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From its humble beginnings,
microfinance today seems to
be an industry whose time has come. Not only has
Bangladesh's Mohammed Yunus, who is the father of microfinance, won the Nobel
Prize for Peace, but also for the first time, SKS Microfinance Limited, a
non-banking finance company based in India and engaged in the business
of microfinance, debuted with an Initial Public Offer on the stock
exchanges in India this August. What was even more surprising was that the
offer was oversubscribed by as much as 13.69 times despite concerns
over high valuation. The Initial Public Offer even attracted the
international investment glitterati and heavy
weight investors such as Sequoia Capital and Vinod Khosla. Also the
venerable George Soros was among those who enthusiastically lapped up the
offer. Such investors do not easily deploy capital without a lot of
homework and without first smelling the exhilarating scent of superior
returns on investment. Not surprisingly, the newspapers are full of stories
about how many other microfinance institutions are now queuing up
with their own plans to go public.
One reason for microfinance institutions to go public is
because some of them have reached such a large size, that it is no
longer possible for them to depend on private sources of finance. When
the loan book reaches about Rs. 3,000 - 4,000 cr, the microfinance
company has no option but to go public in order to obtain capital.
More importantly, many microfinance institutions are on a sound
financial footing, with the SKS Microfinance loan book showing only 0.16%
of non-performing assets, which is excellent performance indeed.
All this suggests that the microfinance industry is coming
of age and is ready to stand shoulder-to-shoulder with the best industries
in the country. |
