“The World is Imploding” ➜ She left a suicide note: “Work hard and earn money. Do not take loans.” ➜ An in-depth Associated Press report on February 24, 2012, implicated SKS in a number of suicides linked to the company’s loan collection policies.

“WORK HARD AND EARN MONEY.

DO NOT TAKE OUT LOANS”

I would add to this bit of advice that in the USA,

do not use prepaid bank cards nor debit cards.

Pay in cash. Do Not spend money that you don’t have.

Live within your own budget.

Your personal inter-relationships are the most important thing that you

have. Creatively work to rebuild community in positive ways.

This is within your power.

 

MUMBAI, India (AP) — First they were stripped of their utensils, furniture, mobile phones, televisions, ration cards and heirloom gold jewelry. Then, some of them drank pesticide. One woman threw herself in a pond. Another jumped into a well with her children.

Sometimes, the debt collectors watched nearby.

More than 200 poor, debt-ridden residents of Andhra Pradesh killed themselves in late 2010, according to media reports compiled by the government of the south Indian state. The state blamed microfinance companies — which give small loans intended to lift up the very poor — for fueling a frenzy of overindebtedness and then pressuring borrowers so relentlessly that some took their own lives.  [ More than 200 poor, debt-ridden residents killed themselves in late 2010; this is significant. This highlights that there is an internal problem causing these suicides.]

The companies, including market leader SKS Microfinance, denied it. [Wow, this is a lot like how META BANK operates… never accepting responsibility so that they can keep on doing what they have been doing. This is indifference and arrogance. ]

However, internal documents obtained by The Associated Press, as well as interviews with more than a dozen current and former employees, independent researchers and videotaped testimony from the families of the dead, show top SKS officials had information implicating company employees in some of the suicides. [I observed that META BANK used tactics such as lying, putting people on hold and blaming the consumer for intentional problems that META BANK had done just to get a hold of the consumer’s money and have interest free use of that consumer’s money… META BANK appeared to be set up more as a collections agency, using tactics a lot like those “BOOKIES” shown in old movies and a lot like what many may perceive to be Mafia like tactics on unsuspecting, innocent and very vulnerable people.]

An independent investigation commissioned by the company linked SKS employees to at least seven of the deaths. [ Seven deaths is already far too many.]

A second investigation commissioned by an industry umbrella group that probed the role of many microfinance companies did not draw conclusions but pointed to SKS involvement in two more cases that ended in suicide. Neither study has been made public.

Both reports said SKS employees had verbally harassed over-indebted borrowers, forced them to pawn valuable items, incited other borrowers to humiliate them and orchestrated sit-ins outside their homes to publicly shame them. In some cases, the SKS staff physically harassed defaulters, according to the report commissioned by the company. Only in death would the debts be forgiven.[ This is why they wanted the community relationships that exist in India. The financial lenders used it to shame these people whom they were scamming. I have observed a similar scenario in the BOESEN SUICIDE related to META BANK.]

The videos and reports tell stark stories:

One woman drank pesticide and died a day after an SKS loan agent told her to prostitute her daughters to pay off her debt. She had been given 150,000 rupees ($3,000) in loans but only made 600 rupees ($12) a week.[Re- read this line, and tell me who is morally responsible for giving a loan to someone who had no way to pay it back!!!!]

Another SKS debt collector told a delinquent borrower to drown herself in a pond if she wanted her loan waived. The next day, she did. She left behind four children. [I am offended by the solution that was presented to this mother. The person who makes such loans is a criminal and immoral person. Greed plays into this.   …. The problem though is that META BANK uses similar practices. What is wrong with a public that refuses to see the truth right before our faces??? We must speak out in outrage as a global community!!!!!]

One agent blocked a woman from bringing her young son, weak with diarrhea, to the hospital, demanding payment first. [Diarrhea is the leading cause of death in developing countries , especially among poor people… ‘one agent’ is immoral. However, META BANK is giving training seminars on their wonderful ( I jest here) banking concepts.]

Other borrowers, who could not get any new loans until she paid, told her that if she wanted to die, they would bring her pesticide. An SKS staff member was there when she drank the poison. She survived. [Thank goodness that she survived to be able to tell her story, but drinking pesticide may have shortened her life and earning capabilities … This is attempted murder by the lender. We can’t mince words here. I have long believed that META BANK caused the death of BOESEN. I wish that the judges would see this as META BANK pushes and pushes for more and more money from his estate. BOESEN had four young children at the time of his suicide.]

