Bharat Financial Inclusion

2021-06-11T08:57:02Z

2401:4900:4E07:F3F6:9FC:D23:759F:DB0B:

{{Use dmy dates|date=November 2018}}
{{Use Indian English|date=November 2018}}
{{Infobox company
| honorific-prefix =
| name = '''Bharat Financial Inclusion Ltd'''
| logo = Bfillogo.jpg
| logo_size = 200px
| type = [[NBFC]]
| traded_as = {{unbulleted list |{{BSE|533228}} |{{NSE|BHARATFIN}}}}
| ISIN = INE180K01011
|fate = Merged with [[IndusInd Bank]]<ref>{{cite news|url=https://www.moneycontrol.com/news/business/stocks/indusind-bank-adds-2-on-nclt-nod-for-merger-with-bfil-3882081.html/amp|title=IndusInd Bank adds 2% on NCLT nod for merger with BFIL|work=moneycontrol|accessdate=25 April 2019}}</ref>
| area_served = [[India]] <br> {{small|(CEO)}}
|founder= [[Vikram Akula]]
| industry = [[Finance]]
| net_income =
| num_employees = 9,698 (2015)<ref>[http://www.bseindia.com/xml-data/corpfiling/AttachHis/999A919A_FADD_4D82_9EA9_59FBEC244C73_190225.pdf SKS Earnings Update Q4FY15]</ref>
| homepage = {{url|bfil.co.in}}
| foundation = 1997
| location = [[Hyderabad]], [[India]]
}}

'''Bharat Financial Inclusion Limited''' (formerly known as '''SKS Microfinance Limited''') '''BFIL''' is a banking & finance company (NBFC), licensed by the [[Reserve Bank of India]]. It was founded in 1997 by [[Vikram Akula]], who served as its executive chair until November 2011.<ref>{{cite news| url=http://www.thehindu.com/business/companies/article2653784.ece | location=Chennai, India | work=The Hindu | title=Vikram Akula quits SKS | date=23 November 2011}}</ref> The company's mission is to provide financial services to the poor under the premise that providing financial services to poor borrowers helps to alleviate poverty.<ref>{{cite web |url=http://www.sksindia.com/our_approach.php |title=SKS: Know SKS: Our Approach |publisher=Sksindia.com |accessdate=2012-07-17 |url-status=dead |archive-url=https://web.archive.org/web/20120513123410/http://sksindia.com/our_approach.php |archive-date=2012-05-13 }}</ref><ref>[https://www.jstor.org/pss/2565486 The Microfinance Promise]. Jonathan Murdoch, [[JSTOR]]</ref> In 2013, the company operated across 17 Indian states.<ref>[http://www.business-standard.com/article/companies/sks-microfinance-concludes-two-securitisation-transactions-113040100106_1.html SKS Microfinance concludes two securitisation transactions] ''Business Standard''. 1 April 2013</ref>

==History==

=== Founding (1997 to 2005) ===
In 1997, inspired by [[Grameen Bank]], [[Vikram Akula]] founded Swayam Krishi Sangham (SKS Society) as a non-profit organization.<ref name=nyt2011>{{cite news|url=https://www.nytimes.com/2011/11/24/business/global/vikram-akula-chairman-of-sks-microfinance-to-step-down.html|title=Amid Scandal, Chairman of Troubled Lender Will Quit|first=Vikas|last=Bajaj|work=The New York Times|date=23 November 2011|archive-url=https://web.archive.org/web/20160820141408/https://www.nytimes.com/2011/11/24/business/global/vikram-akula-chairman-of-sks-microfinance-to-step-down.html|archive-date=20 August 2016|url-status=live}}</ref><ref name="Hindu"/> However, unlike Grameen bank, SKS used an aggressive commission based system to encourage loans, thus forming a network of loan marketers who were not direct employees of SKS, but worked on a commission basis in smaller villages of Andhra Pradesh. SKS used a network of loan sharks to pursue matters with defaulters.<ref name="Hindu"/>

