Unitus Labs has entered a strategic partnership with Unitus Impact to create improved livelihood opportunities for millions of people battling poverty. For the most current details, see Unitus Impact website. Also see Unitus Labs Livelihoods Announce FAQ.
A “livelihood” is defined as one’s “means of support or subsistence” or the activities that economically support a person and his/her family. We are focused on providing opportunities for the working poor (in various occupations) to increase their income-generating capacity.
Need for interventions
Many of the current economic systems in various industries are “gamed” against the poor, meaning that the poor do not earn much gross (or net) income. Economically marginalized populations have a difficult time “ungaming the systems” on their own, so they live in difficult conditions, are unable to realize their earning potential, and will likely battle poverty their entire lives. Thoughtful market-driven interventions and businesses can create new income-generating opportunities or optimize supply chains and economic verticals (e.g. agribusiness markets) to share more of the economic upside with the hard working people who produce many of the commodities societies rely upon for their sustenance (e.g. small farmers and fishermen).
A quality microloan product provides many poor families with a new or less-expensive source of working capital to create their own income generating opportunities. Through appropriately priced microcredit loans, many borrowers benefit from increased incomes and the ability to smooth out their cash flow needs, but most also begin to max out the ability to increase their income after a few loan cycles. Why is this the case? It is due to the fact that most microcredit borrowers are not “opportunity entrepreneurs” with a strong vision for business growth and expansion, but are “necessity entrepreneurs” or “forced entrepreneurs” working diligently to put food on the table, without the skills, risk-tolerance, knowledge base, or opportunity to move beyond the limitations of their current business models.
Why now for livelihoods?
We are seeing a growing number of entrepreneurs who are building innovative ventures aimed at “ungaming” current economic systems and industrial verticals. Such approaches will result in new or improved economic opportunities for many. We are also seeing a growing number of investors who have generated wealth through their own business activities and are looking for ways to invest for social impact in these type of promising entrepreneurs. Our strategic partner, Unitus Impact seeks to become the “market maker” for livelihood ventures in its efforts to create a new, thriving market segment with tremendous social impact.
Our role in livelihoods sector
We hope to play a similar “game-changing” role in the “livelihood space” that we were able to perform in the microfinance sector.
When Unitus Labs entered the microfinance sector in 2001, with a few exceptions, most microfinance institutions were run as donation-subsidized development aid projects with weak leadership, inefficient operating systems, inadequate strategic plans and insufficient capital; all factors that prevented many well-intentioned groups and dedicated teams from reaching their potential. Unitus Labs brought a new perspective to the space, focused on finding the best microfinance entrepreneurs who could build the next generation of microfinance operations that would be professionally run and would reach more people with quality microfinance products in a shorter time period than had previously been seen. Unitus Labs provided catalytic capital and strategic support to help these in-market entrepreneurs realize their vision of reaching millions of poor families in just a few years in a sustainable manner.
The livelihoods space is currently in an even less developed state than when Unitus Labs launched its efforts in microfinance. Most livelihoods initiatives today operate as small-scale, donation-subsidized development aid projects or are ventures who struggle to raise investment capital due to an inflated perception of business and investment risk that typically accompanies new business models that target low-income populations as their supplier or consumer base. We believe there is an opportunity to find and back great in-market entrepreneurs who have the potential to build ventures that can scale to provide improved livelihood opportunities to millions of poor working families. We also believe that if we demonstrate the scalability and commercial viability of livelihood ventures, we can attract enormous sums of capital to this space – changing the economic game to benefit poor individuals working hard everyday to earn a sufficient livelihood for themselves and their families.
Goals for livelihoods investment
We have one over-arching new goal – to catalyze a new investment market for livelihood ventures. We hope to help to create a new and important impact investing category that fosters the generation and growth of livelihood opportunities for millions of BoP families. This goal is similar to the catalytic goal we had during our investment of time and resources in microfinance acceleration: to attract capital markets to the microfinance sector by demonstrating that microfinance institutions are scalable and commercially viable financial institutions and that the working poor are creditworthy clients in need of financial products (e.g. microcredit loans). We believe investments in livelihood ventures must provide the following data points to attract emerging market investors to invest in the livelihood sector: (1) significant scale/growth, (2) reasonable, risk-adjusted financial returns, (3) customer/employee satisfaction and (4) investor exits.