An 18-year-old girl, pressured until she handed over 150 rupees ($3) — meant for a school examination fee — also drank pesticide. She left a suicide note: “Work hard and earn money. Do not take loans.”

In all these cases, the report commissioned by SKS concluded that the company’s staff was either directly or indirectly responsible.

Caught in the despair of poverty, tens of thousands of impoverished Indians kill themselves every year, often because of insurmountable debt. The supportive structure of the microfinance companies was supposed to change that.

But Davuluri Venkateswarlu, director of Glocal Research in Hyderabad, which conducted the industrywide investigation, said in an interview that he told SKS executives there was “clear involvement of SKS personnel” in some suicides.

SKS continues to deny all responsibility for the deaths and says it never commissioned an independent inquiry.

[META BANK also pushes blame off onto the consumer, especially when they have created a desperate situation for the consumer. This kind of lending has been studied thoroughly. These lenders know exactly what they are doing. They charge higher interest rates to people who are poor credit risks; this means more money and coming in lots quicker for the lender. … However taking advantage of the most vulnerable people by misleading them is predatory lending…. META BANK does that to other US citizens. This is a crime that is personal and internal, not one nation against the other. … We have a common bond of humanity.  These lenders have a common bond of thieves; there is nothing left in them that resembles humanity and any of the values that most of us hold near and dear to our hearts.  However, we tend to make heroes out of those people who are rich and powerful. … The meek shall inherit the earth needs to become our motto so that we can fight the abuse of power and position in appropriate and successful ways.]

SKS spokesman J.S. Sai, who flew to Mumbai from the company’s Hyderabad headquarters to discuss the AP findings, said the company stands by its September 2011 affidavit before India’s Supreme Court. In that affidavit, chief executive M.R. Rao says SKS “is neither the cause of nor responsible for any suicides in the state of Andhra Pradesh.” [Why were there so many suicides and all had taken out loans they couldn’t pay back????]

The deaths came after a period of hypergrowth leading up to the company’s hugely successful August 2010 initial public offering. [This is why the lenders did this, but it is still immoral and inhumane. We must all work to stop this, now on a global level. We have more in common with other people who take out loans that we do with the lenders.]

Originally developed as a nonprofit effort to lift society’s most downtrodden, microfinance has increasingly become a for-profit enterprise that serves investors as well as the poor. As India’s market leader, SKS has pioneered a business model that many others hoped to emulate. [ This was a publicity gimmick and a scam!!!! META BANK also gets someone else, another corporate entity to push their prepaid bank cards for them. Promises are strongly implied that consumers will be able to get their good credit history repaired by using a META BANK Debit Card. Nothing could be further from the truth. META BANK and others using the same action plan only want to make lots of money for themselves.]

But the story of what went wrong at SKS has led current and former employees and even some major shareholders to question that strategy and raises fundamental questions for the multibillion-dollar global microfinance industry. [yes, they should question this kind of strategy and raise some fundamental questions about how SKS operates.]

Meanwhile, whistleblowers at SKS say that they have been targeted for retaliation and that the company has failed to correct structural flaws that contributed to the suicides.[META BANK also turned a blind eye and a deaf ear to the origin of the problem; after all they created the problem that was bringing in money hand over fist, at such a fast pace and at such a high rate, it was in their best interest to deny the existence of any problem. They planned the problem and have no apparent moral code that most humans have.]

“At the end of it,” said Alok Prasad, chief executive of the Microfinance Institutions Network, the industry group that commissioned the Glocal report, “you come down to a handful of cases where some things went wrong. Is that indicative of the model being bad or very rapid expansion leading to a loss of control?”  [ 200 + suicides is not “a handful” of cases where something went wrong. This is a major problem and like META BANK, MFI Network’s Alok Prasad is pretending that it is all on the “up and up” – You can fool all of the people some of the time and some of the people all of the time, but you can’t fool all of the people all of the time. World Wide and Internationally regulated lending policies that protect consumers are needed.]

___

SKS Microfinance Limited (SKS) is a non-banking finance company (NBFC), regulated by the Reserve Bank of India. SKS claims its mission is to eradicate poverty by providing financial services to the poor.

The company operates across these 19 states of India: Andhra Pradesh, Karnataka, Maharashtra, Orissa, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, Himachal Pradesh, Haryana,West Bengal, Jharkhand, Chhattisgarh, Gujarat, Kerala, Tamil Nadu, Punjab and Delhi.

