The fact that stock markets greeted the news of Vikram Akula’s departure from SKS Microfinance by boosting its share price only confirms the widely-held view that the company’s founder had become a liability for it. Once the darling of not only the markets but also social policy analysts and officials, both Mr Akula and SKS had begun to attract opprobrium.
SKS was accused of ultra-aggressiveness in collecting loans, becoming a venture for profiteering rather than social uplift. When the Andhra Pradesh government stepped in to introduce new loan collection regulations, it was a big blow to its business model, and losses mounted.
The entire Indian microfinance industry has been under a cloud, even though the original idea of giving small loans was a worthy one. At its heart lies the question whether such an organisation should also aim to make profits like any other company. No business venture can survive by incurring losses, but microfinance is mainly about social good rather than profits. SKS, which began with a bang, and similar outfits found it tough to keep that balance.
Mr Akula’s departure will not solve this basic dilemma. The industry must work closely with governments and policymakers to come up with a tenable model that is beneficial to itself, and also to society’s weakest se-ctions. After all, they need assistance the most and must be kept at the centre of any such enterprise. That is the task before SKS and its peers if they want to restore confidence in microfinance.