India microlenders face heat over rates and debt recovery

NEW DELHI, October 24, 2010 (AFP) – India’s biggest lender to the poor, SKS Microfinance, was the toast of investors when it staged a hugely successful public share offer three months ago. Now SKS, India’s only listed microfinancier, faces an unwelcome spotlight as it and other small-scale lenders come under scrutiny over high interest rates, allegations of strong-arm debt collection tactics and a rash of suicides.

Last Friday, police in Andhra Pradesh arrested several debt collectors for SKS and Spandana Spoohrty Financial, India’s second-largest microlender, after a borrower alleged she was harassed over two loans totalling 1,300 dollars.

The police action followed more than 30 suicides in Andhra Pradesh blamed by politicians on aggressive debt recovery agents operating in the southern state, where many of India’s biggest microfinance institutions are based.

After news of the suicides surfaced in mid-October, SKS said that 17 of the dead were among its borrowers, but rejected responsibility for the deaths.

“Suicides are unfortunate but there might be reasons other than our loans,” SKS chairman and founder Vikram Akula said.

“One thing we are sure about is that ou