The main argument against his way of functioning has been that SKS has been charging almost 28% interest when conventional banks charge only around 16%. Akula's argument is that it is much less than what money lenders do in the countryside. Even when an illiterate farmer is taking a loan from the bank, at 7 to 12 %, the costs resulting from visiting the banks a number of times, the loss of wages on those days and the costs of greasing the palms of the banker and any middlemen all adds upto more than 30%. The same big banks who are crying foul at this rate of interest from the MFIs, have no qualms in charging upto 36% on loans advanced against their credit cards.
The high rate of interest is a major bone of contention between the father of microfinance, Nobel laureate Dr Mohammed Yunus from Bangaladesh and Vikram. Dr Yunus believes Microfinance is more of social entrepreneurship than a for-profit enterprise.
1. To get the required capital, Akula has turned to the for-profit business model to tap into commercial capital which is available in large numbers.
2. To reduce costs he has adopted modern technology aids like mobile phones, palmtops which feed into a Management Information System as finally each day there are millions of tiny transactions and unless the cost of these transactions are managed well, it is not possible to run the operations at all.
3. To increase capacity he has standardised many of the procedures and has eliminated collecting change, visiting customers who are on the route of travel and so on.
Targeting the middle class and the rural population at the bottom of the pyramid, using the Hybrid Value Chain as propounded by Hau Lee in his recent HBR article September 2010, Nokia and Airtel have been able to sell mobile phones and mobile telephone services at cheaper rates to the people, Metro cash-n-carry is able to sell its wares to the same people who are running provision sores in remote areas at cheap rates, Bajaj Allianz and ING have been able to sell their insurance products to cover the risk of the poor illiterate people of Andhra. Mobile banking has been experimented here. These are unheard of in any part of the world ! SKS has also opened up schools which give English medium training for the students helping lift the society from years of bondage and slavery.
Only future can tell whether Akula was in fact moving in the right direction or whether the politicians from AP have derailed this mass poverty eradication process spearheaded by a single person working against the might of Indian corruption and feudal mindset.
Good reviews on the book " A fistful of rice" by Vikram Atula, are given in the links below ..
On youtube an interview with Akula http://www.youtube.com/watch?v=Nf98RPvwJ8U