SKS launches India's first microfinance IPO

SKS Microfinance's share sale, launched Wednesday, has already drawn the ire of one of the leading lights in the field. A publicly traded company's traditional obligation is to make money for its shareholders, while the mission of microfinance — loans typically under US$200 for starting businesses that banks won't make — is to lift people out of poverty.

Some say those are irreconcilable objectives. Others argue it is possible to serve two bottom lines simultaneously, reaping both financial and societal rewards. Either way, SKS's IPO — the first in India and the third worldwide — is likely to set a trend. Other Indian microfinance lenders are watching and waiting to see whether they too should tap capital markets.

“This is pushing microfinance in the loansharking direction,” Muhammad Yunus, who was awarded the Nobel Peace Prize for his work at established microfinance lender Grameen Bank, told The Associated Press.

Advocates of commercialization say tapping capital markets and the deep pockets of private equity investors is the only way to get enough funding to sustainably serve billions of people without access to credit. Demand for microfinance funds in India in 2008 exceeded supply by US$47.1 billion.

The backers of SKS include venture capital funds Sequoia Capital and Sandstone Capital, George Soros and Infosys chief mentor N R Narayana Murthy, considered an august and ethical figure in India's business world.

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