Sometimes, the debt collectors watched nearby.
More than 200 poor, debt-ridden residents of Andhra Pradesh killed themselves in late 2010, according to media reports compiled by the government of the south Indian state. The state blamed microfinance companies — which give small loans intended to lift up the very poor — for fueling a frenzy of overindebtedness and then pressuring borrowers so relentlessly that some took their own lives.
The companies, including market leader SKS Microfinance, denied it.
However, internal documents obtained by The Associated Press, as well as interviews with more than a dozen current and former employees, independent researchers and videotaped testimony from the families of the dead, show top SKS officials had information implicating company employees in some of the suicides.
An independent investigation commissioned by the company linked SKS employees to at least seven of the deaths. A second investigation commissioned by an industry umbrella group that probed the role of many microfinance companies did not draw conclusions but pointed to SKS involvement in two more cases that ended in suicide. Neither study has been made public.
Both reports said SKS employees had verbally harassed over-indebted borrowers, forced them to pawn valuable items, incited other borrowers to humiliate them and orchestrated sit-ins outside their homes to publicly shame them. In some cases, the SKS staff physically harassed defaulters, according to the report commissioned by the company. Only in death would the debts be forgiven.
Davuluri Venkateswarlu, director of Glocal Research in Hyderabad, which conducted the industrywide investigation, said in an interview that he told SKS executives there was "clear involvement of SKS personnel" in some suicides.
SKS continues to deny all responsibility for the deaths and says it never commissioned an independent inquiry. SKS spokesman J.S. Sai, who flew to Mumbai from the company's Hyderabad headquarters to discuss the AP findings, said the company stands by its September 2011 affidavit before India's Supreme Court. In that affidavit, chief executive M.R. Rao says SKS "is neither the cause of nor responsible for any suicides in the state of Andhra Pradesh."
But the story of what went wrong at SKS has led current and former employees and even some major shareholders to question that strategy and raises fundamental questions for the multibillion-dollar global microfinance industry.
Meanwhile, whistleblowers at SKS say that they have been targeted for retaliation and that the company has failed to correct structural flaws that contributed to the suicides.
"At the end of it," said Alok Prasad, chief executive of the Microfinance Institutions Network, the industry group that commissioned the Glocal report, "you come down to a handful of cases where some things went wrong. Is that indicative of the model being bad or very rapid expansion leading to a loss of control?"
In November 2010, the industry group Microfinance Institutions Network hired Glocal to investigate 44 deaths among debtors of microfinance companies, including SKS.
Venkateswarlu, the Glocal director, presented the findings to executives at three lenders. In January 2011, he delivered startling news to Akula and Rao: SKS employees had clear involvement in the suicides of four borrowers, meaning that their actions appeared strongly linked to the subsequent deaths, according to their investigation.
The AP obtained a four-page section of the Glocal report that deals with the SKS case studies. It related the financial history of borrowers, the loans obtained, the nature of pressure or harassment for repayment and the microfinance company involved. Venkateswarlu verified that it was the material he presented to Akula and Rao.
"They said they'd look into the issue and take some appropriate action," Venkateswarlu said.
SKS sent internal audit teams to the field. Their reports exonerated the company.
Unable to reconcile the two sets of findings, SKS hired Guardian's Human & Civil Rights Forum and Third Eye, a private investigative agency, to do a more thorough, independent inquiry, according to Ramesh Vautrey, head of administration at SKS, who oversaw the investigation, and Rajender Khanna, the president of Guardian's.
A Jan. 17, 2011, letter from SKS, signed and stamped by Vautrey, asked Khanna to "carry out a fact finding enquiry on the causes of suicide and complicity of our field staffs without any prejudice," according to a copy of the letter obtained by AP. The AP was shown invoice numbers for SKS payments to Third Eye and emails indicating the findings were sent to top management.
P.H. Ravikumar, who became interim chairman of the SKS board last November, said neither management nor the board authorized an independent inquiry into borrower deaths.
"Our enquiries from 2009 to 2011 have revealed that neither SKS nor its employees have been the cause for any of the suicides in the state of Andhra Pradesh," the company said in a statement.
Khanna’s teams reported that SKS employees bore direct or indirect responsibility for at least seven suicides, including two that overlapped with the Glocal findings.
The interview videos were shown to the AP by Uma Maheshwari, who said she was present during one set of recordings and visited several of the families personally. She left SKS in July.
Vautrey said he sent the case studies to three top managers, including Rao. Emails obtained by AP indicate that summary reports were emailed to the managers.
Rao did not respond to multiple requests from AP seeking comment.
Vautrey went to Akula's office one night and told him what they were doing was bad karma.
"I don't want to be part of a team abetting suicides," Vautrey said in an interview. "It is systemic failure. We have no right to kill anybody for our own business. Let's close down our business if we can't do it right."
Publicly, Akula continued to deny that SKS bore any responsibility for suicides. Privately, he prepared a 55-page presentation for the board that detailed the seven suicides that SKS' outside investigation had blamed on the company. The presentation showed how the pre-IPO push for growth led to a systemic breakdown, and again urged core reforms to restore training and lending discipline.
Board members received copies of Akula's presentation at a July 26, 2011, meeting, said a former employee who helped prepare the material and spoke anonymously for fear of retribution.
The minutes of the meeting, however, make no mention of the report.
"As per my notes, this was not part of the board proceedings," company secretary Sudershan Pallap wrote in a Sept. 26 email to Akula, who had complained of the omission.
Ravikumar, who would become interim chairman when Akula resigned in NOvember last year, said the board was never informed that SKS employees were implicated in any suicides, and denied Akula presented any such findings to the board.
"There was no presentation from Vikram Akula at that board meeting. This will be reflected in the minutes, as signed by Vikram Akula," he said.
Ravikumar said the board reviewed reports from the Microfinance Institutions Network, but none of them implicated SKS employees.
Akula continued to complain to the board that his presentation had been ignored. He summarized his concerns about the company's direction in emails, obtained by the AP, to seven board members, including Sequoia's Sumir Chadha, Sandstone's Paresh Patel and three independent directors: Ravikumar, Harvard's Tarun Khanna, and Pramod Bhasin, the former chief executive of Genpact.
Chadha, Patel and Khanna did not respond to multiple requests for comment.
Ravikumar declined to comment on what he said was personal correspondence.
Bhasin said reports claiming SKS bore responsibility for borrower suicides were "unsubstantiated."
"Any issues raised to the Board at various times were fully investigated by external parties and found to be unsubstantiated or without evidence or actions were taken on them where appropriate," he wrote in an email.