[This means that for India the problem is huge!!!!]

According to a CRISIL Report on Top 50 Indian Microfinance Institutions (MFIs), SKS Microfinance is the largest MFI in India in terms of number of borrowers, number of branches and total loans as of September 30, 2008.[1] Founded in 1997 by current chairperson Vikram Akula, SKS as of December 31, 2010, has 7.7 million clients (2010) [2] in 2,403 branches in the 19 states across India. SKS charges an annual effective interest rate between 26.7% and 31.4% for core loan products.[3] [ Interest rates at that amount is USURY.] At the end of 2010’s financial year on 31 March 2011, the company listed a gross loan portfolio of US$925,844,433 with 6,242,266 female active borrowers.[4]

SKS hopes “to serve 50 million households across India and other parts of the world [ Oh no, this spells ruin for the average person.]  and also to create a commercial microfinance model that delivers high value to our customers”.[5] [ This is nothing but promotional material and jargon, especially from what we now know.]

The hope is that much poverty can be alleviated by providing financial services to low-income households.[6] [ Please note that this is marketing strategy directed both at the government who honestly seeks to address and to find solutions for serious economic problems and also to those who live in poverty. Being a two pronged approach makes it appear like a great idea when all that it will do is garner huge amounts of money for the bank or financial lenders and their investor base.]

SKS practices a standardised processes of delivering and recovering loans, which enables them to reach out to the most customers cost effectively. They are able to expand the business to reach further villages by charging a small interest rate, one that clients are willing to pay in order to avoid starvation, poor money management, or government loan sharks.

 [ This is what I believe and have observed that happened to BOESEN in Iowa due to how META BANK gives out loans.] Company officials denied the claim, but the Associated Press said internal documents, as well as interviews with more than a dozen current and former employees, independent researchers and videotaped testimony from the families of the dead, showed top SKS officials had information implicating company employees in some of the suicides.[7]

Contents

  • 1 Operations
  • 2 Awards
  • 3 IPO
  • 4 Suicide link allegation
  • 5 References
  • 6 External links

[We must  look at the suicide link allegation further. I think that this is far too similar to what happened to Boesen in Iowa to be ignored as as being an isolated incidence. META BANK and any bank like it has studied the market so that they try to tap into whatever may be any given customer’s achilles’ tendon.]

Operations

SKS Microfinance follows the Joint Liability Group (JLG) model. The methodology involves lending to individual women, utilising five member groups where groups serve as the ultimate guarantor for each member.[8] Through the innovation of group lending, situations of adverse selection and moral hazard due to asymmetric information are better managed.[9]

Social collateral replaces asset collateral (which is lacking in the poorer segments of society), and 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 the Indian psyche and wilful default may invite condescending glances, humiliation and even ostracism.[10]  [This is significant information because it also has the potential to destroy the same community base that it is tapping into.]

SKS Microfinance offers 8 financial products and services to its clients – Income Generation Loans, Mid-Term Loans, Mobile Loans, Sangam Store Loans, Housing Loans, Funeral Assistance, Gold Loan, and Life Insurance.[11]

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 enterprises, such as raising livestock, running local retail shops called kirana stores, providing tailoring and other assorted trade and services.”[12] [ To me this sounds like a form of self pat on the back. I question whether this is really as great of a solution as they would wish us to think.]

SKS has had to raise money from several different companies and individual sponsors in order to help these women.[Women in developing countries would be the most financially vulnerable. Is this plan really helpful? It sounds opportunistic when the interest rates are as high as they are.]

In July 2009, Bajaj Allianz made an investment of $10 million (INR 50 crore) in SKS Microfinance which was the first-ever investment by an insurance company in an Indian microfinance institution. In November 2008 SKS raised equity worth $75 million (Rs 366 crore), the largest equity raised by an MFI in the world.

The third round of equity worth Rs 147 crore was raised in January 2008. In March 2006, SKS closed its first round of equity investment; the largest microfinance investment in India to date – $3.2 million from some of the world’s leading microfinance investors, and then eclipsed this accomplishment with a second round equity investment of $11.5 million in March 2007.

It leverages its equity to raise debt from public sector, private sector and multinational banks operating in India.[Think carefully about what this first sentence in this paragraph really means in practice.] This capital has helped the organisation scale up operations and reach out to millions of poor households across the length and breadth of India.[ It sounds like they are taking from one group once, and then appearing to benefit another, but that is all just a lot of publicity and a gimmick to make money for themselves…. They deny culpability, but they are so transparent.]

