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Archive for the ‘Microfinance’ category

Kiva launches in India with poor product experience

August 20th, 2012

The leading crowd-sourced microcredit platform, Kiva.org, has recently launched micro-lending in India.

I am a big fan of Kiva and I am a personal lender on the platform having made more than 200 loans — see my Kiva lender page.

But their micro-lending product for India is very different than what they offer for other countries.

Unfortunately, it is a very poor consumer lending experience. Here are a few of the issues:

all loans are for 3 years (minimum) — even though loan term is only typically for 6-12 months
loan capital is auto re-loaned to whomever the MFI wants to lend to during remainder of the period
no details provided on loan repayments until the end of 3 years
lender takes currency downside risk (but not upside!)

And there’s a warning that India regulations are really unpredictable, so you might not get your money back even if it’s repaid.

I don’t think most lenders are going to be excited about these terms! If there’s a high likelihood that a loan is never going to be repaid — implied in Kiva warnings — then most funders would want to structure their loan as a donation and take the tax write-off upfront … not in 3 years.

I’m very surprised that Kiva would launch such a poor quality micro-lending product. They have historically been a leader in delivering quality micro-lending products. I don’t think this is going to work well for them.

I am very familiar with some of the challenging regulatory issues in India, but platforms like Milaap.org* are providing a much better consumer micro-lending experience without all of these limitations. I do hope that Kiva quickly fixes their product as there is huge demand for micro-lending in India.

*Full disclosure: Unitus Seed Fund is an investor in Milaap

3 comments »

Posted in Microfinance, Opinion

Microfinance is more than a loan

October 24th, 2011

Rural school children in Karnataka, India

Poor children are key beneficiaries of their mother's microcredit loans

Interesting personal experience article by Jitin Mitra on the status and impact of microfinance in India.

As a result of the microfinance crisis in India, there has been a significant decline in the availability of microloans for poor Indian workers. While certain politicians gloat that they are protecting poor borrowers, Jitin notes that ”the reality is that millions of poor families have been forced back to traditional money lenders who have been far less beneficial, often charging over 50% interest and claiming collateral following defaults.” And, when poor families pay higher interest rates to moneylenders, this reduces their (already meager) disposable income. While mothers often take the brunt of the impact by reducing their own consumption (e.g. fewer/smaller meals per day), inevitably their children are also impacted.

Also what’s so often overlooked in an evaluation of microcredit is the empowerment benefits provided to most women borrowers. Jitin notes that ”[Microcredit borrowers'] confidence had soared as they were now able to provide for their families and in turn, gained respect within their communities.” If we care about social justice and equal opportunity, well-managed microcredit is one of the most powerful tools that has demonstrated empowerment benefit at scale.

Jitin also reminds us of a recent study commissioned by the Small Industries Development Bank of India (SIDBI), an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises in India. It showed that borrowers benefitted significantly from microfinance. Amongst the findings were that:

76% were able to increase their income through MFI assistance
66% improved their food consumption
56% could improve their housing conditions
77% could provide better educational facilities

While there are necessary and important reforms needed for a fast-growing industry like microfinance, we need to continue to advocate on behalf of the poor to ensure that power-hungry politicians don’t de-rail programs which have huge benefits for the poor.

3 comments »

Posted in Microfinance, Opinion

Tags: india

Book Review: Poor Economics – Part II

June 22nd, 2011

Poor Economics: A radical rethinking of the way to fight global poverty

By: Abhijit Banerjee and Esther Duflo

This is a continuation of my book review. See Part I of book review >

Here are a few highlights I took away for the book:

