India: Royal Bank of Scotland sells 4.62% stake in SKS Microfinance

Royal Bank of Scotland (RBS) today offloaded 4.62 per cent stake in Hyderabad-based SKS Microfinance for about Rs 63.50 crore.

According to the data available with the stock exchanges, RBS sold 50 lakh shares, amounting to 4.62 per cent stake, of SKS Microfinance through open market transactions.

The shares were sold on an average price of Rs 127.01 valuing the transaction to Rs 63.50 crore.

Meanwhile, Merrill Lynch Capital Markets Espana has acquired 49.95 lakh shares of SKS Microfinance for Rs 63.48 crore.

At the end of March quarter, RBS Asia Merchant Bank (Singapore) Ltd held 50 lakh shares or 4.62 per cent holding in the micro finance player.

In September, RBS had bought 50 lakh shares of SKS from Deutsche Securities Mauritius for a little over Rs 58 crore through open market transactions.

Earlier, in July, Deutsche Securities Mauritius had picked up 9.15 per cent stake, or 95 lakh shares, in SKS through qualified institutional placement for about Rs 78 crore.

SKS Microfinance scrip dropped 1.52 per cent to settle at Rs 129.20 on the BSE.

SOURCE: The Indian Express

India: SKS Microfinance concludes two securitisation transactions

SKS Microfinance Limited, the only listed microfinance institution in the country, on Monday announced the conclusion of two microfinance securitisation transactions aggregating Rs 226 crore.

With this, the company has completed 12 securitisation transactions with seven funding partners aggregating to Rs 1,207 crore during 2012-13.

In addition, SKS has raised incremental debt of Rs 1,680 crore and raised fresh equity of Rs 263.50 crore, taking the total incremental funding inflow for FY13 to Rs 3,150 crore, which is more than double the Rs 1,434 core raised for FY12.

These 12 securitisation transactions helped SKS fund around 1.6 million micro loans extended to borrowers belonging to economically weaker sections. All transactions qualify for the priority sector treatment for the purchaser banks, the company stated in a press release.

“Securitisation is emerging as the preferred instrument of confluence for financial inclusion as it amalgamates the funding capability of banks with the credit delivery skills of Non-Banking Financial Company-Micro Finance Institutions (NBFC-MFIs) like SKS Microfinance Limited,” said S Dilli Raj, chief financial officer, SKS Microfinance.

According to Raj, the most satisfying aspect of these transactions is the community break-up of the beneficiaries — 22% of the borrowers are Scheduled Castes, 5% Schedule Tribes and 17% minorities.

SKS operates across 17 states of India.

SOURCE: Business Standard

India: AP to challenge Supreme Court relief for SKS Microfinance on resuming ops

By BV Mahalakshmi, The Indian Express

The Andhra Pradesh government has decided to challenge the Supreme Court interim relief order given to SKS Microfinance for resuming loan operations in the state. The SC order says that the company has to adhere to the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act, 2011, with respect to new loan disbursements, interest rates and recovery practices.

Speaking to FE, Reddy Subramaniam, principal secretary, rural development, Andhra Pradesh government, said, “The interim relief came without any notice to the state government, which is the main party in the SKS case. We could have clarified if we were informed earlier as in any special leave petition (SLP) cases. Hence, we have decided to challenge the interim relief order at the earliest.”

Reddy clarified that there was no blanket ban on the company to stop operations. “We only suggested that the company has to abide by the state regulations to carry out their operations,” he said. “We have neither arrested anybody so far as claimed by the company and not stopped them from recovering their dues from borrowers,” he said.

The state law, the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act, 2011, defines that no company should use any coercive methods or any mode of harassment on borrowers.

More than 80 suicide cases have been reported in the state due to harassment by the microfinance institutions due to bad recovery methods. Incidentally, the District Rural Development Agency (DRDA) had also cancelled the registration of SKS Microfinance in Mahabubnagar district for allegedly not following rules.

Recently, insurance regulator Irda also slapped a penalty of R50 lakh on SKS, which collected extra funds, apart from the premium, as a corporate insurance agent without proper disclosure to policy holders.

