SKS Microfinance: Giant squid, ?Devta? or Just a Business?
Thursday, July 29, 2010
I’ve written in this space before asking why my BlackBerry stayed on the grid in a remote mountain village where basic banking was missing. A few years earlier I had argued for a model that would make financial services as ubiquitous as paan masala, glucose biscuits and shampoo sachets in remote rural India. So now when this comes to pass in the form of an initial public offering (IPO) from a microfinance firm that has made capital available to hundreds of thousands of poor Indians, what’s the discomfort? The SKS Microfinance Ltd public issue opens on Wednesday for subscription. The lender is offering 16.7 million Rs10 face value equity shares in a price band of Rs850 to Rs985 apiece. And the debate has just begun in the marketplace: Is it justifiable for a firm focused on social goals to make supernormal profits?
Intellectual honesty demands that I weigh in with SKS. After all the Coca-Cola analogy (SKS promoter Vikram Akula, it seems, jumps onto the stage with a Coke can in hand to demonstrate that SKS will do what the fast-moving consumer goods, or FMCG, industry has managed to do-attain mass outreach in a replicable model) is what I have been writing about as well-getting rural financial products FMCGized.
So what’s the issue. Why this discomfort? If capital markets are an efficient way to move money to their best use, why baulk at the SKS issue? Does that mean that hospitals must not list, or educational institutes or media? This logic can take us all back to hundis in a minute.