Most poor aren’t hungry. Despite what the experts say. Generally, the poor don’t eat more even if you give them food. There is though an age-old issue of micronutrient deficiencies in poor people’s diet. So, it’s a “quality” issue, not a quantity issue with lots of complicated behaviorial challenges to overcome.
Demand is low for many beneficial things. Many poor could afford water purification products and bed nets but don’t make them a budget priority. Much of this is based on focusing resources on the short-term.
Paying people to take vaccines can be cheaper. One of the biggest issues for global health is how few children complete a full series of vaccines leaving them unprotected and increasing drug-resistance for diseases. They have found in a trial that it is actually cheaper to provide gifts to mothers who get their children vaccinated and they get more compliance. Read for the details.
Making public good things free and the default. The authors argue that governments should make things like preventative care free, required and of consistent quality. Sounds paternalistic? Yep. They argue that those in the rich world are constant beneficiaries of paternalism that we hardly notice it!
Unconditional cash transfers to poor families work. We’ve heard about popular (and statistically effective to help people out of poverty) programs in South/Latin America like Mexico’s Oportuniadades which provide grants to poor families on the condition that they do things like ensure their kids are in school. Two studies have found that without these conditions that the poor still send their kids to school, etc.
Most poor people want a job, not a micro business loan. Despite what many microfinance advocates say, most self-employed do so out of necessity, not out of choice. Jobs bring more security which enables poor families to plan and invest for a brighter future.
Microcredit has high marginal ROI, but low overall ROI. Since most poor who take microcredit loans are underemployed, any capital can often quickly improve their income (think: having inventory on their store shelves). But most micro-businesses stay micro as they have insufficient capital to get to the next level. And micro businesses equal micro incomes. Better than no income, but not the jackpot.
Many poor parents don’t treat their children equally. They look for early signs of who might be “smarter” and often focus their resources on a single child’s education. They do this because they undervalue a smaller amount of education and overvalue a larger amount of education. Lots of parental expectations need reseting.
Micro insurance for the poor is a hard sell. Despite all the interest by promoters in the space. The poor don’t value insurance services enough to be willing to pay premiums, which results in the insurance pool being skewed to the higher risk people raising premiums further … a downward cycle. And then there’s fraud. Their conclusion: micro insurance will only work with government subsidy. Sounds like farm insurance in USA and EU?
Most poor need structure to save. If money sits around, it gets spent on other things, so the best savers amongst the poor are those who immediately invest their profits. Lots of good examples in book of structured savings. We know in USA that having opt-out approaches to things like auto-deduct-from-paycheck 401(k) savings programs result in much more saving than opt-in programs. We’re all human and subject to temptation.
Building small businesses into bigger businesses is very rare. There are always publicized examples of a poor entrepreneur who defied all odds to build a big business from scratch. But these are extremely rare — especially in developing markets. Most poor don’t even have the ambition for this.
Most small/micro business owners don’t benefit from training. Yep, that’s right. Mostly because they don’t care that much about growing their business because growing a business is very hard and not likely to succeed. This is unwelcome news to the many NGOs who believe that this is an important intervention.
Non-agriculture growth is more beneficial than agriculture growth. When a factory locates near a village, it most often results in faster wage growth than agricultural productivity growth resulting from innovations like the famed Green Revolution. Why? Because higher-paid employment becomes available even to those with low skills.

Summary of authors’ learnings

The poor often lack critical pieces of information and believe things that are not true.
The poor bear responsibility for too many aspects of their lives.
There are good reasons that some markets are missing for the poor, or that the poor face unfavorable prices in them.
Poor countries are not doomed to failure because they are poor, or because they have had an unfortunate history.
Expectations about what people are able or unable to do all too often end up turning into self-fulfilling prophecies.

I’ve only covered a small portion of the book’s content. I recommend that you read it for full benefit.

5 comments »

Posted in Livelihoods, Microfinance, Poverty Facts, Poverty Reading List

Tags: cash transfers to poor jobs microfinance limitations vaccines

Book Review: Poor Economics

June 22nd, 2011

Poor Economics: A radical rethinking of the way to fight global poverty

By: Abhijit Banerjee and Esther Duflo

This is one of the best books I’ve read on addressing global poverty. And I’ve read a LOT of books on this topic. It summarizes a massive amount of primary in-the-field research and has lots of interesting finds which will surely challenge some of your assumptions on effective poverty programs. The authors founded Abdul Latif Jameel Poverty Action Lab in 2003. Also, there is a book website.

