Does Microfinance offer a low risk investment opportunity, with maximum impact for small...
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UNITE USFOR A BETTER WORLD
September 2005
UNITE US
FOR A BETTER WORLD
Triple Bottom Line
Investing Conference
October 2005
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Introduction to Microfinance
• 1970s: Microfinance Institutions (MFIs) are born in places like Bolivia and Bangladesh
• 3,000+ MFIs offer small $50-$150 loans at reasonable interest rates. Borrowers use to improve businesses
• Borrowers often sign up in groups, securing each other’s loans
• Borrowers repay principle and interest with extremely low delinquency – repayment rates exceed 95%
• Proven results/development tool:– Businesses grow; increase family income, access to
health care, medicine– Children attend school, improved housing, nutrition– Increased borrower self-esteem
• Industry expanding to provide savings, insurance, remittance, and other financial products
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Huge Unmet Demand
Source: Unitus estimates, based on research from The World Bank
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Most Microfinance Institutions (MFIs) are Small
Source: Unitus estimates, based on research from the Microcredit Summit
The MFI industry has failed to develop a systematic growth model
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Why Don’t MFIs Grow?
Lack of Capital
• Negatively perceived as unprofitable and undisciplined
• Most are unregulated nonprofit organizations, prevents
– Building equity base– Optimizing use of commercial
debt for leverage– Capturing savings deposits
• Limited access and familiarity with local capital markets, except for the few top-tier MFIs
Lack of Capacity
• Weak corporate governance
• Lack of management depth
• Absence of management and strategic planning systems
• Insufficient business infrastructure
– MIS/Accounting– Technology– HR
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How Unitus Accelerates MFI Growth
Capital
• Assist with transformation to regulated financial institution
• Invest equity to– Meet minimum regulatory capital
requirements– Bolster balance sheet to support
leverage through debt
• Facilitate access to local capital markets through
– Catalytic debt– Relationship building
• Strengthen MFI operating capacity with initial grants
Capacity
• Improve corporate governance
• Expand depth of management
• Strengthen reporting and strategic planning processes
• Facilitate capacity-building consulting projects to improve
– MIS/Accounting– Technology– HR
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Unitus Acceleration Model
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Unitus Acceleration Model: Select
Employ proprietary tools to• Identify favorable markets for
microfinance– Regulatory / legal environment– Economic and political stability– Accessible capital markets– Competition– Poverty density
• Select highest-potential MFIs– Potential for rapid, large-scale,
profitable growth– Strong, socially-minded
management– Focus on serving poor clientele
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Unitus Acceleration Model: Consult
Capacity-building to prepare MFIs for rapid, long-term, profitable growth• Improve corporate governance
– Ensure local board oversight; Unitus board participation
• Expand depth of senior management– Evaluate organization structure– Assist with establishment of hiring and training systems
• Strengthen reporting and strategic planning processes– Implement Monthly Management Reporting and Balanced Scorecard– Support adoption of industry best practices (e.g. CGAP reporting standards)
• Facilitate capacity-building consulting projects– Improve MIS/Accounting systems and technology– Implement performance and human resource management systems– Expand product offering for target customer base
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Unitus Acceleration Model: Invest
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Results from MFI Partner SKS India
• Increased five-year borrower growth goals from 100k to 300k
– Current projections at >600k
• Assisted transformation to regulated for-profit institution in 2005
• Spurred access to local capital markets through catalytic debt
• Assisted with CEO and CFO hiring processes
• Guided implementation of monthly management reporting package
• SKS awarded 2004 CGAP Financial Transparency Award
400%+ growth in less than 2 years
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Results from Unitus MFI Partners
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Announcing New Strategic Partnership
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Think of Unitus as…
• Microfinance Experts– Extensively studied microfinance and analyzed 30+ year history of
successes and failures– Determined when, where and how to have the greatest impact– Continues researching and implementing best ways to alleviate poverty
via microfinance
• Microfinance Venture Investors– Selecting only the highest-potential MFIs – Focusing on accelerated, profitable growth– Providing consulting expertise and oversight– Not tied or limited to any MFI brand or network
• Hear from our MFI Partner, SKS Founder Vikram Akula:– http://www.unitus.com/resource_mediaresources.asp#videos
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UNITE USFOR A BETTER WORLD
September 2005
UNITE US
FOR A BETTER WORLD
Triple Bottom Line
Investing Conference
October 2005