Microfinance: Profiting from Poor

The massive investments by private equity firms coupled with an initial public offer (IPO) by SKS Microfinance have ignited a debate about the ethics and objectives of microfinance institutions (MFIs) in India.

SKS Microfinance, the largest MFI in India with substantial investments by private equity firms and hedge funds, is planning to raise Rs 11,000 million ($250 million) through an IPO. According to media reports, the original promoters of SKS Microfinance have sold part of their stake to a hedge fund thereby making a 12-fold profit even before the IPO. This shrewd act by promoters and top management not only raises doubts about their long-term commitments but, more importantly, questions the real motives of promoters who have become millionaires while their borrowers remain desperately poor.