What works; not what you think should work

I was impressed with the authors’ focus on “what actually works” based on empirically validated experiments and data. This is very refreshing in a world where so many people approach poverty with pre-determined viewpoints. I particularly like how they compare, contrast and critique the two primary international development perspectives of “supply wallahs” (Jeff Sachs & co) and the “demand wallahs” (Bill Easterly & co). The authors (both economists) seek to test whether there are specific poverty traps (Sachs’ concept which Easterly contests) in specific situations. Their conclusion — sometimes there are and other times there aren’t. It just depends on the specific situation.

Similarly they critique the pessimism of both the political left and the right who (for different reasons — colonialism or unfortunate culture) think that political institutions in these countries must change first and they won’t. They look for pragmatic steps forward in both good and bad political regimes.

Progress generally comes incrementally and at the margins

They are not idealists. The authors are realists who believe that improvement comes incrementally at the margins. It is all about the small stuff which adds up. Much of what works isn’t “sexy” and therefore isn’t easy to raise donor money for. Some of the successful approaches they’ve discovered are counter-intuitive at first and many are far from perfect. But they are committed to taking a scientific approach and to judge things by their results and to learn as they go.

There are far too many excellent facts in this book to cover in a short review. So, I will call out a few as illustrative and recommend that you read the book for the full benefit.

Focus on testing specific interventions (with randomized controlled trials)

“This book will not tell you whether aid is good or bad, but it will say whether particular instances of aid did some good or not.” One of the big issues with aid is, how do we know what interventions are effective? or more effective than others?

Read Part II of book review >

3 comments »

Posted in Livelihoods, Microfinance, Poverty Facts, Poverty Reading List

Tags: micronutrients poverty pragmatists

Entrepreneurs by Opportunity vs. Necessity

April 30th, 2011

Small fishing boat in Lombok, Indonesia

Interesting article posted by Forbes challenging the widespread use of the general term “entrepreneur” to describe both Bill Gates and a poor street fruit seller in a developing country.

In reality, there are entrepreneurs by necessity (because you have to eat) and those by choice or opportunity.

Forbes argues that we do a disservice to not distinguish between these two types. If you ask most necessity entrepreneurs what they aspire to, most would much prefer a salaried job rather than to run their own business.

On the other hand, opportunity entrepreneurs love not having a boss and thrive on creating a new, growing business.

This doesn’t mean we should stop providing micro-loans to the necessity entrepreneurs because without those loans most would indeed be worse off. But we must also consider other investments which ultimately create more jobs in the local economies to employ many of these people over the longer-term.

Lending to the Small Enterprise

Loans of a few thousand dollars to small businesses (vs. a few hundred dollars to self-employed micro-entrepreneurs) is very rare in most developing countries. The microfinance banks view this as a much riskier proposition then spreading their risk across 10 times as many individuals with a group guarantee methodology. The traditional banks are looking for either hard collateral or proven cash flow to lend against, hence they are not interested.

In Asia, you are starting to see MFIs like Swadhaar in India starting to experiment with so-called “micro-enterprise” or individual loans as the regulators start heavily regulating microcredit. And in Indonesia, you are starting to see banks like btpn creating new products for this segment as a growth strategy. But, I think you are also going to start seeing more new specialized finance companies like Vistaar Finance which are focused exclusively on innovative financing for this segment.

I believe that this new sector of micro-enterprise lending is a new frontier opportunity to help generate millions of jobs for the poor over the coming decade.

2 comments »

Posted in Microfinance

Tags: entrepreneurs micro-entrepreneurs microenterprise SME finance

India Regulator Proposes Radical Microfinance Reforms

January 22nd, 2011

This week, the Reserve Bank of India (India’s central banking regulator) proposed significant new microfinance regulations which would impact the majority of microfinance lending in India.

