SKS Microfinance Ltd, one of the founding and largest microfinance institution based out of India has files its preliminary paperwork on the Indian Capital Market where it aims to raise about $250 million.  If they go IPO, this would make SKS the very first microfinance institution to go public.  Personally, I think this is great.  I’m sure there are pros and cons to this, and there will be people scrutinizing this decision, but I think it is a great idea to help raise money with an initial public offering.  When microfinance platforms first started, people loaned money without any incentives of making money.  Then microfinance platforms such as Microplace came along and gave investors and opening into microfinance.  The next step was donating to MFIs.  First it started with simple donations, but then Microfinance platforms like Dvelo.org came along that allow lenders to give to MFIs as well as entrepreneurs. I think that by SKS offering an IPO, it is the first step to the next level of the natural microfinance progression to gaining more access to capital.  It is going to be interesting to see what kind of reception this gets.
Read the entire Wall Street Journal article for for more details about SKS’s IPO preliminery prospectus.

With the downturn of the economy, many people are wary of investing their money.  Those that are investing are making sure that they get a solid return for their risk.  Microplace has reached a new benchmark by offering a 6% return to its investors, which should help increase the investment rate in microfinance loans.
Read the entire article over at The Mifi Report

I was reading a good article on livemint.com called “Big Microfinance Firms Taking Over Clients of Smaller Players,” and in it Vikram Akula, the founder and CEO of SKS Microfinance, discusses how smaller MFIs are having a hard time getting funding, so SKS is helping out a lot of their recipients:

“Banks are lending only to large MFIs. We are in a strong position. We are holding discussions with MFIs who are facing strain and helping them by taking over their clients,”

Since there are so many small MFIs out there who are having trouble finding funding, why do MFIs run out of people to loan to?  It has happened multiple times that I have gone to microfinance lending platforms and have not been able to loan money.  If these small MFIs in India are having trouble getting money for their recipients, why don’t they reach out to these organizations?  The article also mentions that there is a demand for 55 billion dollars while India currently only provides about 5 billion in microfinance loans.  If the people are out there, wouldn’t it just be a matter of connecting them to the right organizations?  It seems like there are plenty of lenders ready to donate to individual recipients, but not so many who are willing to donate to MFIs. What if there was a microfinance lending platform that was similar to Kiva and Microplace, but instead of donating money to individual recipients, you could donate to different MFIs?  Lenders could give loans to MFIs, who would in turn give loans to entrepreneurs.  The loans would have to be for a longer term than normal since they would most likely be bigger loans.  The model could be either non-profit or provide a return, depending on the business model, and it could help smaller MFIs who are having a harder time coping with the current economic crisis.  Of course there would be pros and cons to lending platform, but I think that if they were weighed out, the pros would win.

Learn more microfinance lending platforms.

When people learn about microfinance, one of the first questions they ask is “how can I help?” I was reading an article at the Microfinance Gateway called Open Up Your Virtual Wallet, where they compare two online lending platforms: Kiva.org and Microplace.

Although I personally use Kiva.org, I think that both platforms are a really easy and beneficial way to helping promote awareness about microfinance. Here is a quick highlight of what I personally think are the benefits to each:

• Whereas Kiva.org is a non-profit, Microplace earns it’s investors an interest. I think that this is extremely beneficial to microfinance because it opens up microfinance to a whole new demographic of people.
• Microplace is owned by Ebay. We all know the success that Ebay has had. With the ways that Ebay has changed online buying, I can’t wait to see what new innovative ways. Additionally, being a subsidiary of Ebay, Microplace will get world wide attention
• At Microplace, if a loan is defaulted, the security issuer bears the risk, so it is theoretically less risky than Kiva, so people who are hesitant or low on finances will feel more secure about donating with Microplace.

• Kiva allows you to get more involved with the loan recipient. The UI is really easy to browse, and you get a real sense of being a part of the solution.
• The fact that Kiva is a non-profit will spark more involvement around the world with people who are trying to make a difference and help alleviate poverty.
• Kiva is easier. With Kiva, all you have to have is a Paypal account and you can donate from anywhere in the world. Within finding a recipient, you can easily make the transaction within minutes.

Although there are differences in these two organizations they are both working for the same goal. Both are working towards a great cause, and whichever one you choose — know that you are part of the solution.