The Founder of SKS Microfinance: Vikram Akula

Introduction

SKS Microfinance, now known as Bharat Financial Inclusion Limited, is one of India’s leading microfinance institutions. Founded in 1997, SKS has been pivotal in providing financial services to millions of underserved individuals, primarily women in rural areas. At the helm of this groundbreaking initiative was Vikram Akula, whose vision and leadership transformed the landscape of microfinance in India. This article delves into Vikram Akula’s life, the founding of SKS Microfinance, its evolution, and its impact on the microfinance sector and society at large.

Vikram Akula: Early Life and Education

Vikram Akula was born in 1972 in a prominent Indian family. His educational journey began at the prestigious St. Xavier's College in Mumbai, where he earned his undergraduate degree in economics. He furthered his studies at the University of Chicago, obtaining a Master’s degree in Social Science and later pursued his Ph.D. in Political Science at the same institution.

Akula’s exposure to economics and social issues during his academic years deeply influenced his commitment to social entrepreneurship. His early experiences included a pivotal trip to rural India, where he witnessed firsthand the financial struggles faced by the poor, particularly women. This experience laid the groundwork for his future endeavors in microfinance.

The Founding of SKS Microfinance

In 1997, armed with a vision to empower the underprivileged, Akula founded SKS Microfinance. The organization aimed to provide small loans to lowincome households, enabling them to start or expand small businesses. The name SKS stands for Swayam Krishi Sangam, which translates to SelfEmployment Group, reflecting its commitment to fostering selfsufficiency.

The initial years were challenging; however, Akula’s approach was innovative. He utilized the Grameen Bank model developed by Muhammad Yunus in Bangladesh, which emphasized group lending and peer support. This model not only minimized default risk but also encouraged community bonding and empowerment.

SKS introduced several innovative practices that set it apart from traditional lending institutions. The organization focused on:

• Group Lending: Borrowers were organized into small groups, allowing them to support each other in repayment.
• Women Empowerment: A significant emphasis was placed on lending to women, as it was believed that empowering women would lead to broader societal change.
• Financial Literacy: SKS provided training to borrowers on financial management, business skills, and entrepreneurship, ensuring that clients were wellequipped to use their loans effectively.

These strategies not only increased loan recovery rates but also fostered a sense of community and responsibility among borrowers.

Growth and Expansion

Under Vikram Akula’s leadership, SKS Microfinance experienced rapid growth. By the mid2000s, SKS had expanded its reach across several Indian states, offering services to millions of clients. The organization became known for its robust operational model, transparency, and commitment to social goals.

In 2005, SKS Microfinance became the first microfinance institution in India to register as a nonbanking financial company (NBFC), enabling it to access a wider range of funding sources. This transition marked a significant turning point, allowing the organization to scale its operations further and meet the growing demand for microloans.

In 2010, SKS Microfinance went public, making it the first microfinance institution in India to launch an initial public offering (IPO. The IPO was highly successful, raising approximately $350 million and significantly increasing the organization’s visibility and credibility. This financial boost allowed SKS to enhance its services and expand its geographical footprint.

Challenges and Controversies

Despite its success, SKS Microfinance faced several challenges. The microfinance sector in India came under scrutiny due to reports of overindebtedness among borrowers and unethical lending practices by some institutions. In 2010, a crisis in Andhra Pradesh, where several suicides were reportedly linked to aggressive microfinance practices, brought significant negative attention to the industry.

In response to these challenges, Akula emphasized responsible lending and advocated for stronger regulatory frameworks within the sector. He believed in the necessity of protecting clients while ensuring that microfinance institutions operated sustainably.

The Andhra Pradesh crisis led to regulatory changes that impacted microfinance operations across India. The Reserve Bank of India (RBI) introduced new guidelines aimed at protecting borrowers and promoting responsible lending practices. SKS Microfinance adapted to these changes by reinforcing its commitment to social responsibility, enhancing client education, and refining its lending processes.

Social Impact and Legacy

Vikram Akula’s vision for SKS Microfinance transcended financial services; he aimed to create a transformative social impact. The organization’s focus on women’s empowerment has had profound effects on families and communities. Access to microloans has allowed women to start businesses, contribute to household income, and invest in their children's education and health.

Research shows that when women control financial resources, they tend to invest more in their families and communities. SKS Microfinance has empowered over 8 million women, significantly improving their social standing and economic independence. This empowerment has ripple effects, fostering greater gender equality and community development.

Through its innovative approach, SKS has played a crucial role in promoting financial inclusion in India. By providing access to credit, the organization has helped lift many individuals out of poverty, enabling them to pursue entrepreneurial ventures that contribute to local economies.

Conclusion

Vikram Akula’s founding of SKS Microfinance marked a pivotal moment in the evolution of microfinance in India. His commitment to empowering the underprivileged through financial services has had a lasting impact on millions of lives. While challenges remain, the legacy of SKS Microfinance continues to inspire social entrepreneurs and organizations striving for inclusive growth and sustainable development.

In a rapidly changing world, Akula's vision of creating a society where financial access is available to all remains more relevant than ever. The journey of SKS Microfinance is a testament to the power of innovation, resilience, and the belief that financial services can be a force for good.

The Operational Model of SKS Microfinance

At the heart of SKS Microfinance's operational model is the concept of group lending, which creates a supportive network among borrowers. When women come together in groups, they share not just financial responsibility but also the social fabric that strengthens community ties. This model encourages accountability, as members are motivated to ensure each other's success.

The structure of group lending allows for smaller, more manageable loan sizes, which reduces the risk for the lender. The default rates are significantly lower than those seen in traditional lending models. By promoting mutual support and collective responsibility, SKS has cultivated a unique ecosystem where the success of one member contributes to the success of all.

SKS Microfinance has also developed a range of financial products tailored to meet the diverse needs of its clients. These products go beyond simple microloans and include:

• Income Generation Loans: Small loans aimed at helping borrowers start or expand businesses.
• Emergency Loans: Quickaccess loans designed to help families navigate unforeseen financial hardships.
• Savings Products: Encouraging a savings culture among borrowers, enabling them to build financial resilience.
• Insurance Products: Offering microinsurance to protect borrowers against risks that could derail their financial stability.

By diversifying its product offerings, SKS not only increases its customer base but also enhances the overall financial literacy of its clients.