There are many new regulation recommendations which they hope to have adopted as early as April 1, 2011. Here are a few highlights:

Create a new non-banking financial company category called NBFC-MFI with new regulations
Max microloan size of RS 25,000 (~US$500)
Minimum 12 months duration for loans under RS 15,000 (~US$300) and 24 months for loans above that
Each borrower chooses whether they make weekly, bi-weekly or monthly repayments
Only one joint liability group (or self-help group) per borrower and max of 2 loans per borrower
Interest rate cap of 10-12% margin over cost of capital
Minimum 90% of assets must be for microloans and at least 75% of these loans must be for business purposes
Limitation on loan-related revenue to interest, loan insurance (must be optional) and max 1% loan origination fee
NBFC-MFI must have minimum capitalization of RS 15 crore (~US$3m) up from RS 2 crore (US$500k)
Minimum capital adequacy of 15% up from 12% and with stricter definitions of capital basis
Consideration of appointing local bank officials or political appointees as arbitrators in loan repayment issues

The RBI is attempting to create a national regulatory framework which supersedes specific India state-based legislation like we have seen in Andra Pradesh. Overall, I think national banking regulation with an independent regulator is positive for the poor in India.

It is going to be interesting to see what the reaction to this proposal is from the microfinance industry. Typically, this type of legislation is generally embraced by the large, established players because it creates more certainty and they have the resources and sophistication to leverage this to grow their market share at the expense of the smaller players. Since in microfinance scale often benefits operational efficiencies, it is easier for the larger players to manage their profit optimization under regulations with price caps.

So, I would expect that if this is implemented it would have the following results:

Slower growth in access to microfinance. The report notes that microfinance and self-help group market penetration is < 1% in all regions of India except the south where is is 3.4%. Most MFIs will have to slow down growth as interest rate margin cap discourages forward investing. Fewer new MFIs will start because of the higher initial costs and higher operating subsidy required before getting to large scale. The interest margin cap will also dramatically slow growth in areas which are currently the most underserved — i.e. higher poverty and lower density areas of India where cost of operations are higher and revenue per client is lower (due to lower loan sizes).
Significant industry consolidation. The big, at-scale players will gobble up many of the smaller players or the smaller players may just fold. This is not necessarily good for borrowers as it reduces competition and some of the higher value add approaches of these smaller players.
Less financial product innovation. The strict requirements are going to stall the development of better quality (from borrower perspective) financial products outside of the one-size-fits-all business microloan product. This includes more business-cycle friendly working capital loans, housing loans, various insurance products, savings-type products, etc. And % of revenue restrictions will prevent MFIs from distributing 3rd party products as well.
More populist politicalization of financial products for poor. This concept of appointing a local ombudsman (for loan repayment arbitration) from the local business or political elite has predictable results — corruption, political posturing and ultimately higher costs for MFIs (which can’t be passed along to borrowers).

Do you agree with my observations and/or conclusions? Please add additional insights and thoughts in comments.

UPDATE: Here are additional responses to RBI recommendations:

Disinformation on Microfinance Hurts the Poor

January 17th, 2011

Muhammad Yunus’ OpEd piece in Friday’s New York Times entitled Sacrificing Microcredit for Megaprofits is plainly and simply factually challenged. Yunus advocates for changes which will result in fewer of the working poor receiving quality financial services and those who do will pay more for those services.

[NOTE: Those of you who read my blog know that I have been a big fan of Yunus and his innovative contributions to the microfinance sector. But, more recently he has instigated a fierce vendetta against some of the strongest innovators in the microfinance space which undermines his credibility as an advocate for the poor. I honestly don't know why he is doing this. See references at end of this post.]

Bad Facts Lead to Bad Conclusions

Yunus has misrepresented facts which leads him to wrong and harmful conclusions. Here are some examples:

