2010 Changes FAQ

Here are responses to some of the most common questions Unitus, Inc. has received about our announcement of strategic direction change on July 2, 2010.

Q: What did Unitus, Inc. announce on July 2, 2010?

Unitus, Inc. announced a major change in strategic direction. Unitus, Inc. will not be taking on new microfinance projects. Unitus, Inc. will be fulfilling existing microfinance commitments. Unitus, Inc. will be significantly scaling back operating expenses over the next few months as we transition to a core team researching a new focus for Unitus, Inc.

Q: Is Unitus, Inc.’s mission changing?

No. Unitus, Inc.’s mission continues to be reducing global poverty through economic self-empowerment.

Q: What were Unitus, Inc.’s goals for its microfinance focus?

A decade ago, Unitus, Inc. established two interrelated primary goals: (1) to bring commercial funding into the worldwide microfinance marketplace, thus greatly increasing the amount of money available for microloans; and (2) help demonstrate that microfinance organizations can be scaled to serve hundreds of thousands of clients at the base of the economic pyramid.

Q: What were the factors that Unitus, Inc. board considered in this strategic direction decision?

With more than $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, Inc. to seek out other transformative ways to best achieve our mission. Since there are many fine organizations now serving the microfinance space, we are confident that MFIs will continue to increase and improve their activities of making capital available for microloans.

Unitus, Inc. is not a conventional charitable organization. Our goal from the outset has been to identify promising young ideas (such as microfinance) and help them rapidly demonstrate their full potential. The Unitus, Inc. board and many of our donors support this creative, innovative and risk-taking approach to improving our world. When we started ten years ago, microcredit was still somewhat of an experiment. Today the commercial microfinance model has been validated and—as we envisioned—powerful commercial players are doing far more to expand access than Unitus, Inc. ever could.

Q: Do you believe commercial entities can play a significant positive role in microfinance and poverty alleviation?

There is persistent and vigorous debate between philanthropists and economists about the role—if any—commercial activity should play within the field of microfinance and other forms of economic outreach to the working poor. For us, the fundamental question that needs to be addressed in this respect is a simple one: “What works?” What will result in the greatest alleviation of poverty? What provides the greatest assistance and empowerment for the working poor? There is strong and growing evidence that commercial entities have extended the reach of microfinance to many millions of poor people who would otherwise not receive it. A recent survey by IDB found that commercial MFIs charge lower interest rates than do their non-profit counterparts. Clearly, the proper role of markets is an issue worthy of serious, practical consideration.

Q: Is Unitus, Inc. shutting its doors?

No. We are redirecting our efforts from our focus on accelerating microfinance to determine a new focus where we hope to make new transformational impacts on reducing global poverty. As a result, we are significantly scaling back our existing operating expenses.

Q: Is charitable/philanthropic involvement in microfinance no longer relevant?

There are still many people in the developing world who would like access to microfinance services, especially where the commercial case has not yet been made. In these areas, donor dollars may still be required to demonstrate viability. And there are now many high-quality permanent players in this field. Some example charities include ACCION, Opportunity International and Grameen Foundation. We are confident that these and other organizations, along with the influx of funds from the capital markets, will successfully fill this role within the next decade. This enables Unitus, Inc. to shift our focus to addressing other pressing needs of the global poor that have received far less attention and require creative and innovative approaches that we are uniquely suited to provide.

Q: Why was this change so abrupt? How long has Unitus, Inc.’s board been considering this decision?

The announcement may seem abrupt, but Unitus, Inc. leadership has been considering strategic options for a number of months as it became clear that our original goal of attracting commercial capital to microfinance was reaching a tipping point. In the end, the path we took and our timing represented something of a balancing act. On the one hand, we wanted to wait until we had a high level of confidence that we have done what we needed to do in order to ensure that our strategic partners were on a solid footing. On the other hand, once we had arrived at a definitive decision, we felt a fiduciary responsibility to right-size our expenditure of donor capital while ensuring that we had met our legal, financial and moral obligations to our partners and employees. The reality is that significant changes like this always feel abrupt when they are announced. We are sorry that we could not make this announcement feel less abrupt.

