NBFCs in the business of microfinance) In the case of NBFCs. (In India. ± ± .Key Challenges Deficiency of Capital Constrain on Outreach ± ± ± Until recently. it violates the Income Tax Act and could lose its charitable status.Microfinance .
2 million women) Inter-linked three principles: 1.Challenges present Opportunities SKS. latest technology . best business practices 3. for-profit methodology 2. specializing in microfinance is one of the largest and fastest-growing microfinance organizations in the world (disbursements exceeding $500 million to about 2.
SKS (Swayam Krishi Sangam) Microfinance Empowering the Poorest of the Poor to Become Self-Reliant Founder and Executive Chairman : VIKRAM AKULA .
he returned to SKS when it converted to a for-profit company and led it from serving just thousands of poor women borrowers in one state in India to millions across the country today. In 2005. Vikram founded SKS Microfinance as a non-profit in late 1997. As a Fulbright Scholar in India in 1994-95. Vikram led on a governmentfunded action-research project that provided micro-credit to poor farmers for food security. He led the organization until 2004. After extensive research based on field work and graduate study. where he wrote articles on poverty and development. . a non-profit working in rural Andhra Pradesh.Vikram Akula. the person Vikram began working in rural India two decades ago. He then joined the World Watch Institute in Washington DC as a researcher. He started his development career in 1990 as a community organizer of women s selfhelp groups for the Deccan Development Society. India. when he joined McKinsey & Company in Chicago as a management consultant.
including the Ernst & Young Entrepreneur of the Year in India (Business Transformation in 2010. NEVERTHELESS HIS GREATEST ACHIVEMENT IS FOUNDING OF SKS ITSELF FOR WHICH HE IS WIDELY APPRECIATED WORLD OVER. in Political Science from the University of Chicago. He holds a B. in International Relations from Yale.A. the World Economic Forum s Young Global Leader award (2008).A. Vikram has received several awards for his work with SKS. and a Ph. Social Entrepreneur of the Year in India (2006). My Unexpected Quest to End Poverty Through Profitability.D. and the Echoing Green Public Service Entrepreneur Fellowship (1998-2002). in Philosophy and English from Tufts. Start-up in 2006). an M. He is the author of the book A Fistful of Rice. 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. . In 2006.
Mission and Profile of SKS Founded June 1998 Mission To Empower the Poorest of the Poor to Become SelfReliant by Sustainably Providing Financial Services Focus Poorest of the Poor in Drought-Prone Deccan Region of India 12 .
Borrowers undergo financial literacy training and must pass a test before they are allowed to take out loans. 12. Their microenterprises range from raising cows and goats in order to sell their milk.000 (about $44-$260) to poor women so they can start and expand simple businesses and increase their incomes. Weekly meetings with borrowers follow a highly disciplined approach. Re-payment rates on our collateral-free loans are more than 99% because of this systematic process. SKS uses the group lending model where poor women guarantee each other s loans. 2. to opening a village tea stall.000 to Rs.Working of SKS SKS distributes small loans that begin at Rs. . SKS also offers micro-insurance to the poor as well as financing for other goods and services that can help them combat poverty.
its inability to scale to large numbers. capacity constraints. It was launched in 1997 because of a fundamental flaw in microfinance namely.SKS Microfinance. . and the high costs of delivering miro-loans. applies global business best practices to the field of microfinance. SKS has overcome this challenge on the basis of three innovative principles: (1) using a profit-oriented model to overcome capital constraints (2) leveraging best practices for scaling from the business world to overcome capacity constraint (3) using technology to automate processes and lower costs. SKS identied the constraints to scaling as the three Cs lack of capital. . an NGO-turned-for-profit company.
Group-Based Grameen Methodology 15 .
SKS MAPS Framework ± Designed for Scale 16 .
Low Value High Transactions Costs High Risk 2. Identification of Key Element of Solution SKS MAPS .Context of Technology Innovation 1.High Volume. Identification of Barriers to Growth . Funders CGAP (Pro-Poor Innovation Award Winner) Grameen Foundation USA Digital Partners (SEL Award Winner) 17 . Fully-Automated MIS 3.Fully-Integrated.
User Friendly Highly Sophisticated User-Interface Yet Intuitive and Easy-to-Use 18 .SKS Portfolio Tracker .
SKS WAVE.The Future: Smart Cards as Cash Substitute For the Customer . Digital Platform for e-Health«. 19 .Flexible Services Credit linkages at local hospitals Linking into proposed rural ATM networks Lines of credit with local vendors For the MFI .Cashless Microfinance using Phone Booths For Other Uses .
SKS had lent over 15 billion rupees ($400 million) to over 1. has led to the ability to leverage debt from banks. in turn. benefiting approximately 6 million individuals . Indeed.300. This.000 poor women. including Vinod Khosla (co-founder of Sun Microsystems). (an early investor in companies such as Cisco. Sequoia.PARTNERS SKS s profit-oriented model has attracted major equity investments from premier venture capitalists. as of November 2007. Yahoo and Google) and Ravi Reddy (cofounder of Think Systems).
055 2.051 276 FY09 554 80 3.953 4. of Staff Total No.Operational and Financial Information Operational Information Total no.353 307 12.089 FY07 45 2 335 .321 crores)* * includes assigned loan portfolio Financial Information Revenue (INR crores) PAT (INR crores) Assets (INR crores) FY10 958 174 4.381 603 452 Amount Disbursed for the 7.039 FY08 170 17 1.680 FY07 276 103 2.879 1.154 6. of Members (in '000) FY10 2. of Districts Total no.818 1.485 FY08 770 219 6. of Branches Total no.618 period (INR crores) Portfolio outstanding (INR 4.780 FY09 1.456 1.814 3.029 341 21.
who lambasted SKS Micro Finance for seeking profits at the cost of its social objectives. . Mohammad Yunus. Akula is unfazed. even if you have the charisma that Yunus has. no loss. he says. Among its detractors is the Nobel Prize-winning founder of Grameen Bank.Social entrepreneurship in non YUNUS way Explosive growth of SKS has however attracted as much criticism as praise. Professor Yunus view is that microfinance should be a social business no profit. My view is that if you are trying to raise $50 billion in the Indian market. However. We have a different view. you still can t raise that kind of capital from social investors.
THANK YOU .
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