Farmer suicides, SKS issues worries Microfinance, IPOs delay

By siliconindia   |   Thursday, 14 October 2010, 19:21 IST
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Bangalore: Negative publicity over the sacking of SKS CEO and the alarming increase in suicide deaths in Andhra Pradesh has brought out nervousness among microfinance firms and intern causes delay in the plans for an Initial Public Offering (IPO). Officials from Hyderabad-based microfinance firms recently said that they are not willing to take up an IPO at this stage. The attention is more likely to be focused on non-operational issues, reports The Economic Times. "The industry is going through a bad phase. Moreover, after watching the scheme of events at SKS, once they terminated the services of Gurumani, we have decided to go slow with our plans. Funds can be raised through other avenues as well. If the IPO happens, the core management team may have to shift focus from operations and get entangled in procedural issues," a top official said, on condition of anonymity. Another Hyderabad-based firm, Share, the third-biggest in terms of business value, planned to merge with Asmitha Microfinance and hit the market sometime early next year. The merger was supposed to help them increase market share. "The industry is going through turbulent times and we may put our other plans in the backburner," an official with Share said. State chief minister K Rosiah warned the government will enact a law to check their alleged misdeeds. The MFIs, should stop charging unreasonably high interest rates or they will be put down with an iron hand. "There is no question of allowing them to continue to harass the rural poor. A blanket ban on MFIs may not be in the best interest of the rural women, but we will act firmly on them," he added. Andhra Pradesh's minister for rural development, V Vasanth Kumar said that many MFIs charge exorbitant interest rates from women with the rates sometimes going upwards of 45 percent.