Since microfinance is not suitable for the destitute in society who need not just access to finance but livelihood training, social and health inputs, SKS has a unique Ultra Poor programme for this section of society. Under the programme, the beneficiaries receive training to run an income-generating enterprise, financial education and an asset.[This sounds great, right? But was the plan actually implemented in this way?]

Over an 18-month period these beneficiaries are trained to become self-sufficient and graduate into regular microfinance. The first phase of the Ultra Poor programme was conducted in Medak district of Andhra Pradesh where nearly 500 women were covered. In all, 426 women have successfully graduated from this programme. In the next phase, the Ultra Poor Programme is being planned in some of the poorest districts of Orissa and Jharkhand.  [ This may really be a way of pushing the debt off onto the general community. The bank or microfinance institution will profit, but the overall community will bear the brunt of the financial and social pain created by lending money to people who can’t pay back loans.]

Vikram Akula, founder of SKS Microfinance resigned from the board on 23-November-2011. PH Ravikumar, an independent director on the board of SKS India and former chief executive officer of NCDEX is taking over as the interim non-executive chairman of the only listed microfinance institution[13]

Awards

SKS was ranked as the Number 1 MFI in India and number 2 in the world by MIX MarketBusiness Week has rated SKS as one of the most influential companies. SKS has received numerous awards including the CGAP Pro-Poor Innovation Award, the ABN-Ambro/Planet Finance Process Excellence Award, Citibank Information Integrity Award, the Digital Partners SEL Award, SHG Foundation funding and the Grameen Foundation USA Excellence Award. SKS is the only MFI in India to receive the MIX Transparency Certification. SKS was selected by Unitus as the most promising microfinance organization in India.

[ Many times I have seen that META BANK creates a non-profit to create these awards so basically META BANK and any bank that operates like it gives themselves awards. It is a form of publicity. However, it helps to promote their scam too. Don’t trust awards because of this.]

IPO

On July 28, 2010, SKS Microfinance, India’s biggest Microfinance Institution (MFI), made its debut on the Bombay Stock Exchange, offering its shares to the general public. SKS’s chairperson and founder, Vikram Akula, claimed that Initial Public Offering (IPO) has been made to raise more funds so that SKS could reach out to a larger number of poor people. [This sounds too good to be true.

However, others, most notably the father of microfinance Muhammad Yunus, expressed doubt that Akula will be able to juggle SKS’s social mission with the demands of a traditional profit-maximizing business.

[ Meta Bank has often bragged that they serve the under banked in our community as if it was a genuine service that they are providing to the poor who don’t have a good credit history and who can’t get loans any other way. META BANK’s manner of doing business doesn’t really serve to help the poor because they charge outrageous fees, and set all the rules governing accounts in META BANK’s favor. META BANK changes the rules as needed to serve their own financial needs; they reserve the right to change the rules without giving notice to their customer base. The bottom line here is that this is really a major scam of the most vulnerable people in any of our societies. This kind of banking is a scam, and it needs to be stopped.   I agree with  Muhammad Yunus on his understanding of this situation.]

The main obligation of any public company is to make dividends for its shareholders, while the main obligation of an MFI is to serve the poor.

Yunus is afraid that in the end SKS will have to put its shareholders’ interests above the ones of the poor. [Yunus is right. Pay attention to what Yunus is saying, consumers.]

“By offering an IPO, you are sending a message to the people buying the IPO there is an exciting chance of making money out of poor people.  This is an idea that is repulsive to me.  [ And to me too!!!!]   Microfinance is in the direction of helping the poor retain their money rather than redirecting it in the direction of rich people,” Yunus said.[14] He added further, “If they do it, I cannot stop them but I would encourage genuine Microcredit programs.”[15]

In their face-to-face debate at 2010 Clinton Global Initiative, Akula insisted that going public is the only way for an MFI to raise sufficient funds to provide micro-loans for 3 billion people in need worldwide.

Yunus contradicted Akula by saying that micfofinance is, first of all, banking.

Therefore, Yunus continued, MFIs need to work towards obtaining banking licenses, which will enable them to take deposits from the public and, thus, become self-sustaining.[16] [ Yes, banks should act like banks. The rules and regulations should be very clear to consumers.]

However, the differing legal frameworks in Bangladesh and India could justify SKS Microfinance’s IPO initiative.