“[commercial microfinance] banks needed to raise interest rates.” False. Microcredit interest rates for well-run, commercial microfinance operations are often lower than for non-profit microfinance operators. What’s even more interesting is the fact that SKS Microfinance’s microloan interest rate is 24.55% APR vs. Grameen Bank’s interest rate of 24.36%-26.87% APR despite SKS having a much higher cost of capital since it can’t accept savings.
“borrowers [in India] came to believe lenders were taking advantage of them, and stopped repaying their loans.” False. Populist politicians created falsehoods about microcredit loans leading to borrower suicides and enacted laws which prevented borrowers from repaying. Fact: microcredit borrowers were 5-10x less likely to commit suicide then the general population.
“[commercial microfinance operators] treat microcredit as an ordinary profit-maximizing business.” False. Neither SKS nor Compartamos have operated in this way. In fact, they have always been managed as client-focused, sustainable businesses. See letter to editor below.
“Furthermore, it means commercial microcredit institutions are subject to demands for ever-increasing profits, which can only come in the form of higher interest rates charged to the poor, defeating the very purpose of the loans.” Sounds credible, but too simplistic. Just about every growth business achieves higher profits through scale and additional services, not higher prices. Think Walmart, Google, Bharti or … SKS.

Here is a letter that Michael Chu, a respected microfinance expert submitted to the NY Times in response to Yunus’ OpEd:

Sunday, January 16, 2011 5:10 PM
To: letters@nytimes.com
Subject: Muhammad Yunus Op-Ed

To the Editor of the New York Times:

Having served in the front lines of microfinance for two decades, I found Muhammad Yunus attack on commercial microfinance (Op-Ed, January 14, “Sacrificing Microcredit for Megaprofits”) dangerously misleading at a time when the industry most needs clarity. His accusation that commercial microfinance inevitably leads to higher prices is plain wrong. Since its IPO in 2007, Mexico’s Compartamos Banco, which I am proud to have helped establish, has actually been reducing its interest rate (and, by the way, tripling its active clients.) Yet, Compartamos has continued reporting outstanding financial returns. How is that possible? Simple: cost structures can be lowered, assets more efficiently managed and capital structures optimized. As any able manager knows, price is only one, and often the crudest, lever of profit.

But even more damaging, Yunus calls for government-mandated interest rate caps. This ignores the Latin American experience, where such short-sighted measures have always made reaching the poorest, and their smaller-sized loans, not more but less viable. Intense, open competition has been the most reliable way to ensure that the lowest priced loans reach the largest number of the poor in the shortest amount of time. That is why Bolivia has the lowest microfinance rates in the continent. And for that you need a healthy, commercial industry serving the poor.

Michael Chu
Senior Lecturer
Harvard Business School

Additional related resources:

3 comments »

Posted in Microfinance

Tags: microcredit Microfinance muhammad yunus

India microcredit crisis analysis

December 17th, 2010

Good video explainer and analysis on the microcredit crisis in the state of Andra Pradesh in India. I recommend if you’d like to get a good overview of the history and situation.

A Ujjivan client is highlighted in the first and second video. Ujjivan is one of the most socially responsible and professionally run MFIs in India and deserves the credit given.

Video 1: The microfinance mess: How it all began…

Video 2: The tragic turn of events: The reason…

Video 3: Killing MFIs is not the answer…

3 comments »

Posted in Microfinance

Tags: andra pradesh india microcredit crisis

India microfinance crisis by the numbers

November 16th, 2010

Finally a reporter who actually attempts to explain the objective facts on the current microfinance crisis in the Indian state of Andhra Pradesh.

Microfinance by the Numbers by Eric Bellman

Here are a few highlights:

Default rates by borrowers were ~2% before the politicians intervened and now have risen to 50% since they instructed borrowers not to repay their loans
On a per capita basis, there are 5-10x fewer suicides amongst microcredit borrowers than the general Indian population
Upon closer investigation, it appears that loan sharks, landlords and even family members are more to blame for the suicides than the microcredit companies
The interest rate for microcredit loans (24-30%) is the same as the local rate for credit cards (30%) which has never been controversial
Even though government schemes like self-help groups offer heavily subsidized 3% loans to women, why is there so much demand for microcredit (hint: loans insufficient, not available or require bribes)

Net: If the government continues this harassment of MFIs and imposes unreasonable regulations, the current microcredit borrowers will no longer have access to these financial services and will either have to go without, or more likely be back as clients of the local loan shark at 150-300% interest rate plus their well-known collection techniques.

