Will SKS redefine governance standards?

Will SKS redefine governance standards?

You can either love Ashok Jhunjhunwala or hate him, but you cannot ignore him. Depending on whom you are listening to, the professor either is the man who holds the keys to the salvation of indigenous, low-cost technology or the one responsible for its damnation (for the record, this writer believes he is the former).

The recent debate about the initial share sale of SKS Microfinance—in this paper (see Monika Halan’s insightful column on it at www.livemint.com/sksmicrofinance.htm; the then work-in-progress initial public offering was also the subject of an earlier column by this writer) and elsewhere—reminded me of Jhunjhunwala, and, more specifically, a meeting with him many years ago.

The meeting had happened at his small flat, inside the verdant campus of the Indian Institute of Technology, Madras. It was a Sunday morning and this writer’s arrival in the quiet corner that housed the professor’s house had startled a spotted deer that had been grazing on a grassy embankment nearby (it was a stag, antlers and all). Up a flight of stairs, inside the flat, Jhunjhunwala and this writer discussed, sitting cross-legged on mattresses in the living room— the only furniture around— low-cost technology and how it could be made more inclusive (inclusion was just beginning to become a buzzword).

“Charity isn’t a sustainable business model," the professor had said.

I agreed with him then and I agree with him now, which probably indicates where I stand in the whole for-profit or not-for-profit debate that is being played out around SKS.

Which means—and this is possibly a red flag for liberals of all hues—that I do not agree with Mohammed Yunus.

Enough has been said about the advantages and disadvantages of being a public company, the biggest among the former being access to low-cost funds and that among the latter, an unhealthy obsession with profits.

Without getting into the positives, it is clear to this writer that SKS should succeed simply because this will benefit the ranks of the unbanked; it has already reached a scale, in terms of reaching out to people who previously had no access to credit, that no Indian bank, including state-owned ones have.

And without getting into the negatives, it is equally clear to this writer that SKS should, just like it redefined the business of microfinance in India, also set new standards in terms of how companies are managed and governed.

SKS’ IPO filings are transparent—most companies’ are—but they shed no light on the quality of management and governance. On paper at least, SKS has a good board but a true measure of its performance, as well as that of the company’s management’s, will come only after a few quarters. By then, the company would have undergone the regulatory and media scrutiny that all high-profile public companies go through. For our part, we will cover SKS much like we would cover any large public company—which means we won’t cut it any slack for being a microfinance company that is, essentially, improving lives. Then, nor will we criticize it for focusing on profits or profitability.

Write to acuteangle@livemint.com