SKS Microfinance shares rise after it trims operations

Officials from SKS Microfinance receive payment from a borrower Microfinance is one of the key ways in which rural people in India can get access to credit

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Shares in India's SKS Microfinance have risen after the firm said it would cut 1,200 jobs and close 78 branches in the state of Andhra Pradesh.

Its shares rose as much as 16% to 105.7 rupees on the Bombay Stock Exchange.

Its business has been hit after the state introduced strict rules two years ago to curb alleged harassment of clients by microlenders.

India's biggest microlender said it had written off 11.2bn rupees ($210m; £130m) of its loans in the state.

"Closing down branches and reducing headcount are extremely painful decisions for us, but these have become urgent in view of the present financial situation," said MR Rao, chief executive of SKS.

"Our business in Andhra Pradesh has come to a standstill."

Growing troubles

Microlenders provide loans as small as $20 to small business owners and farmers, and is a key way in which people living in rural areas can get access to credit.

India has a large rural population, making microlending an attractive business option in the country.

SKS, which launched in 1998, has had success tapping into this vast potential.

It attracted investment from the likes of George Soros when it listed on the stock market in 2010.

However, its fortunes have dwindled in recent times, and its share price has fallen more than 90% since August 2010.

It made a loss of 13.61bn rupees for the year ending March 2012, compared with a profit of 1.12bn rupees in the previous year.

It has also witnessed a boardroom battle that saw its founder and chairman, Vikram Akula, resign in November last year.

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