At the Crossroads
Breach of Trust
When SKS formed a non-banking finance company as part of its commercialisation, as many as 30,000 borrowers came together and contributed Rs. 4.55 crore to its equity. They gained a 40 percent stake in the company. They were pretty much the safe keepers of SKS’ commitment to put above everything else the interests of the poor women it served.
But as private capital started coming in, their stake started getting diluted. In February 2007, Akula tried to get foreign grant to help the borrowers maintain their stake. He did not get that grant. As a result, the Mutual Benefit Trust (MBT) that owns the shares on behalf of the community saw its ownership fall to 25 percent after the second round of funding with Sequoia. Later, this ownership plummeted to 15.6 percent.
If SKS gets a valuation of $1 billion, this stake would be worth as much as $150 million. But those brought on to protect the interests of the MBT have been against diluting the customers’ stake in the company as it might lead to less say for the borrowers in the future of SKS.
|
|
|
Image: Vikas Khot
|
|
SOCIAL COMPACT: Borrowers helped kickstart SKS' Finance company | |
Just before the fourth round of funding, the company board wanted to sell the shares for further equity infusion for the company. The advisors for MBT resisted this. “We wanted the money from the shares, if sold, to be ploughed back into infrastructure schemes benefitting the community,” says Vijayalaxmi Das, CEO of Friends of Women’s World Banking and a former advisor to the Trust. However, Akula was pushing for the proceeds from the sale of the shares to go towards another purpose entirely: the Ultra Poor Programme (UPP), the big banner project of the SKS NGO.
The UPP was aimed at the poorest of the poor, those below traditional MFI reach. The idea was to engage them in some sort of livelihood enterprise creation, but some of the advisors felt the UPP was an expensive publicity stunt. There was a Rs 20,000 cost per beneficiary, bulk of it going toward operational and administration expenditure.
They quit. And fears persist that borrowers will lose even the little say they have now.
Single Page View
