We had to find a way to change microfinance
Mar 20 2012, 19:22 | By Infomedia18
Vikram Akula, chairman, SKS Microfinance
Image: Entrepreneur Magazine
It was the summer of 1995 when a woman in rural India asked the simple, five-word question that changed my life.
I was an idealistic graduate student, working in India on a Fulbright scholarship and determined to change the world. This was my second stint working in remote Indian villages with the nonprofit Deccan Development Society (DDS), but my first time working in microfinance. The possibilities of microfinance—lending very small amounts of money to very poor people—seemed limitless, and I was excited to be learning about it on the ground.
As head of an agricultural lending program serving thirty villages, I’d putter down dirt roads on a Hero Honda motorbike, meeting with borrowers, disbursing loans, and collecting repayments. Each week, I talked with rural Indians who were pulling themselves out of poverty and despair—landless laborers who had started with nothing but were now launching their own small businesses, earning not only money but greater self-respect as well.
The degree of poverty in these remote Indian villages was unlike anything I’d ever seen in the United States. Children with spindly legs and hungry eyes played in the mud alongside mangy stray dogs and farm animals. Piles of garbage dotted village roadsides, and sewage ran in trenches alongside homes. People lived in one-room mud huts, sweltering in the Indian sun. There was a smell of desperation in the air, a sense of resignation that went back centuries. The poor had always been poor, and here in the Indian hinterlands, it felt like they always would be.
Working to help these villagers was incredibly gratifying, though there were definitely hardships to living in remote villages: sleeping on a straw mat on the floor in a small room, fetching drinking water from a distant well, and seeing the effects of poor nutrition and hygienic conditions all around me was certainly a far cry from the middle-class comfort of New York, where I had grown up. But I felt like I was really making a difference, really helping to end poverty in India.
Then, one day, a woman walked into our regional office. Barefoot, emaciated, and wearing a faded purple sari, she was obviously poor and from a lower caste. But she’d found her way to our office because she’d heard about our program and wanted to learn more. This was no small achievement, as she’d either paid to take a bus or had walked quite a distance to find us.
She asked some questions about our lending, then got quickly to her point. “Can you start this program in my village?” she asked.
I looked closely at her. She was probably in her mid-thirties, but like many poor Indians, she looked older than her years. Her face was worn and her skin weathered, but her eyes were alight with purpose. Life had beaten her down, but it hadn’t beaten the hope out of her. This, I thought, was exactly the kind of person we should be lending to. So I promised to ask DDS’s director later that day.
Yet when I asked him if we could start lending in the woman’s village, I got a disappointing answer. “Our grant cycle is coming to an end, Vikram,” he told me. “We don’t have the funds to expand right now beyond the villages we’re already in. There’s nothing we can do.”
The next day, I rode my motorbike to the woman’s village to break the news to her. The sudden appearance of an Indian man speaking Telugu with an American accent always caused a stir in remote villages, and it didn’t take long for word to spread. The woman soon came outside to meet me.
“Here’s the situation,” I told her. “We don’t have the resources right now to expand to new villages. We’ve got a set amount of money, and we’ve already committed it elsewhere.” Even as the words came out of my mouth, I wished I could take them back. But all I could say was, “I’m very sorry.” The woman looked me in the eye, and with great dignity, she spoke the words that would change my life. “Am I not poor, too?” she asked me. I stared at her, jarred by the question, and she went on. “Do I not deserve a chance to get my family out of poverty?”
Am I not poor, too? With these words, this driven, determined woman suddenly made me see how unfair—unjust, really—our microfinance program was. Yes, we were helping hundreds of poor Indians take the first steps to pull themselves out of poverty.
But my program had just Rs. 1 crore to spend in thirty villages—that was all DDS had been given for the project. And once that money was disbursed, there was no money left for other poor Indians who desperately wanted a chance too. This woman wasn’t asking for a dole. She wasn’t asking for a handout. She was simply asking for an opportunity. But we couldn’t give it to her.
This was a defining moment for me. We had to find a way to change microfinance—to make it available to any Indian, or any poor person anywhere in the world for that matter, who wanted to escape poverty.
Microfinance was a fantastic tool, but a deeply flawed one. There simply had to be a way to scale it beyond the constraints of how it was currently being practiced.
I rode my motorbike home over those same dirt roads, but everything had changed. I had a new mission: to solve the problem of how to make microloans available on a mass scale, far larger than the few million people worldwide who were then being served.
The search for that solution—and the incredible results, white-hot controversy, and vigorous ongoing debate it engendered—is what my entrepreneurial journey is about.
(Excerpt from A Fistful of Rice: My Unexpected Quest to End Poverty through Profitability by Vikram Akula, Founder and Executive Chairman, SKS Microfinance Ltd.; Harvard Business Press: 2010)
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