Q: When was this decision made by Unitus, Inc. board? Was it unanimous?

Our ultimate decision was made in the final weeks before our announcement. All members of the board agreed that this was the right decision.

Q: Whom did the Unitus, Inc. board consult before making this decision?

We have consulted with many Unitus stakeholders—friends, founders, investors and donors—about possible future directions. This decision incorporates the many diverse views generated by these conversations.

Q: Is there a problem with microfinance—a financial bubble or something?

We don’t focus our energy and efforts on prognostication. However, we (along with the reasoned analysis of The Economist and many other credible observers) do not see signs of a global bubble brewing in microfinance – notwithstanding the unavoidable anecdotal cases of over-borrowing and over-lending. With that said, we and our partners have always strived to follow sound fiscal policy and due diligence processes, which we feel should be incumbent upon all lenders—not only for their own sake but also that of their borrowers. Most of our partners, and many more MFIs in the industry, are following sound lending practices (such as those outlined by the SMART Campaign).

Q: Why are you letting go many members of the Unitus, Inc. team?

The board’s view is that the directions we are exploring will not require an organization of the current size and shape. This downsizing has been without question the most painful decision we have made. Our employees are extraordinary, which doubles the pain. The fundamental reality is that the outgoing Unitus, Inc. staff—bright, talented and passionate—was built for our focus on accelerating access to microfinance.

We are trying to balance what we feel is our moral obligations to our staff with what we see as our fiduciary responsibility to deploy resources in order to have the greatest impact toward sustainably reducing global poverty. All employees were given reasonable notice and offered severance pay commensurate with their seniority and tenure with Unitus, Inc. Going forward, we feel that the most responsible thing to do is to gauge our human resource needs as the strategic direction of Unitus, Inc. evolves, and fill these needs on a case by case basis with the best possible people for that direction—whether or not those individuals are former Unitus, Inc. employees.

Q: Will Unitus, Inc. be involved in accelerating financial services for the poor or something else? Will Unitus, Inc. continue to work in India? Africa? Other places?

Our core underlying purpose of improving opportunity and quality of life for the world’s working poor remains unchanged. The Unitus, Inc. board is currently considering a variety of strategic opportunities throughout the developing world, including India, Africa and other important areas. Our primary goal/mission is still to maximize the socio-economic impact for those currently not being served by current solutions in the marketplace. As we solidify our direction, we will be providing further updates and announcements.

Q: How will the remaining Unitus, Inc. charitable resources be used/spent?

100 percent of monies donated to Unitus, Inc. will be used for our charitable mission of reducing global poverty and enabling economic self-reliance. In the short-term, some resources will be used to complete our obligations to microfinance partners and to efficiently wind down the microfinance-related operations of Unitus, Inc. The remaining funds will be allocated to new philanthropic strategic initiatives determined by the board in keeping with our mission of reducing global poverty. As always, we will continue to be completely transparent in the ultimate uses of the dollars our donors have entrusted to us.

Q: Will any members of the Unitus board benefit financially from investments in Unitus Equity Fund?

No. 100 percent of any financial gain by charitable and proprietary organizations affiliated with Unitus, Inc. board members is committed to further poverty alleviation efforts.

Q: Did the timing of the Unitus, Inc. announcement have anything to do with the public offering of SKS Microfinance?

No. Our timing was based only on our desire to make a transformative difference in other fields of poverty alleviation, and to be the best possible stewards of the resources—including funding—with which we have been entrusted.

Q: Why does Unitus, Inc. say so little about its involvement with SKS Microfinance?

The governing Indian financial regulatory body has named Unitus, Inc. a “promoter” for the SKS Microfinance public offering. Accordingly, we have been restricted from public commentary about SKS Microfinance during the quiet period, which ends 45 days after the public offering.

Q: What is next for Unitus, Inc.?

We are currently examining many areas of opportunity designed to reduce poverty throughout the world, and to empower the working poor. As we did in the microfinance arena, we will seek out opportunities with the potential to effect transformative, sustainable impact.

UPDATE: See Unitus, Inc. new strategic partnership announcement >