The TightRope Walker

In 1994, 26-year-old Vikram Akula was disbursing loans to villagers in remote areas of Andhra Pradesh state on behalf of a voluntary group. One day a woman from a village not covered by the loan scheme approached him. She pleaded with him to extend the programme to her village. But his organisation didn’t have the resources to do that. Akula gave her the bad news. The woman looked Akula in the eyes and asked, ‘Am I not poor too? Why are you discriminating against me?’

Left-leaning Akula was particularly troubled by his helplessness. Service-motivated voluntary organisations were content with helping a small number of people and the profit-motivated lenders didn’t care. Nobody was ready to explore a middle ground.

Young Akula decided to do it. He would make a Faustian bargain: Dance with the “devil” of capitalism in return for a model that can reach a vast number of poor people. “I couldn’t stop thinking how does one design microfinance in such a way that you never have to say no to any poor person who is simply asking for an opportunity?”

He set up SKS in 1997 with a view to show that private capital could be used to nurture sustainable livelihoods in villages. And he succeeded. SKS has so far raised $153 million in equity capital, given loans to 4.7 million rural women, is on the verge of becoming the world’s largest micro-finance institution (MFI) and India’s first to go public.

Akula was born in Hyderabad but spent the better part of his childhood in New York, returning every summer. He speaks with a heavy accent and retains an American flavour even when breaking into his native Telugu language. He laughs and apologises, aware that it is not quite as good as he would like it to be.

Akula says that the home visits made an indelible impression. “You see the extreme poverty we have in our country and you go back to the extreme wealth you have in an American suburb and I would do this consistently, every school holiday, summer after summer and that’s a very jarring experience.” An undergraduate at Tufts University in Boston, Akula says he chose to major in philosophy. But Akula remembered what Karl Marx had said: “Philosophers have only interpreted the world… the point is to change it.” So, Akula started SKS in 1997. The early days were tough and in five years the toil was evident.

In January 2004, Akula’s marriage ended. His wife left with their three-year-old son to return to the US. “I was faced with the choice,” he recalls. “Do I continue the work I love or do I go back and be a father to my son? Honestly, it wasn’t a choice.” Akula stepped down and appointed another CEO in his place. He joined consulting firm McKinsey in Chicago.

But after just 18 months, Akula was back at SKS to reclaim his title. In mid-2005, SKS had converted to a non-banking finance company, and had attracted blue chip investors who wanted to invest in brand Akula. In 2007 and 2008, SKS grew in excess of 200 percent. The company began to look like a Wall Street firm. It certainly hired people who looked the part. In December 2008, Suresh Gurumani, a banker for 22 years, came on board as the new CEO. It is said that SKS will list on the stock exchanges some time in 2010. Not surprisingly, this worries those who believe microfinance should eschew the profit motive.

Ask the redoubtable Mohammed Yunus, the man who invented microfinance. “In going for IPO, if SKS does not make it clear that they will make absolutely sure that their interest rate will not exceed 10 points over the cost of fund, I will get very worried,” he says. But Akula points out that Yunus’ Grameen Bank took 35 years to reach 7 million clients. He wants to reach 150 million people in a much shorter time.

To do that, Akula has even agreed to relinquish control. The path of SKS is now being charted by professional managers. Today, Akula handles the broader public and policy matters at SKS.

Akula is also crafting a career out of his life’s work, and his autobiographical account, aptly titled Fistful of Rice: My Unexpected Quest to End Poverty Through Profitability, is due in 2010 and will be followed by the release of another book entitled Goat Economics in 2011 (based on his experiences with Bill Gates).

(Vikram Akula did not talk for this story. The quotes used here are from an earlier story in Forbes India.)