Life after Vikram Akula at SKS Microfinance: Some unanswered questions?
November 23, 2011
It seems unlikely that Vikram Akula’s exit will transform SKS Microfinance into a better governed and managed microfinance company. Only time can tell if and whether the exit of Vikram Akula would bring better times to SKS micro-finance, its investors and clients Ramesh S Arunachalam
The board of SKS Microfinance is said to be meeting in Mumbai today and it has been widely speculated that Vikram Akula is all said to resign from SKS Microfinance as its executive chairman. While the reasons for this are not exactly known, it has been suggested that the poor performance of the company during the last quarter has brought increased pressure on Mr Akula to resign.
Whether it happens or not is something we will hopefully know in a short while today. That said, if indeed Vikram Akula quits as has been extensively reported in the media, what are the implications for SKS Microfinance as a company?
Three questions are extremely relevant for investors and other stakeholders:
a) What will happen to SKS in its post Vikram era? Would the corporate governance issues and operating practices change for the better?
b) What about Vikram Akula’s successor and others at the helm of SKS (if and when he quits)? Will they be able to shepherd SKS Microfinance through its turbulent lines? What is their understanding of microfinance? What is their track record of governance and management?
c) What about the mutual benefit trusts (MBTs) and the low-income people to whom they belong? Who will control them? Who will safeguard their interests in SKS Microfinance? Who will assume responsibility for the huge (notional) losses caused to the MBTs owned by the low-income people?
A small divergence is necessary here. It is important to note that while many corporate and other investors have divested their shares, the MBTs have continued to hold (a majority of) their (huge) investments despite the steeply falling share price of SKS Microfinance (which stood at Rs112.90 per share today). Please recall that a little after SKS got listed, the shares were selling close to an all time high of Rs1,490.70 per share —this represents a fall of almost 92.43% from this super (share) price indeed.
That said, to set the record clear, it is indeed ironical that Vikram Akula is being pressured to resign by a board that was, at least in part, responsible as much, for many of the happenings at SKS Microfinance as him.
And the board (with some common members) was undoubtedly a party to the huge growth story of SKS Microfinance during the period 2006 to 2010 as shown in table below:
And last but not the least, this board, by and large, again remained quiet during the unceremonious removal of Suresh Gurumani, the then CEO (through a hurriedly convened board meeting and especially conducted on a Sunday), after he had led SKS Microfinance through a spectacular initial public offer (IPO) in 2010
Therefore, whether it was the interest-free loan to the founder MD to enable him to buy shares in SKS Microfinance or the unceremonious sacking of the CEO after the successful IPO or the burgeoning growth of SKS Microfinance, it is clear that the SKS board has to bear ultimate responsibility.
That being the case, it seems unlikely that Vikram Akula’s exit will transform SKS Microfinance into a better governed and managed microfinance company. Only time can tell if and whether the exit of Vikram Akula would bring better times to SKS micro-finance, its investors and clients…
(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments)
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