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SKS Microfinance Committed to serve AP

Feb '2011

SKS MICROFINANCE COMMITTED TO SERVE AP, WELCOMES MALEGAM COMMITTEE REPORT

HYDERABAD, FEBRUARY 7, 2011: Dr Vikram Akula, Chairperson, SKS Microfinance Limited, today reiterated that SKS will continue to serve the state of Andhra Pradesh. “We started our work in AP and we are committed to staying in AP to fulfill our commitments to unbanked households in the state,” he said.

Welcoming the RBI committee report headed by Y.H. Malegam, Akula said, “the recommendations of the Malegam committee have provided a tremendous boost to the microfinance sector. The committee recognizes the critical role of microfinance in enhancing financial inclusion and we feel the committee’s recommendations will lead to an orderly and healthy growth of the sector, enabling microfinance institutions to continue to provide access to finance for millions of unbanked households across the country.”

He pointed out the he expects that the Malegam committee will help resolve the microfinance situation in AP because the committee has given seven reasons to withdraw the Andhra Pradesh Microfinance Institutions Act and has requested the AP government to do so. Reading from the committee report, Akula said the seven reasons are:

1. The state bureaucrats and politicians may be subject to political pressure, unlike an independent regulator.

2. When regulations are enshrined in legislation, they acquire a certain rigidity whereas an independent regulator can react faster to changing circumstances.

3. There are problems when two agencies regulate the same sector and the RBI under the Reserve Bank Act is already the regulator for NBFCs that undertake microfinance.

4. The problem of multiple regulators get compounded if each state regulates a sector, as the AP state government has done.

5. The RBI covers both banks and NBFCs, which which have 90% of the microfinance business, which makes the RBI the best regulator.

6. The committee recommendations in substance cover almost all the provisions of the Act and therefore the need for a separate Act applicable to NBFC-MFIs will not exist if our recommendations are accepted.

7. If there still remain some areas of concern, these can be resolved through a co-ordination committee consisting of the representatives of the State Government, the Reserve Bank and NABARD.

Akula said he hoped the Andhra Pradesh Government would accept the the recommendations of such an eminent body as the Malegam Committee, which was made up of RBI board members and includes notaries such as Kumarmangalam Birla. “It is a great credit to the Andhra Pradesh government for having spurred the RBI to set up a committee and ensure proper regulation of microfinance across the country. The AP government should be applauded for this, Indeed, the RBI has shown the AP government great respect in having taken seriously the concerns the AP government has raised and setting up the Malegam committee. At the same time, it would be great if the government also respects the request made by the Malegam committee to withdraw the Act.

About SKS Microfinance Limited:

SKS Microfinance Limited (SKS) is a non-banking finance company (NBFC), registered and regulated by Reserve Bank of India, whose mission is to eradicate poverty by providing financial services to the poor.

SKS operates across 19 states of India. They include: Andhra Pradesh, Karnataka, Maharashtra, Orissa, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, Himachal Pradesh, Haryana, West Bengal, Jharkhand, Chhattisgarh, Gujarat, Kerala, Tamil Nadu, Punjab and Delhi.

SKS has been the recipient of many awards, which include Social and Corporate Governance Award by BSE, NASSCOM Foundation for Best Corporate Social Responsibility Practice (2007), Social Performance Reporting Award (MFIs) - Silver Category for Social Performing rating conducted by MIX market (2009) etc. SKS was founded by Dr Vikram Akula, who has been conferred the award of Young Global Leader by World Economic Forum and Business Transformation Entrepreneur of the Year by Ernst & Young (2010). He was named by TIME magazine as one of the 100 Most Influential People in the World (2006).