Leading Indian microfinance institution SKS Microfinance has received $11.5 mn of venture capital funding from Sequoia Capital. This is "the first pure for-profit private equity play" ever seen in the micro-lending world, according to SKS Microfinance CEO Vikram Akula, in an interview with CNBC. Sequoia's investment makes SKS the largest for-profit microfinance institution in the world. Sequoia's investment also makes it SKS' lead investor. Other stakeholders include Unitus Equity.
The concept of microfinance, which is providing small business loans to poor borrowers who lack credit, was made famous by Nobel peace prize winner Mohammed Yunus, founder of the not-for-profit Grameen Bank of Bangladesh. While the foundations are similar in concept, SKS' version of micro-lending provides loans that carry interest rates to its 600,000 members in 7200 villages in rural India.
However, it is to be noted that Sequoia's investment comes with a rider: in the next 3-5 years, SKS will either have an initial public offering or be acquired.
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