Second Prize in Baylor-USASBE Student Case Research Competition organized by The Baylor University Entrepreneurship Program and United States Association for Small Business and Entrepreneurship (USASBE)

SKS Microfinance: Managing Growth and Continuity of a Social Enterprise

Case Code: LDEN073
Case Length: 25 Pages
Period: 2009-2010
Pub Date: 2011
Teaching Note: Available
Price: Rs.500
Organization : SKS Microfinance
Industry :Microfinance
Countries : India
Themes: Social Entrepreneurship, Entrepreneurship, Venture Financing
SKS Microfinance: Managing Growth and Continuity of a Social Enterprise
Abstract Case Intro 1 Case Intro 2 Excerpts


Vikram Akula - an eEntrepreneur with a Vision

The story behind the founding of SKS Microfinance was one of the passion, determination, and hard work put in by its Chairman and founder, Akula, to realize his dream. Akula was born in Hyderabad, India, but his family emigrated to the US when he was just three years old. At the age of seven, he visited his aunt’s house in Hyderabad during his summer holidays. There he saw a poor woman and her son dressed in torn and shabby clothes selling pots. When someone bought a pot, they paid for it with a fistful of rice. As Akula watched one such transaction, he saw the woman drop a few grains on the floor. She immediately knelt down and picked up each and every grain by pressing a finger against each....

SKS- the Genesis

"Am I not poor, too? Do I not deserve a chance to get my family out of poverty?" – This was a question posed by a woman to Akula when he worked as a loan officer at Deccan Development Society. This simple question ignited Akula’s mind and he began thinking about the development of a new model, which would allow scaling up of a microfinance organization so rapidly that no poor person would be turned down...

SKS Microfinance - the Business Philosophy

Industry analysts expected that by 2011, SKS would become the world’s largest MFI surpassing Grameen Bank. Yunus, considered as the Father of Microfinance, was opposed to the idea of mixing private profits with microfinance ventures – "That's what loan sharks have been doing over centuries," he argued. But Akula, who had initially started SKS as an NGO MFI and gradually converted it into an NBFC, followed a for-profit business model to attract private investments from foreign investors....

SKS's Business Model

The business model of SKS was similar to Yunus’s Grameen Bank model. It followed a Group Lending model in providing micro loans to the poor. This helped in ensuring credit discipline among the members through mutual trust and peer pressure within the group, ensured prudent usage of funds by borrowers, and also led to prompt repayment of the loan....

SKS at Crossroads

As of March 2010, SKS was already the biggest micro-lender in India, and the fifth largest globally in terms of client base, with 6.8 million clients and 5.8 million active borrowers. 48 Industry experts expected it to become the world's largest MFI with 15 million clients by 2012, crossing Grameen Bank. It was present in 19 Indian states and had an employee base of 21,154 operating in 2,029 branches all over India...

The IPO Controversy

In April 2010, the dispute between the MFIs who believed in the altruistic spirit of being 'social enterprises' and those that were the proponents of commercialization gained momentum when SKS revealed its plans to raise US$350 million by selling 6.8 million equity shares in an IPO...

The Road Ahead

Analysts felt that SKS had revolutionized the Indian microfinance industry by introducing a profit-oriented model. Though the model was seen as exceptionable in the early days, it gradually gained acceptance, and grew at a brisk pace. However, while the firm was growing at a high rate, annually adding over 50 new branches and 130,000 new customers every month with a payment default rate as low as 1%, it was not free of criticism. Its critics opposed its business principles and the manner of its growth...


Exhibit I: SKS Milestones
Exhibit II: Classification of MFIs by Legal Structure
Exhibit III: Model of MFI's in India
Exhibit IV: Growth Trend of Microfinance Sector in India
Exhibit V: Top 10 MFIs in India
Exhibit VI: SKS Operational Highlights
Exhibit VIII: SKS Consolidated Balance Sheet

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