In 2003, Akula created a for-profit arm under the name of SKS Microfinance Private Limited. In order to capitalize the new business, Akula established the SKS Mutual Benefit Trusts (MBTs), which fundraised among women from [[Andhra Pradesh]] villages. The Mutual Benefit Trusts were used as vehicles to funnel grants for the non-profit SKS Society to the for-profit SKS Microfinance, a move that would be illegal to do directly. In 2005, SKS Microfinance raises enough funds to become a [[non-banking financial company]].<ref name=et2013>{{cite news|first1=John Samuel|last1=Raja D|first2=M.|last2=Rajshekhar|title=Vikram Akula's attempt to return to SKS Microfinance rests on Rs 250 crore trusts|url=https://economictimes.indiatimes.com/industry/banking/finance/banking/vikram-akulas-attempt-to-return-to-sks-microfinance-rests-on-rs-250-crore-trusts/articleshow/23432304.cms |date=3 October 2013|publisher=The Economic Times |archive-url=https://web.archive.org/web/20180824135038/https://economictimes.indiatimes.com/industry/banking/finance/banking/vikram-akulas-attempt-to-return-to-sks-microfinance-rests-on-rs-250-crore-trusts/articleshow/23432304.cms |archive-date=24 August 2018 |url-status=live}}</ref><ref name=mff>{{cite news|url=http://www.microfinancefocus.com/news/2010/05/17/exclusive-sks-microfinance-journey-to-ipo-an-inside-story/|title=Exclusive: SKS Microfinance journey to IPO – An inside story|first1=Vikash|last1=Kumar|first2=Daniel|last2=Rozas|work=[[Microfinance Focus]]|date=17 May 2010|archive-url=https://web.archive.org/web/20100522024746/http://www.microfinancefocus.com/news/2010/05/17/exclusive-sks-microfinance-journey-to-ipo-an-inside-story/|archive-date=22 May 2010}}</ref>

=== Growth and IPO (2005 to 2010) ===

In 2007, SKS Microfinance raised $11.5 million through equity investments led by [[Sequoia Capital]].<ref>{{Cite news|url=https://www.cnbc.com/id/17844093|title=Sequoia Invests $11.5 Million in Microfinance Fund|date=2007-03-29|work=CNBC|access-date=2018-09-04}}</ref> In 2008, it further raised $74.5 million through equity investments led by Sandstone Capital.<ref>{{Cite news|url=https://www.dnaindia.com/business/report-sks-micro-gets-51m-funding-from-sandstone-1205252|title=SKS Micro gets $51m funding from Sandstone|date=2008-11-11|work=DNA|access-date=2018-09-04|language=en-US}}</ref>

On 28 July 2010, SKS Microfinance debuted on the [[Bombay Stock Exchange]] with an IPO that was oversubscribed 14 times. [[Muhammad Yunus]] expressed concern that going public would put the demands of shareholders ahead of the poor.<ref>{{cite web|url=http://www.businessweek.com/ap/financialnews/D9H86ICG2.htm |title=Archived copy |accessdate=2011-03-10 |url-status=dead |archive-url=https://web.archive.org/web/20150623052910/http://www.businessweek.com/ap/financialnews/D9H86ICG2.htm |archive-date=2015-06-23 }} ABCNews, SKS Launches India's First Microfinance IPO</ref> He added further, "If they do it, I cannot stop them but I would encourage genuine Microcredit programs."<ref>{{cite web |url=http://www.microfinancefocus.com/news/2010/04/09/microfinance-pioneer-prof-yunus-raises-concerns-over-sks-ipo/ |title=Microfinance pioneer Prof Yunus raises concern over SKS IPO |accessdate=2011-09-19 |work=Microfinance Focus |url-status=dead |archive-url=https://web.archive.org/web/20110829093149/http://www.microfinancefocus.com/news/2010/04/09/microfinance-pioneer-prof-yunus-raises-concerns-over-sks-ipo/ |archive-date=2011-08-29 }}</ref>

SKS founder Vikram Akula resigned from the board on 23 November 2011. In 2015, P. H. Ravi Kumar became the non-executive chairman.<ref>[http://www.careratings.com/upload/CompanyFiles/PR/SKS%20MICROFINANCE%20LIMITED-04-06-2015.pdf Care Ratings - SKS Microfinance Limited]. 6 April 2015</ref> The company's shares meanwhile lost 96% of their value from a high of Rs. 1491.50 in 2010.<ref name="bbc">{{cite news|title=Boss of Indian microfinance firm SKS steps down|url=https://www.bbc.com/news/business-15866827|accessdate=12 January 2018|publisher=BBC|date=24 November 2011}}</ref>

=== Debtor suicides crisis (2010 to 2014) ===

In September 2010, reports surfaced in the media of nearly 200 suicides by defaulters of a number of micro finance institutions, including SKS finance. This led to an enquiry by the Andhra Pradesh government.{{citation needed|date=November 2020}}