Yunus’s Grameen Bank in Bangladesh is funded primarily by deposits raised from its own borrowers and non-members, whereas Indian MFIs are prohibited by law from collecting deposits.

For them, funding must come from outside by necessity.

Given the magnitude of demand, the only sufficient external sources to provide that are the commercial capital markets. P.N. Vasudevan, founder and CEO of Equitas – the fastest-growing MFI in India in 2009 – argues that being for-profit in no way contradicts the client-focused mission, inviting any critic “to spend a day with us and then declare that not-for-profit format is the only way of being mission focused and I promise to quit my organization.”[17] [ Did he just contradict himself?]

Suicide link allegation [Compare this to Meta Bank’s relationship with Boesen, who was given loans he would never be able to repay]

An independent investigation commissioned by the company linked SKS employees to at least seven suicides, according to a report by the Associated Press.

A second investigation commissioned by an industry umbrella group that probed the role of many microfinance companies did not draw conclusions but pointed to SKS involvement in two more cases that ended in suicide, the report said. Neither study has been made public.

According to the Associated Press report, “More than 200 poor, debt-ridden residents of Andhra Pradesh killed themselves in late 2010, according to media reports compiled by the government of the south Indian state.

The state blamed microfinance companies — which give small loans intended to lift up the very poor — for fueling a frenzy of overindebtedness and then pressuring borrowers so relentlessly that some took their own lives.” [18]

[Misleading information to get people to borrow when they shouldn’t is predatory by its design…. This is a moral crime against humanity.]

References

  1. ^ Angel Broking, “SKS Microfinance,” http://indiamicrofinance.com/wp-content/uploads/2010/07/sks-ipo-angel-broking.pdf
  2. ^ CGAP, “Indian Microfinance Goes Public: The SKS Initial Public Offering,” http://www.cgap.org/gm/document-1.9.47613/FN65.pdf
  3. ^ Mix Market, “SKS Microfinance Private Limited,” http://www.mixmarket.org/mfi/sks
  4. ^ Mix Market, “SKS Microfinance Private Limited,” http://www.mixmarket.org/mfi/sks/data
  5. ^ http://www.sksindia.com/our_approach.php
  6. ^ Jonathan Morduch, “The Microfinance Promise,” http://www.jstor.org/pss/2565486
  7. ^ Kinetz, Erika“Associated Press Business Writer” (in English). AP IMPACT: Indian lender SKS’ own probe links it to borrower suicides, despite company denials. Associated Press/Yahoo. Retrieved 25 February 2012.
  8. ^ http://www.sksindia.com/methodology.php
  9. ^ Prabal Roy Chowdhury, “Group-lending with sequential financing, joint liability and social capital,” http://www.isid.ac.in/~planning/workingpapers/dp04-23.pdf
  10. ^ Eric Savage, Abhijit Ray & Abhishek Fogla, “Indian Microfinance: Swimming Fully Clothed!,” http://www.lcsi.smu.edu.sg/downloads/SocialSpace2010-EricSavage&AbhijitRay&AbhishekFogla.pdf
  11. ^ http://www.sksindia.com/our_products.php#1
  12. ^ http://www.sksindia.com/our_products.php#1
  13. ^ http://www.moneycontrol.com/news/business/sks-will-miss-akula-to-raise-funds-via-qipfy12_623405.html#toptag
  14. ^ ABCNews, SKS Launches India’s First Microfinance IPO http://abcnews.go.com/Business/wireStory?id=11270209
  15. ^ Microfinance Focuse, “Microfinance pioneer Prof Yunus raises concern over SKS IPO,” http://www.microfinancefocus.com/news/2010/04/09/microfinance-pioneer-prof-yunus-raises-concerns-over-sks-ipo/
  16. ^ “Clinton Global Initiative,” Special Session: Profiting from the Poor? A Discussion on Microfinance IPOshttp://www.clintonglobalinitiative.org/ourmeetings/2010/meeting_annual_multimedia_player.asp?id=83&Section=OurMeetings&PageTitle=Multimedia
  17. ^ Microfinance Focus, “Exclusive: SKS Microfinance journey to IPO – An inside story,” http://www.microfinancefocus.com/news/2010/05/17/exclusive-sks-microfinance-journey-to-ipo-an-inside-story/
  18. ^ Kinetz, Erika“Associated Press Business Writer” (in English). AP IMPACT: Indian lender SKS’ own probe links it to borrower suicides, despite company denials. Associated Press/Yahoo. Retrieved 25 February 2012.

External links

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