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This case makes a comparison between two banks involved in social banking using microfinance. Both banks aspire to enable people in poverty and small enterprises to obtain small loans. Both banks are committed to providing access to the money and credit for these individuals and their small enterprises. The case examines the similarities and differences of the banks and raises questions about the long term viability of their mission and for how long stockholders and contributors will be willing to forego satisfactory earnings to support the banks social missions and the future of social banking and both banks.
INTRODUCTION
Grameen Bank was founded in Bengladesh as a corporation under the Grameen Bank Ordinance in 1983. At its inception, authorized capital was 100 million Takas (equivalent to US $1,436,162.50). Paid up capital was 30 million Takas ($432,848.77). Presently Grameen's authorized capital is 3,500 million Takas ($1,050 million). Borrowers hold 96.57 percent of the shares of stock.
The principal business of Grameen is lending without collateral to landless people for economic activities. The bank additionally takes deposits, excluding business in foreign exchange. Grameen offers the following loans: basic loans, housing loans, higher education loans, young entrepreneur loans and struggling members' loans.
While Grameen Bank does business in a number of countries, most of its activity is in Bangladesh. Bangladesh is a country located adjacent to India in Asia. (See description of Bangladesh in the following section).
SKS Microfinance is the largest lender to poor persons in India in terms of market share, outstanding loans and total borrowing. SKS (Swayan Krishi Sangan) Society was founded in 1997 as a nonprofit organization. Its mission was to make small loans to poor individuals and to entrepreneurs. It operates primarily in India- the largest market of such people and businesses in the world. Since its transformation to a for-profit bank under the name of SKS Microfinance, it has been successful in making microfinance loans with a repayment rate of 99 percent. At the end of August 2010, its stock traded at 26.3 times estimated earnings.
In 2003, the founder of SKS, Mr. Vikra Akula, created five trusts. Each trust started with US $500,000 in philanthropic contributions. In 2008 SKS Microfinance was set up as a separate for profit company and...