In a 2012 cover story, [[The Hindu]]<ref name="Hindu">{{cite news|last1=Kinetz|first1=Erika|title=Small loans add upto lethal debts|url=http://www.thehindu.com/news/national/Small-loans-add-up-to-lethal-debts/article13325024.ece|accessdate=12 January 2018|publisher=The Hindu|date=25 February 2012}}</ref> reported that a marked shift took place in the values and incentives of SKS in 2008, after large scale investment began to flow in from venture capitalists and prospectors including Boston-based Sandstone Capital and Sequoia Capital.{{citation needed|date=November 2020}}

An independent investigation commissioned by the company linked SKS employees to at least seven suicides of creditors in [[Andhra Pradesh]]. A second investigation said SKS may have been involved in two other suicide cases.<ref name=kinetz>{{cite web|last=Kinetz|first=Erika|work=Associated Press Business Writer|url=https://finance.yahoo.com/news/ap-impact-lenders-own-probe-080122405.html|title=AP IMPACT: Indian lender SKS' own probe links it to borrower suicides, despite company denials|publisher=Associated Press/Yahoo|accessdate=25 February 2012}}</ref> In 2012, SKS Microfinance cut 1200 jobs and closed 78 branches in Andhra Pradesh.<ref>{{cite news|title=SKS Microfinance cut 1,200 jobs in Andhra Pradesh|url=http://timesofindia.indiatimes.com/business/india-business/SKS-Microfinance-cuts-1200-jobs-in-Andhra-Pradesh/articleshow/13083157.cms|accessdate=10 May 2012 | work=The Times Of India}}</ref> Interviews with family members of the deceased, by [[BBC]] suggested that the reason for these suicides appeared to be large sub-prime loans taken by the villagers, with the active encouragement of SKS loan agents.<ref>{{cite web|last1=Morris|first1=Madeline|title='India's Microfinance Meltdown' for BBC Newsnight|url=https://www.youtube.com/watch?v=JzF6thf5GqA|website=You Tube|publisher=BBC|accessdate=23 July 2015}}</ref>

In 2014, the investors in the SKS Microfinance, Mauritius Unitus Corporation, Sequoia Capital India Growth Investments and SKS Mutual Benefit Trust as well as its founder Vikam Akula relinquished their roles as promoters.<ref>{{cite web|title=Vikram Akula, Sequoia Capital no longer promoters: SKS Microfinance|url=https://www.businesstoday.in/current/corporate/vikram-akula-sequoia-capital-no-longer-promoters-sks-microfinance/story/205810.html|date=3 May 2014|publisher=Business Today}}</ref>

=== Rebranding (2016 to present) ===

In 2016, SKS Microfinance was renamed to Bharat Financial Inclusion Ltd.<ref>{{cite web|title=SKS Microfinance renamed Bharat Financial Inclusion |url=https://economictimes.indiatimes.com/industry/banking/finance/sks-microfinance-renamed-bharat-financial-inclusion/articleshow/52734652.cms|date=13 June 2016|publisher=Economic Times}}</ref>

In 2017, the company launched a loan approval system based on Adhaar to reduce the time and cost involved in the loan approval process.<ref>{{cite web|title=Bharat Financial looks to reduce cost with digital loan processing system | url=https://economictimes.indiatimes.com/industry/banking/finance/bharat-financial-looks-to-reduce-cost-with-digital-loan-processing-system/articleshow/57291079.cms |date=22 February 2017|publisher=Economic Times}}</ref> In the same year, it also launched its Kirana store ([[general store]]) service which allowed its customers to do financial transactions by visiting its designated stores.<ref>{{cite web|title=Bharat Financial to use 2 lakh kirana stores as service sites | url=https://www.dnaindia.com/business/report-bharat-financial-to-use-2-lakh-kirana-stores-as-service-sites-2472690 |date=14 June 2017|publisher=DNA India}}</ref>

Later in 2017, the company entered into discussions of a possible merger with [[IndusInd Bank]].<ref>{{cite web|title=Bharat Financial Inclusion, IndusInd Bank enter merger talks | url=http://www.newindianexpress.com/business/2017/sep/12/bharat-financial-inclusion-indusind-bank-enter-merger-talks-1655882.html |date=12 September 2017|publisher=New Indian Express}}</ref> The merger received approvals from [[Reserve Bank of India]], [[National Stock Exchange of India]] and [[Bombay Stock Exchange]] later in 2018.<ref>{{cite web|title=Bourses approve merger of IndusInd Bank, Bharat Financial | url=https://www.thehindubusinessline.com/news/bourses-approve-merger-of-indusind-bank-bharat-financial/article24098049.ece |accessdate=28 August 2018|publisher=Hindu Business Line}}</ref>