Recently, the Andhra Pradesh HC division bench dismissed the petitions filed by SKS and other microlenders against the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act, 2011. The company then moved the apex court. Also, the SC asked the AP government not to take coercive steps against the company.

India: Supreme Court allows SKS Micro Finance to resume operations in AP

In a major relief to the crisis-hit SKS Microfinance Ltd, the Supreme Court on Monday gave an interim order allowing it to resume operations in state.

It was two years ago that the government had barred SKS and all other non-banking finance companies (NBFCs) and micro finance institutions (MFIs) from conducting business in the state citing exorbitant interest rates and coercive loan recovery practices. SKS then moved the court, challenging the state’s regulation.

For SKS, the court’s order will now override the AP MFI Act, which came into effect in 2011. Other MFIs will have to submit petitions separately in order to get relief from the AP Act.

“We are still awaiting a copy of the Supreme Court judgment. At this stage, it is only by way of an interim relief and its implications can be examined only after the judgment copy is in hand,’’ said Alok Prasad, CEO, Microfinance Institutions Network (MFIN).

While SKS need not secure approval for every new loan it offers as mandated by the AP Act, it however, has to adhere to the Act as far as interest rates and recovery practice clauses are concerned. Andhra Pradesh is one of the biggest markets for SKS. Overall, the state accounts for more than a quarter of the total MFI industry in the country.

The AP Act was a big blow to SKS and MFIs. Operations of SKS, the country’s only listed MFI, fell from 7.7 million borrowers in December 2010 to 5.9 million in December 2011. Similarly, the number of active borrowers plunged from 6.7 million in December 2010 to 4.3 million in December 2011. At the time of the crisis, SKS’ total debt in the state was Rs 1,285 crore, including dues of Rs 620 crore and future receivables of Rs 680 crore. Complying with the RBI provisioning norms, the company had to write off the entire AP portfolio which, in turn, affected its profits for several quarters.

SOURCE: New Indian Express

India: SKS Microfinance pays penalty to insurance watchdog IRDA

SKS Microfinance said it has paid Rs 50 lakh as penalty imposed by insurance regulator IRDA along with a request to file a review petition to drop the charge made against the company.

“The company has paid Rs 50 lakh to IRDA with a request to permit it to file a review petition to drop the said charge,” SKS said in a filing to bourses.

The insurance watchdog last month imposed Rs 50 lakh penalty on the SKS Microfinance which had collected extra funds, apart from the premium, as a corporate insurance agent without proper disclosure to policy-holders.

As per the Insurance Regulatory and Development Authority (IRDA) order, a microfinance institution (MFI), which also operates as a corporate insurance agent, cannot collect more than the premium amount charged for the policy on behalf of an insurance company.

It held the company which acted as a corporate agent of Bajaj Allianz Life Insurance Company, guilty on that score and charged a penalty.

Meanwhile, the company in a separate statement said that it has appointed Ranjana Kumar, former vigilance commissioner with Central Vigilance Commission, as an Independent Director on its Board.

The company’s shares closed today at Rs 140, down 2.32 per cent on the BSE.

SOURCE: The Financial Express

India: Irda slaps Rs 50-lakh penalty on SKS Microfinance

Insurance Regulatory and Development Authority (Irda) has slapped a penalty of Rs 50 lakh on SKS Microfinance for violating insurance norms. Irda said the microfinance institution (MFI) levied a charge on its members, which was more than the premium amount, in violation of insurance regulations.

Irda has asked SKS to remit the penalty within 15 days from the date of receipt of the order.

According to the group insurance guidelines, an MFI cannot collect from its members amounts that are higher than the policy premium charged by the insurance company. MFI has not collected any ‘premium’ amount from its members but it collected one per cent of the loan amount as DRF fee.

According to the Irda order, the MFI was acting as a group policyholder and administrator for group life insurance policies, taken to cover the loan amount granted to its members.

Irda noticed that the group policy holder was recovering one per cent of the loan amount towards DRF (death relief fund) fee.

A portion (around 55 per cent) of the DRF fee is utilised to fund the group term insurance premium for the members. In case a member opts to insure her spouse/child, an extra one per cent is charged for each additional member.

