India: SKS Microfinance to Scale Up Non-Core Business
Hyderabad, India, August, 09 2011 -
SKS Microfinance Ltd is scaling up its non-core business as part of its focus on revenue diversification.
“We are scaling up our pilot on the ‘Samgam' stores scheme and expanding it to Bangalore. Subsequently, this may be extended to all other States later,” Mr M. R. Rao, Managing Director and Chief Executive Officer, SKS Microfinance, told Business Line here.
The scheme is aimed at providing material for retail grocery stores run by poor women by tying up with wholesale suppliers like Metro in Hyderabad. SKS would get some commission from the suppliers.
The gold loan business, which was started by the Hyderabad-based company recently, is also being ramped up.
“The number of branches is being increased from the present five to 20 as there is huge demand-supply gap in rural micro credit,” Mr Rao said.
In Andhra Pradesh, the only-listed MFI in the country has stopped fresh lending in view of the AP Microfinance (Regulation of Money Lending Act).
“The approval rate is less than two per cent from the Government side. Out of about 80,000 fresh loan applications, the State Government cleared only about 1,500,” Mr Rao said.
As the application process was very ‘cumbersome', the company thought it wise to stop lending, he added.
The AP Act mandates all MFIs to seek prior approval from the Government for fresh loans to prevent multiple-lending.
SKS, which has an outstanding loan portfolio of Rs 1,257 crore in AP as on June 30, 2011, now has 12.1 per cent recovery.
The total outstanding portfolio as of June 30, 2011, is Rs 3,450 crore (including off-balance-sheet portfolio of Rs 390 crore).
“The micro-loans are used for working capital by MFI clients. Our view is that repayments will only begin if fresh disbursal of loans takes place without any hassles,” he said.
In the long-run, SKS does not see the AP crisis having any major impact. “The business in other States is going on and recoveries are good. Our net worth is high due to the Initial Public Offer, and the AP exposure in total portfolio is only 20 per cent,” Mr Rao explained.
SKS has provided/written off Rs 126 crore in the first quarter ended June 30, 2011, on its AP portfolio.