Akula Admits Error

Vikram Akula, who founded SKS Microfinance in India, and long aggressively defended it in the face of controversy, apparently has publicly stated that he made mistakes. I just have this fragment from a summary of the talk he gave at a Harvard Business School conference (HT @sushmitameka):akula

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.Recent press reports indicated SKS Microfinance agents may have used coercive loan recovery practices, departing from the traditional values-based model of social enterprise. Other reports have emerged that recipients of the loans were entering into potentially un-repayable debt. Akula stepped down from SKS Microfinance in November.Akula also stated tonight that he had focused on scaling SKS’ model and had not fully anticipated the potential downside of accessing the public market for social enterprise.

Note that at least as quoted here, Vikram is blurring an important distinction amidst his self-criticism---or at least can easily be interpreted that way. 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.At any rate, I don't endorse that position, as I explained before. There are plenty of stable, for-profit financial firms delivering useful financial services, including credit, to poor people: the ProCredit banks in 20-odd countries, BRI in Indonesia, microcredit banks in Peru and Bolivia, BASIX in India before the crisis, and more. The overshoot in India actually confirms that microcredit is not so different from other forms of credit in its relationship with the profit motive. In microcredit, as in other forms of credit, there are examples of private capital working well. And in microcredit, as in other forms of credit, there are examples of it going haywire.