==Products==
SKS Microfinance offers life assurance and a variety of financial loans – income generation loans; mid-term loans; long-term Loans; loans for purchase of products like cook-stoves, solar lights, water purifiers, mobile phones, bicycles and sewing machines; and loans secured on gold jewellery.<ref name="sksindia1">{{cite web|url=http://www.sksindia.com/our_products.php#1 |title=SKS: Our Work: What We Do: Our Products |publisher=Sksindia.com |accessdate=7 February 2016}}</ref> The company lists some of the social benefits of its financial product and service offerings as "providing self-employed women financial assistance to support their business with enterprises, such as raising livestock, running local retail shops called ''kirana'' stores, providing tailoring and other assorted trade and services."<ref name="sksindia1"/> Loans were subsequently also offered to men, and for various reasons including marriage expenses and to purchase seeds.<ref name="Hindu" />

== Operations ==
SKs Microfinance follows the Joint Liability Group model. The methodology involves lending to individual women, using five– member groups as the ultimate guarantor for each member.<ref>{{cite web |url=http://www.sksindia.com/methodology.php |title=SKS: Know SKS: Our Approach: Methodology |publisher=Sksindia.com |accessdate=2012-07-17 |url-status=dead |archive-url=https://web.archive.org/web/20120513141425/http://sksindia.com/methodology.php |archive-date=2012-05-13 }}</ref> Through group lending, situations of [[adverse selection]] and [[moral hazard]] due to [[asymmetric information]] are better managed.<ref>[http://www.isid.ac.in/~planning/workingpapers/dp04-23.pdf] Prabal Roy Chowdhury, "Group-lending with sequential financing, joint liability and social capital,"</ref> "Social collateral" replaces asset [[collateral (finance)|collateral]] (which is lacking in the poorer segments of society). Such a system works because India is still a highly community-centric society. The concept of honour and respect within society is deeply rooted in Indian culture and willful default invites condescending glances, humiliation and even ostracism.<ref>Eric Savage, Abhijit Ray & Abhishek Fogla, "Indian Microfinance: Swimming Fully Clothed!," {{cite web |url=http://www.lcsi.smu.edu.sg/downloads/SocialSpace2010-EricSavage&AbhijitRay&AbhishekFogla.pdf |title=Archived copy |accessdate=2011-09-19 |url-status=dead |archive-url=https://web.archive.org/web/20120321085828/http://www.lcsi.smu.edu.sg/downloads/SocialSpace2010-EricSavage%26AbhijitRay%26AbhishekFogla.pdf |archive-date=2012-03-21 }}</ref> In Nov 2015, SKS Microfinance Ltd has cut interest rates by one percentage point to 19.75% on the loans it offers to low-income women borrowers, making it the sole Indian microlender to offer loans at a rate below 20%.The move came after Reserve Bank of India (RBI) decided to double the borrower limit for microfinance loans for less than 24 months. Lower interest rates can attract more borrowers in an increasingly competitive market. Microfinance companies, which had started lending at around 28-34% in 2010, are now able to charge lower interest rates because of newer avenues to raise funds at lower cost and their ability to operate more efficiently than before."SKS is the first company to charge sub-20% interest rates on the core income generating loans," the company claimed in a statement on Friday. This is the fourth time SKS has reduced interest rates since October 2014.<ref>{{Cite web |url=http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/856C7C7F_8A04_4C32_912C_3E7CD5A7E667_084919.pdf |title=Archived copy |access-date=6 February 2016 |archive-url=https://web.archive.org/web/20160206182748/http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/856C7C7F_8A04_4C32_912C_3E7CD5A7E667_084919.pdf |archive-date=6 February 2016 |url-status=dead }}</ref>

==References==
{{Reflist}}

==External links==
*[http://www.bfil.co.in/ Official site]
*[http://indiamicrofinance.com/y/sks-microfinance SKS Microfinance News]
*[http://indiamicrofinance.com/sks-microfinance-draft-red-herring-prospectus.html SKS Microfinance IPO – Draft Red Herring Prospectus filed with SEBI]
*[https://www.wsj.com/articles/SB10001424052748704104104575621822772077134 SKS Shares Drop on Microloan Backlash]

{{Financial services in India}}
{{Authority control}}

[[Category:Microfinance companies of India]]
[[Category:Community development financial institutions]]
[[Category:1997 establishments in Andhra Pradesh]]
[[Category:Organisations based in Hyderabad, India]]
[[Category:2018 mergers and acquisitions]]
[[Category:IndusInd Bank]]

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