beyondbrics

Rahul Gandhi, the presumed heir to India’s Congress party, may be media-shy, but he already enjoys a quiet, behind-the-scenes potency. And in India today, very little seems to escape association with him.

So it is with the microfinance crisis rocking the southern, Congress-ruled state of Andhra Pradesh. After several struggling micro-borrowers committed suicide, public outcry forced the state government to rein in lenders. Now some microfinance executives are arguing the crisis is politically motivated, designed to embarrass the young Gandhi.

In 2005, Gandhi visited SKS, a leading microfinance company, whose recent $350m initial public offering put the spotlight on the huge personal fortunes being made in the industry. Back then, SKS was not nearly so big or as profitable as it has now become.

But that’s not stopped critics from alleging close ties between Gandhi and SKS’s founder, Vikram Akula, apparently hoping that some of the public ire against Akula will singe Gandhi too. That effort is being aided by a 2006 photo (below) of Sonia Gandhi, Rahul’s mother and the Congress party president, presenting Akula with an award for Social Entrepreneur of the Year at the World Economic Forum’s India Economic Summit.

Some argue that the outcry against the microfinance sector is being deliberately fanned by Jagan Reddy, a disgruntled, out-of-power Congress party politician – and the son of the late chief minister Y.S. Reddy, who was killed in a helicopter crash while in office last year.

Reddy junior believed he deserved to inherit his father’s mantle and position. But New Delhi’s Congress-leadership – read Sonia Gandhi – did not share that view, and has supported the current chief minister K. Rosaiah.

So the theory goes that Reddy is out to do anything he can to embarrass the Congress party’s high command, including its golden boy, Rahul. Indeed, his newspapers and TV channels have whipped up public and political backlash against microfinance companies.

There may be some truth in this interpretation of the media’s motivations. But politics can only explain so much. India’s microfinanciers must ask why their industry was so open to such attacks in the first place.

Related reading:
Choppy ride ahead for India’s microlenders, beyondbrics