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Creative Capitalism

Letter from the Editor

Published: Sep 11, 2009 12:01:00 AM IST
Updated: Sep 20, 2009 02:42:49 PM IST

This magazine was born around the belief that India could learn from the best in the world—and also teach a few things to the rest of the world. This edition of Forbes India attempts to capture that flavour.

In the early eighties, Mohammad Yunus in neighbouring Bangladesh taught the world the concept of micro-finance. Since then, micro-finance institutions have become the harbinger of change. The Grameen Bank model has been emulated around the world to help pull millions of people out of poverty. Yunus won the Nobel Peace Prize in 2006.

The micro-finance model took off in a real sense in India only towards the middle of this decade. And one of our social entrepreneurs is now poised to go one up on Yunus. Vikram Akula says SKS, the firm he helped found in 1998, will overtake Grameen to become the largest micro-finance institution (MFI) in the world sometime next year.

Akula followed the Grameen model for most part, but has chosen to now take a leaf out of Compartamos, a business in Mexico that lends small amounts of money, sometimes as little as a few hundred dollars, to women and poor people to help them start businesses and escape the slums.

Compartamos is run like a big business. It went public in 2007 and began to trade stock and has made profits of $80-million for investors. Till the global recession struck, investors were said to have seen returns of 40 percent.

Yet despite its low overhead, many of its savings have not been passed on to loan customers, who still pay interest rates of above 100% percent. Around the time Compartamos went public, Yunus and other luminaries from the non-profit world mounted a strident attack on its market-oriented model, accusing it of making money at the cost of the poor.

SKS is set for a public listing sometime next year. Harvard don Tarun Khanna who sits on the SKS board told me recently that he expected considerable heat and dust at the time of listing. All of it was misplaced, he said. After all, Grameen Bank took more than three decades to reach 7 million borrowers. SKS might do it in just over a decade.

So what if a handful of investors make a little bit of money while millions escape the clutches of rapacious moneylenders? Mohammad Yunus isn’t about to agree with this view. Yet not too long ago, Grameen made the mistake of over-lending, before it eventually self-corrected.

To my mind, Akula now has the chance to show the world that it is possible to strike the middle ground between rabid capitalism and a pure development approach. So can he pull it off?

Read Shloka Nath’s engrossing story.

(This story appears in the 25 September, 2009 issue of Forbes India. To visit our Archives, click here.)

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