3 comments »

Posted in Microfinance

Tags: andhra pradesh ap crisis india microcredit Microfinance SKS suicide wsj

SKS Microfinance IPO Report

September 30th, 2010

CGAP (part of The World Bank) has recently produced an analysis of SKS Microfinance IPO in India. This is the first IPO of an Indian MFI. The IPO was 13 times oversubscribed … that is, 13 times more demand than availability of IPO shares. SKS priced at the high end of their range with valuation of US$1.5B and sold 11% new stock raising US$155M. In the first 5 weeks of trading, the stock rose 42%.

This article summarizes a lot of good historical and current data about SKS and also outlines some of the key issues that a successful IPO raises for SKS and the microfinance industry overall.

2 comments »

Posted in Microfinance

Tags: india ipo Microfinance SKS

Questions about Unitus changes

August 11th, 2010

I wish I had posted this closer to the announcement date, but I still think this will be helpful for people who care deeply about Unitus and microfinance/poverty alleviation…

I am a board member of Unitus, a global poverty 501c3 charity which recently announced that it is redirecting its efforts from microfinance to new areas of reducing global poverty. This came as a shock to many people who have valued the transformative work that Unitus has done to dramatically increase access to financial services for poor families.

False and Misleading Rumors

Unfortunately, false and misleading information about this announcement have become widespread. This is very disheartening because:
(a) The significant positive impacts Unitus has made on behalf of the global poor have been largely ignored, and
(b) Concern that Unitus’ announcement indicates that microfinance no longer requires innovative philanthropic support.

In an attempt to correct some of these misconceptions, I have re-stated some of the most common questions that I’ve been asked along with my thoughts that I shared in conversations with multiple people:

Q: What is Unitus’ mission? Vision? Approach?

Unitus’ mission is to help eliminate global poverty. Like Nobel Peace Prize laureate Muhammad Yunus has said, we want poverty to be something future generations can see only in museums. From the start, we have been agnostic about methods. We are not about microcredit, profits, nonprofits, or any other methodology. We have searched for highly leveraged ways that we might uniquely contribute to empowering millions of poor working families with the opportunity for economic self-reliance. We are strong believers in identifying and accelerating the activities and approaches that most effectively reduce poverty and empower the working poor. We see market systems and capitalism as powerful tools that can and should be harnessed to bring opportunity and sustainability and global impact. We are committed to identifying high-impact projects with clearly defined and measurable goals. When we determine our work is done with a particular job, we will declare that we are done, then exit and pursue other worthy projects.

Q: What did Unitus announce?

With approximately $50 billion of microfinance capital now available to more than 150 million of the world’s working poor — and a large and a growing community of philanthropic and (now primarily) commercial microfinance institutions serving this previously greatly underserved market — we feel the time is right for Unitus to seek out other transformative fields of endeavor. Accordingly, going forward Unitus will no longer initiate new microfinance partnerships. We will honor all existing obligations and commitments to existing MFI partners, then move on to new high-value activities. Consequently, Unitus will be downsizing its operations to a small team as we identify new transformative projects to reduce poverty.

Q: What project has Unitus completed?

Our first project was focused on attracting commercial capital into the microfinance sector. When we first started on this project 10 years ago, almost all microfinance was funded by philanthropic capital. Less than 10 percent of the working poor had access to microfinance and growth was slow due to capital constraints and lack of innovation. Our vision was to identify entrepreneurs building the next generation of microfinance organizations in underserved and un-served markets and to support them in demonstrating the financial viability of commercial microfinance operations. The results of our endeavors have been beyond our imagination when we started. Our partners are now serving 12-plus million poor families, and represent some of the most innovative, efficient, fast-growing financial organizations on the planet. And many of them are passing on those efficiencies by regularly reducing interest rates paid on microloans by the working poor to levels never seen before. A recent IDB survey reported that “profit-making MFIs (charge) lower interest rates [than non-profit MFIs].” This is significant.

