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The Commercial Approach and the SKS IPO


The SKS Microfinance IPO (Initial Public Offering) has been big news in India and in the microfinance community. SKS is the first Microfinance Institution (MFI) to go public in India. News of this IPO brings up good questions about the profitability of microfinance and the commercial model. 

A billboard advertising the SKS IPO seen in Mumbai

Microfinance isn’t a panacea; it won’t solve poverty on its own. But used as a tool along with other poverty alleviation strategies microfinance is very powerful. It gives people the much needed opportunity to better their station in life through the use of financial services. But just as microfinance is only one avenue to alleviate poverty there are different approaches within the field too. 

The approach that ACCION takes, and the one that I believe in, is commercial microfinance. The commercial approach is one way to expand access to credit and financial services to microentrepenuers. The infusion of private capital allows MFIs to reach more people and provide better and more efficient services at lower interest rates than philanthropy would alone. At least that’s the idea. 

Now SKS and a US based nonprofit, Unitus, are ensnarled in a bit of controversy over the recent IPO and the validity of the commercial model. Last month before the IPO opened Unitus closed up shop and announced that microfinance will not be the focus of any future activities by the organization. 

I think that it’s a shame to see Unitus go. Microfinance needs the voices of nonprofits to protect the consumers and keep the focus on the double bottom line (social responsibility and profitability). That’s why I’m glad ACCION is still in the game promoting client protection through the Center for Financial Inclusion’s (CFI) Smart Campaign. 

The Smart Campaign addresses how financial services can cater to the needs of poor people in an efficient and affordable manner. The CFI aims to make it easy for MFIs to protect clients and be transparent financial organizations. This is increasingly important as the industry matures and naturally comes under more scrutiny. 

I truly believe that access to credit and financial services should be a right in this day and age. Naturally, financial services aren’t as essential as access to clean drinking water or housing, but each improves life for the recipients. Yet microfinance (and the commercial model) has the capacity to improve lives so much further because it is a sustainable approach to alleviating global poverty. 

For more about the SKS/Unitus controversy please read this article published by the New York Times last week. And for more about the Smart Campaign please go to If you’ve enjoyed this blog you may want to check out the CFI’s blog too.

5 thoughts on “The Commercial Approach and the SKS IPO

  1. Excellent explanation of ACCION’s approach!

  2. I’m impressed – great post!

  3. Interesting post.

    I also believe in a self-sustainable microfinance system as well as long as the purpose of microfinance stays the same. But I think it is this “purpose” that stir some feelings on people, because according to my understanding of microfinance, it is the vehicle to provide poor people access to banking at low cost ( this is why for some people microfinance and not for profit institutions are inseparable) now once you bring profitability to this process, how is it going to affect the borrower?

    • Great point, Jose. That’s exactly why I think the work that the CFI is doing on consumer protection is so vital. Microfinance has to stay true to its roots providing low cost financial services to the poor, like you said.

      I think the truth is we’re not exactly sure how profitability will affect the microentrepenuers. We’re still in the early stages of figuring that out. But I also think that there is room for lots of different models in microfinance. Right now there’s a need for both the nonprofit and the commercial approach and I don’t believe that will change anytime soon.

      No matter which road we follow it is extremely important to keep the questions you raised in our minds and keep the consumers’ best interests at the forefront of our work.

  4. Nice work, Mariel – keep ’em coming!

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