India’s biggest lender to the poor, SKS Microfinance, was the toast of investors when it staged a hugely successful public share offer three months ago.
Now SKS, India’s only listed microfinancier, faces an unwelcome spotlight as it and other small-scale lenders come under scrutiny over high interest rates, allegations of strong-arm debt collection tactics and a rash of suicides.
Last Friday, police in Andhra Pradesh arrested several debt collectors for SKS and Spandana Spoohrty Financial, India’s second-largest microlender, after a borrower alleged she was harassed over two loans totaling US$1,300.
The police action followed more than 30 suicides in Andhra Pradesh blamed by politicians on aggressive debt recovery agents operating in the southern state, where many of India’s biggest microfinance institutions are based.
After news of the suicides surfaced earlier this month, SKS said that 17 of the dead were among its borrowers, but rejected responsibility for the deaths.
“Suicides are unfortunate, but there might be reasons other than our loans,” SKS chairman and founder Vikram Akula said. “One thing we are sure about is that our ethical way of doing microfinance has not caused these tragedies.”
Both SKS and Spandana have denied using coercion to get back loans.
Shares in SKS — which has also made headlines over the abrupt firing of its chief executive early this month because of “interpersonal differences” — have slumped by around a quarter as the company has been roiled by controversy.
The mushrooming microfinance sector has been hailed as a savior of India’s poor for providing loans averaging US$250 to millions of borrowers — often small entrepreneurs — unable to get credit from mainstream banks.
However, the microfinanciers’ strongly growing profits, accusations of coercion and interest charges of up to 36 percent have put them under the scanner, with critics saying they risk turning into despised moneylenders.
“Microcredit was designed to serve poor people — to help them overcome poverty. We had no intention of making money for investors,” Bangladeshi microfinance pioneer and Nobel Prize winner Muhammad Yunus said.
SKS, which says it sees no conflict between pursuing profits and helping the poor, reported last week that its net profit leapt 116 percent to 805 million rupees (US$18 million) for the financial quarter ended last month.
SKS, which charges 27 percent interest, and other lenders say their rates reflect the high cost of obtaining funds and expenses in servicing borrowers across wide and often hard-to-reach areas.
The microfinanciers, who borrow from commercial banks at rates of up to 15 percent, say their rates are still far lower than those charged by moneylenders who typically charge rates such as 70 percent annual interest.
Friday’s arrests came as part of a drive by Andhra Pradesh state — which accounts for a third of the microfinance industry’s nationwide outstanding loan portfolio of US$6.7 billion — to rein in the sector.
The arrests followed a new state measure aimed at halting alleged “harassment” of borrowers by microfinanciers, whose loan portfolios have been growing by a scorching 70 percent annually.
The measure imposes penalties of up to three years in jail and 100,000 rupees in fines for attempting to coerce borrowers.
In another move to control the industry, the central Reserve Bank of India recently named a committee to look at how to make microlenders’ rates more “reasonable.”
“There is a need for regulation of the sector,” India’s Daily News and Analysis newspaper said in an editorial. “The Andhra episode has shown all is not well or clear in the sector and the ostensible financiers of the poor have to be checked from exploiting the poor.”
‘BIG LOSS’: This year might see the last generation of Huawei’s Kirin chips, as their production would stop next month because they are made using US technology Chinese tech giant Huawei Technologies Co (華為) is running out of processor chips to make smartphones due to US sanctions and would be forced to stop production of its own most advanced chips, a company executive has said, in a sign of growing damage to Huawei’s business from US pressure. Huawei, one of the biggest producers of smartphones and network equipment, is at the center of US-Chinese tension over technology and security. Washington last year cut off Huawei’s access to US components and technology, and those penalties were tightened in May, when the White House barred vendors worldwide from using US
’WHITE BOX’: The open platform would give local firms access to Cisco’s cloud-based mobile network to develop 5G telecom equipment and tap into the global market The Ministry of Economic Affairs (MOEA) yesterday introduced a new 5G “open lab” in collaboration with US-based information technology and networking giant Cisco Systems Inc to address the rapidly growing “white box” 5G networking equipment market. The open lab will be a platform where Taiwanese manufacturers can access Cisco’s cloud-based mobile network to develop their own 5G telecom equipment, such as small-cell base stations, network switches, modems and Internet of things (IoT) devices, a ministry statement said. The open platform would allow Taiwanese manufacturers to tap into the lucrative 5G telecom equipment market, which was previously monopolized by Nokia Oyj, Ericsson AB
Nintendo Co is raising its target for Switch production to about 25 million units this fiscal year, people familiar with the matter said, as the ongoing COVID-19 pandemic keeps lifting demand and component shortages ease. The Kyoto, Japan-based company, which in April hiked orders to 22 million units by March next year, is asking partners to tack on another few million units, said the people, who did not want to be identified discussing internal goals. Assembly partners plan to work at maximum capacity through December. The new production target suggests that Nintendo is likely to outperform its Switch sales forecast of 19 million
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported that revenue last month expanded 25 percent annually, but fell 12.8 percent month-on-month to NT$105.96 billion (US$3.59 billion). In the first seven months of this year, the chipmaker’s revenue surged 33.6 percent to NT$727.26 billion, compared with NT$544.46 billion a year earlier. TSMC has said it aims to grow its revenue by more than 20 percent this year. The company has since May 15 stopped taking new orders from Huawei Technologies Co (華為), its second-biggest customer after Apple Inc, due to the US’ restrictions on exports containing US technologies. TSMC has no plans to