Business Basics at the Base of the Pyramid
Tuesday, June 10, 2008
A decade after founding SKS Microfinance, CEO Akula explains how to make money at the bottom tier of the economic pyramid while raising the living standards of the people who occupy it. His company, which provides many small-business loans and other financial services to poor women in India, has a customer base that has been nearly tripling each year and now numbers more than 2 million. Akula attributes his firm’s success in part to heeding three principles: Adopt a profit-oriented approach in order to access commercial capital; boost capacity by standardizing products, training, and other processes; and use the latest technology to reduce costs and limit errors.
Collectively, these for-profit maxims reflect a rethinking of the conventional microfinance model, which simply aims to break even. Instead, SKS scales up to achieve growth; the margins are razor thin, but the volume is staggering–160,000 new customers every month. Numbers like that give the company great leverage with partners–insurers, telecom providers, consumer goods manufacturers, and so on–whose products SKS’s clients need. Customers are indeed central to Akula’s enterprise. Every SKS loan officer is required to do what’s best for the client, even if it undermines the firm’s short-term interests.
That means everything from traveling far and wide to meet with prospective borrowers on their schedules to scratching out repayment plans in the dirt with them. Such commitment scales up customer loyalty, which ultimately improves the fortunes of not only the clients themselves but also the company and its investors.