Revisit San Francisco in Today’s Wall Street Journal
Attendees of 2004’s Eradicating Poverty Through Profit conference may have only dim memories of the 3-day BOP bonanza (flashes of Scott Shuster, anyone?), but not me. Which brings me to today’s Wall Street Journal, whose front page featured 3 conference speakers in an article entitled ?Entrepreneur Gets Big Banks To Back Very Small Loans.? As you rifle through the Rolodex to check if you know the famous ones, keep an eye out for Vikram Akula, CEO of Chicago-based SKS Microfinance–he’s the article’s main attraction, featured for his innovative microfinance practices which cut out waste and maximize return. Author Eric Bellman gets points in my book for excellent quotes from Citibank’s Robert Annibale and ICICI Bank’s Nachiket Mor.
On microfinance: “This can work driven only by greed,” says Mr. Akula, a one-time McKinsey & Co. consultant who was born in India and grew up in Schenectady, N.Y. “That’s the magic of it.”
The [microfinance] programs were run by well-intentioned people, he recalls, but poorly managed. The way that nonprofit organizations “were doing microfinance was incredibly inefficient and hopelessly unscalable,” he says. Mr. Akula decided in 1997 to build his own microfinance company from scratch. His goal: to model a business on McDonald’s Corp. or Starbucks Corp., using technology and standardized systems to wring enough efficiency out of each tiny transaction to lower costs.
“We are taking microfinance beyond philanthropy,” says Robert Annibale, the London-based global director of microfinance at Citigroup. “I may have the smallest business (within Citigroup) but I have the largest potential client group in the world.”
More-efficient systems have enabled SKS to drop its annual interest rates to around 24%, from 36% in 1998. That’s lower than what most people pay for credit-card debt in the cities. More important, the rate is less than half that charged by many rural loan sharks, who have been blamed in a rash of suicides by farmers who faced ruin in the past year when their crops failed.