For Love or for Money? SKS Microfinance IPO Stirs Debate

Thursday, July 29, 2010

MUMBAI, India (AP) – An Indian company that makes tiny loans to villagers aims to raise up to $354 million in an initial public offering, a move critics fear will encourage the microfinance lender – India’s largest – to put shareholders above the poor it serves.

SKS Microfinance’s share sale, launched Wednesday, has already drawn the ire of one of the leading lights in the field. A publicly traded company’s traditional obligation is to make money for its shareholders, while the mission of microfinance – loans typically under $200 for starting businesses that banks won’t make – is to lift people out of poverty.

Some say those are irreconcilable objectives. Others argue it is possible to serve two bottom lines simultaneously, reaping both financial and societal rewards. Either way, SKS’s IPO – the first in India and the third worldwide – is likely to set a trend. Other Indian microfinance lenders are watching and waiting to see whether they too should tap capital markets.

“This is pushing microfinance in the loansharking direction,” Muhammad Yunus, who won a Nobel Prize for his work at long established microfinance lender Grameen Bank, told The Associated Press. “It’s not mission drift. It’s endangering the whole mission.”

Source: Canadian Business (link opens in a new window)