An estimated 450 million people in India have no access to formal financial services and are forced to depend on the government or loan sharks to meet their financing needs. However, since 2007, the growth of for-profit Micro Finance Institutions (MFIs) has greatly improved access to finance for many and has enabled them to participate in the Indian economy.
Following a 2010 law banning private sector MFIs from operating in the state of Andhra Pradesh (AP), the MFI sector in India sustained heavy losses leading to the collapse of many operators. SKS Microfinance, the largest MFI in India at the time, had gone public just before the introduction of the law and was in need of capital in order to continue operating.
In July 2012, Legatum led a significant equity raising from SKS, which provided an opportunity for the company to survive and grow, but perhaps more importantly, was seen as a vote of confidence for the Indian microfinance sector as a whole. Legatum again led a further capital raising for SKS in May 2014. With confidence in the sector restored and the company once again on a solid financial footing, Legatum chose to exit the investment in late 2014, realising a 4x return on investment.