Irda said the group policy holder does not insure all its members in a single policy, but obtains a different policy for each month. As the group policy holder pays only a part of the DRF fee as insurance premium, the remaining amount is booked as revenue income. This, according to Irda, is in violation of the group insurance guidelines

“The documents establish that the premium is only about 0.55 per cent of the loan amount and not 1 per cent as charged for the death protection fee,” the Irda order said. Thus, the MFI has levied a charge more than the premium in violation of guidelines, Irda noted.

SOURCE: Business Standard

India: SKS Microfinance concludes securitisation of two loans worth Rs 390 cr

Hyderabad: SKS Microfinance today said it has concluded securitisation of two loans given to small borrowers aggregating to Rs 390 crore.

With this, SKS Microfinance has completed seven securitization transactions aggregating to Rs 803 crore in FY13, SKS said in a statement.

SKS Chief Financial Officer S Dilli Raj said the present transactions generate liquidity of Rs 370 crore for SKS Microfinance Ltd, country’s only listed micro-lender, and also bring in the concomitant capital relief.

“Notably, 26 per cent of the pool is from Scheduled Caste and Scheduled Tribe entrepreneurs, 18 per cent from minorities, 34 per cent from Backward Castes and the

remaining 22 per cent from women belonging to other castes,” the statement said.

“The transactions have helped us provide working capital access to 5,00,000 women rural entrepreneurs while enabling the purchasing banks to achieve their priority sector loan obligations,” Dilli Raj said.

The two pools are rated A1+(SO) signifying ‘Highest Safety’ by one of the leading rating agencies, SKS said.

The pools comprise receivables from 14 states (excluding Andhra Pradesh), it said.

SKS has completed 22 assignments/ securitization transactions worth Rs 2,481 crore since October 2010, when Andhra Pradesh promulgated its Andhra Pradesh Micro Finance Institutions (Regulation of Money-lending) Ordinance, 2010 (which became an Act in December 2010).

All transactions have been rated A1+(SO), signifying ‘Highest Safety’, by one of the leading rating agencies, and Credit enhancement has not been invoked in any of the

structures, SKS statement said.

Shares of SKS rose by 10 per cent to close at Rs 145.75 apiece on BSE from its previous close.

SOURCE: The Financial Express

Top 10 microfinance institutions: A primer

By Eliza Villarino, Devex

Although the practice can be traced back centuries, microfinance as we know it is commonly credited to the movement started by Nobel Peace Prize laureate Muhammad Yunus in the 1970s. And that movement continues to grow, as donors and civil society alike emphasize the importance of financial inclusion — or providing affordable financial services to the poor and disadvantaged sections of society — in the developing world.

There are three sources of microfinance services: formal institutions like rural banks and cooperatives, semiformal ones such as nongovernmental organizations, and informal groups including money lenders. Women and small entrepreneurs benefit the most from microfinance.

The biggest microfinance institution is BRAC in Bangladesh. The country’s Asian neighbors have also widely adopted the practice and play host to some of the world’s largest MFIs.

Devex ranked the top 10 MFIs in terms of staff size. The below list also includes information on active borrowers and gross loan portfolio. Check out the Devex jobs board for career opportunities with these and other groups.

 

1. BRAC

Headquarters: Dhaka, Bangladesh
Founded: 1972
Staff size: 44,306
Number of borrowers (2011): more than 5 million
Gross loan portfolio: $646 million

 

2. Grameen Bank

Headquarters: Dhaka, Bangladesh
Founded: 1983
Staff size: 25,283
Number of borrowers (2011): more than 8.3 million
Gross loan portfolio: $939 million

 

3. SKS Microfinance

Headquarters: Hyderabad, India
Founded: 1998
Staff size: 22,733
Number of borrowers (2011): more than 7.3 million
Gross loan portfolio: $925 million

 

4. ASA

Headquarters: Dhaka, Bangladesh
Founded: 1978
Staff size: 21,298
Number of borrowers (2011): more than 5 million
Gross loan portfolio: $531 million

 

5. Compartamos Banco

Headquarters: Mexico City, Mexico
Founded: 1990
Staff size: 13,298
Number of borrowers (2011): 2.3 million
Gross loan portfolio: $840 million

 

6. BASIX

Headquarters: Hyderabad, India
Founded: 1996
Staff size: 10,000
Number of borrowers (2011): more than 1.5 million
Gross loan portfolio: $281 million

 

7. Bandhan

Headquarters: Kolkata, India
Founded: 2001
Staff size: 9,754
Number of borrowers (2011): 3.8 million
Gross loan portfolio: $733 million

 

8. Vietnam Bank for Social Policies

Headquarters: Hanoi, Vietnam
Founded: 2003
Staff size: 8,900
Number of borrowers (2011): 8.5 million
Gross loan portfolio: $4.9 billion

 

9. Spandana Sphoorty Financial Ltd.

Headquarters: Hyderabad, India
Founded: 1998
Staff size: 8,328
Number of borrowers (2011): nearly 4.2 million
Gross loan portfolio: $778 million

 

10. ACLEDA

Headquarters: Phnom Penh, Cambodia
Founded: 1993
Staff size: 7,340
Number of borrowers (2011): 272,300
Gross loan portfolio: $1 billion

India: SKS Microfin eyes rebound, to expand beyond Andhra

India’s only listed microfinance lender SKS Microfinance, which posted net losses in the previous five quarters, expects to turn profitable in the third quarter of 2012-13, driven by cost reductions and higher lending. The company is also looking to ramp up its presence outside Andhra Pradesh (AP).

“We will be back in black by Q3,” S Dilli Raj, chief financial officer, SKS Microfinance told Hindustan Times.

“With branch consolidation and headcount rationalisation, the cost structure will be optimised and the benefits of cost reduction will start flowing from the second quarter onwards,” he said.

SKS cut down branch count to 1,350 from 2,400 and headcount to 13,000 from 27,000 since the AP crisis in October 2010.

After reports of suicide of borrowers in the state, the AP government had come out with the AP Microfinance Ordinance in October 2010, and later made it into an Act, crippling all MFIs.

In the previous five quarters, the company’s non-AP portfolio declined due to lack of bank funding, an issue, which the company said has been resolved.

By Sachin Kumar, Hindustan Times

India: SKS Microfinance employees embezzle Rs 15.8 cr

SKS Microfinance has said that some of its employees have cheated the company to the tune of Rs 15.8 crore in the last financial year.

The services of employees involved have been terminated and the company has written off over Rs 14 crore.

The auditors of the company have reported that there was cash embezzlement by the employees to the tune of Rs 2.5 crore and loans given to non-existent borrowers was Rs 13.3 crore, , the micro lender said in its annual report.

“We have been informed that during the year there were instances of cash embezzlements by the employees of the company aggregating Rs 2,50,91,317; and loans given to non-existent borrowers on the basis of fictitious documentation created by the employees of the company aggregating Rs 13,33,13,975,” auditors S R Batliboi & Co said in the annual report.

“The services of all such employees involved have been terminated and the company is in the process of taking legal action. The outstanding balance (net of recovery) aggregating Rs 14,24,40,656 has been written off,” the auditors added.

SKS said that employee fraud is an inherent risk in the business the company operates in, since all the transactions are cash-based.

In case of cash embezzlements, the company has recovered an amount of Rs 1,08,59,714 including the insurance cover.

Cash embezzlement is 0.09 per cent of disbursement during the year, SKS clarified.

According to the annual report, total disbursements in the 2011-12 stood at Rs 2,736 crore.

To mitigate this risk to a large extent, the management has put in place several preventive control measures such as procuring indemnity bond from every field staff, with personal guarantee of a third person.

“Every bank transaction (deposit/ withdrawal) is to be executed by minimum of two staff comprising a bank signatory and a confirmed staff. The strongbox at every branch is controlled by two keys and the keys are held by two different employees in the branch,” SKS informed.

The company also said that surprise visits are conducted by managerial employees, at the time of carrying out cash/ bank transactions by field employees besides minimising the cash balances at various branches to the lowest level possible (50,000 + next day disbursement).

In case of cash embezzlements, SKS said it has taken fidelity insurance to minimise the losses from cash embezzlements.

In case of loans given to non-existent/ fictitious borrowers, SKS said it has recovered an amount of Rs 73,97,648 against these cases including insurance cover. These cases are 0.49 per cent of disbursement during the year.

SOURCE: The Hindu Business Line

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