A bit of a buzz followed remarks made by SKS Microfinance head Vikram Akula at the Harvard Social Enterprise Conference a few weeks ago. While Mohammad Yunus is the most famous casualty, if you will, of the microfinance crisis of 2010, SKS and Akula have taken quite a beating themselves. Ground zero of the crisis was Andhara Pradesh state in India, where SKS is headquartered.
Akula and Yunus had a famous exchange at the 2010 Clinton Global Initiative where the two debated the merits of for profit microfinance. Yunus contended that the term 'microfinance' applies to a social venture and for-profit lending should fall under the moniker of 'banking.'
The debate is not new, but it was an important moment since two of the figureheads for each side had the opportunity to engage in a public forum. So it came to the surprise of many when Akula admitted that Yunus was right in regards to bridging private capital and social enterprise.
Neha Thirani in the New York Times India Ink blog summarizes the event:
“Professor Yunus was right,” Mr. Akula said, referring to Muhammad Yunus, the Grameen Bank founder, economist and a frequent critic of Mr. Akula and others who tried to turn microfinance into a for-profit industry. “Bringing private capital into social enterprise was much harder than I anticipated,” he said.
Mr. Akula also told conference attendees that “he had focused on scaling SKS’s model and had not fully anticipated the potential downside of accessing the public market for social enterprise,” a statement from conference organizers said.This probably came from having read the Social Enterprise Conference, where Akula spoke, blog:
Akula acknowledged the legitimacy of the criticism he had received from Mohammad Yunus, 2006 Nobel Peace Prize Laureate Professor and Founder of Grameen Bank, who had long taken issue with SKS’s deployment of private capital in microfinance and its profit orientation.
“Professor Yunus was right” Akula said tonight, amidst a room of 500 attendees at the Conference. “Bringing private capital into social enterprise was much harder than I anticipated.”Reports and headlines would have you believe that Akula was admitting defeat and realized that his vision of private microfinance institutions was not possible. A closer read reveals that Akula is only admitting that it is hard, not wrong. Akula is admitting that he though it would be relatively easy to 'bring private capital into social enterprise.'
David Roodman argues,
He is saying he made mistakes, in particular in the aggressive way in which he brought private capital and the profit motive into microcredit, and to that extent that Yunus was right. But I don’t think that in acknowledging that “Professor Yunus was right” Vikram means to fully endorse Yunus’s position that microcredit should never be done for profit.Given the wording of the statement, it appears that Roodman is right about Akula's intent.
What matters is what Akula and SKS will do next. Such a statement changes little. The crisis in AP knocked SKS down, but not out. At the end of the last fiscal year (March 31, 2011), SKS had a $925,844,433 loan portfolio with 6,242,266 female active borrowers. With a large base of borrowers, SKS is not going away any time soon.