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Message: <blockquote data-quote="ibnanv" data-source="post: 12175422" data-attributes="member: 218596">“You have a [borrower group], and a loan officer goes out  and trains  them, educates them, then they give the loan. That's the  SKS I'd seen in  1999. That was the whole model on which microfinance is  supposed to  work. In the quest for growth, a lot of these things got  neglected,”  said Ankur Sarin, director of the SKS trusts, which are the  fourth  largest shareholder in the company and tasked with looking out  for  borrower interests.   As the relationships between heavily indebted borrowers  and loan agents  broke down, it became harder to collect. Frustrated  agents began working  together and going door to door to collect, rather  than taking payments  only in public, a company rule that had been  designed to limit  coercion. They began using other borrowers to  pressure defaulters into  repaying.   “The growth was very rapid. That growth led to some  suboptimal  outcomes,” said Ashish Lakhanpal, managing director of  Kismet Capital,  one of SKS' largest shareholders, who was on the SKS  board until October  2010. “Were there lapses? Absolutely.”   While the board was concerned about fast credit growth,  the company  never believed it was harming borrowers, Mr. Lakhanpal  said. “Mistakes  were made, but I find it difficult to believe there was  anything people  did at a managerial level to encourage field officers  to do that,” he  said.   Plan that never made it   In the spring of 2011, Mr. Akula began circulating a  plan to spend Rs.  49 crore to train financial counsellors, who would  make sure clients  were not getting into too much debt and used their  loans productively,  according to Mr. Sarin, Mr. Vautrey and others with  firsthand knowledge  of the proposal.   But the plan was never adopted. Publicly, Mr. Akula  continued to deny  that SKS bore any responsibility for suicides.  “Whatever happened was  due to external factors and was not reflective  of any fundamental flaw  in our model,” he told Business Today.   Privately, Mr. Akula prepared a 55-page presentation  for the board that  detailed the seven suicides that SKS' outside  investigation had blamed  on the company. The presentation showed how  the pre-IPO push for growth  led to a systemic breakdown, and again  urged core reforms to restore  training and lending discipline.   Board members received copies of Mr. Akula's  presentation at a July 26,  2011, meeting, said a former employee who  helped prepare the material.   The minutes of the meeting, however, make no mention of the report.   “As per my notes, this was not part of the board  proceedings,” company  secretary Sudershan Pallap wrote in a September  26 e-mail to Mr. Akula,  who had complained of the omission.   Mr. Ravikumar, who would become interim chairman when  Mr. Akula  resigned, said the board was never informed that SKS  employees were  implicated in any suicides, and denied Mr. Akula  presented any such  findings to the board. “There was no presentation  from Vikram Akula at  that board meeting. This will be reflected in the  minutes, as signed by  Vikram Akula,” he said.   Mr. Ravikumar said the board reviewed reports from the  Microfinance  Institutions Network, but none of them implicated SKS  employees.   Complaints   Mr. Akula continued to complain to the board that his  presentation had  been ignored. He summarised his concerns about the  company's direction  in e-mails, obtained by the AP, to seven board  members, including  Sequoia's Sumir Chadha, Sandstone's Paresh Patel and  three independent  directors — Mr. Ravikumar, Harvard's Tarun Khanna,  and Pramod Bhasin,  the former chief executive of Genpact.   Mr. Chadha, Mr. Patel and Mr. Khanna did not respond to multiple requests for comment.   Mr. Ravikumar declined to comment on what he said was personal correspondence.   Mr. Bhasin said reports claiming SKS bore  responsibility for borrower  suicides were “unsubstantiated.” “Any  issues raised to the Board at  various times were fully investigated by  external parties and found to  be unsubstantiated or without evidence or  actions were taken on them  where appropriate,” he wrote in an e-mail.   Rancour within the company was intensifying. Board  members felt Mr.  Akula was suffering from a bad case of “founder's  syndrome,” that he  could not stand to share power at a company that had  become too big for  him to run.   Finally, on November 23, 2011, Mr. Akula resigned.   Mr. Vautrey said he was targeted, and SKS began termination proceedings against him on February 6.   Three members of his staff have been fired and have filed wrongful termination complaints.   On February 6, SKS also sold Rs. 243 crore in  securitised loans. The  stock price surged 10 per cent. Top executives  have been on the road,  hoping to raise Rs. 500 crore from international  investors.   Mr. Sai, the company spokesman, said SKS has hired an  ombudsman, is  spending Rs. 14.7 crore to improve its customer grievance  programme and  has revamped training to ensure that employees comply  with current  regulations and do not lend to over-indebted borrowers. He  said the  company would like to reorganise incentives to maintain rapid  growth  while ensuring loan quality. Those changes have yet to be  implemented,  he said. -- AP http://www.thehindu.com/news/national/article2932670.ece?homepage=true</blockquote>

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