Therefore, Unitus is declaring “project accomplished” (which I think is a more accurate statement than the politically charged “mission accomplished” language.) We set out to accomplish a specific project — attracting commercial capital to the microfinance sector. There was broad agreement amongst Unitus staff and board (although not unanimous) that we had reached our demonstration effect goal. We looked extensively at (and actually experimented in a few) other geographies where we thought our consultative approach to accelerating access to high-density microcredit might apply and we concluded that the right situations did not exist for Unitus to have further transformational impact. Since our organization and structure was set up for this project, the board unanimously decided that the right decision was to: (a) wind down the existing microfinance accelerator organization; and (b) with a small team, begin new explorations for areas where we could start new projects that had similar transformative potential on global poverty.

Q: The announcement felt so abrupt. Why?

I think it felt abrupt because so many people care so much about Unitus and had expectations that Unitus had a long-term commitment to microfinance beyond our initial project commitment. It also felt abrupt because Unitus announced we were downsizing our staff size not due to funding issues or staff performance issues or other more common reasons that charities reduce their expenses. It also felt abrupt because Unitus staff members, with the board’s determination that the microfinance project was complete, were hard at work identifying new opportunities for Unitus projects. And it felt abrupt because the board chose to announce the changes soon after they were finalized, because we wanted to have sufficient resources to help impacted Unitus employees to find their next world-changing roles.

Q: Is innovative philanthropic capital still needed for microfinance?

Yes! There are many situations where there are still market failures or gaps in delivering financial services to poor families. In many cases, these will require strategically and innovatively targeted philanthropic resources to move things forward. There are also many good philanthropic microfinance organizations that have long-term commitments to improving the microfinance sector, so we believe there is greater need for our particular skills and contributions elsewhere.

Q: Will donations received before this announcement be allocated to microfinance or to new Unitus philanthropic activities?

All donations received prior to the announcement will by default be directed towards microfinance activities, including the completion of our existing microfinance commitments and the wind down of our microfinance operations. For donors who wish for their monies to be allocated towards new Unitus philanthropic activities, we will provide a mechanism for doing this. To be clear, 100 percent of donations to Unitus are and will be used exclusively for philanthropic purposes.

Q: How much money does Unitus have remaining?

Until we finalize fulfillment of all of our existing microfinance commitments and obligations, we will not have an exact number. We are taking the approach of being generous to fulfill not only the letter, but also the spirit of our commitments wherever feasible. Also, as noted above, we still need to have conversations with donors who may want remaining portions of their donations allocated to new Unitus philanthropic activities.

Q: Will Unitus be able to properly invest donor monies with a smaller staff?

Yes. There will continue to be sufficient professional staff to effectively allocate and invest donor resources into projects approved by the Unitus board.

Q: Did Unitus time this announcement because of the upcoming public offering of SKS Microfinance?

Absolutely not. Our timing was based entirely on the factors I outlined above: our desire to make a transformative difference in other fields of poverty alleviation, and within the context of our existing microfinance commitments, to be the best possible stewards of the financial and other resources with which we have been entrusted.

Q: Why can’t Unitus talk more about its involvement with SKS Microfinance?

Under India law, Unitus is considered a “promoter” for the SKS Microfinance public offering, and is restricted from any public commentary about SKS Microfinance during the quiet period before and after the public offering.

Q: Did (or will) Unitus board members personally benefit from Unitus Equity Funds?

Absolutely not. Some Unitus board members did provide investment capital for Unitus Equity Funds (a separate commercial social venture fund setup in 2006). These investments either came through: (a) family/community foundations; or (b) personal investments with a commitment for all proceeds to be used for charitable purposes. So, 100 percent of any financial returns to board member-related investments are committed to further charitable activities.

Q: What are the new philanthropic projects/activities for Unitus 2.0?

There are many significant areas of market failure which deny the working poor the opportunity to thrive and reach their dreams and potential. Traditional international development approaches have continued to fail to deliver results. We are currently researching systems, approaches and strategies where we believe there is the potential for transformative impact to create large-scale, sustainable opportunities to reduce global poverty. We will be announcing more details soon.

Unitus has published a follow-up FAQ.

If there are additional questions in which you think a larger audience may be interested, please post in comments.

Updates: