Would You Like a Soda with Your Small Loan?

Thursday, July 29, 2010

SKS Microfinance, India’s largest microfinance institution (MFI), aims to raise up to $353 million in a closely watched IPOthat has already drawn top anchor investors.

As India’s largest MFI and the first to do an IPO, SKS is answering lots of questions: Should MFIs charge 28 percent interest on loans to the poor? Should MFIs operate as for-profits? Should they allow private equity firms to invest in them? Should they come to the capital market?

With a base of some 120 million unbanked homes with a potential microcredit demand of about $270 billion, there is enough work for the more than 400 active MFIs in India who are currently serving about 70 million poor people.

This is where SKS founder Vikram Akula’s consumer goods analogy comes in: he would like to make microcredit available within arm’s reach, like a bottle of Coca-Cola.

In fact, he would like to sell Coke, too.

Source: Reuters (link opens in a new window)