those who were making a big..hugh and cry for unitus controversy kindly read this Unitus article.....in ET today:
Roughly a month before the SKS Microfinance IPO, the Seattle-based charity Unitus, a large investor in the firm, unexpectedly announced it wasJoseph Grenny
shuttering its non-profit operations in micro-credit and laying off more than 40 employees. The decision sparked a controversy because Unitus stood to make $70-80 million from the sale of its shares in SKS. In an e-mail interview with ET , Unitus chairman Joseph Grenny answers all the uncomfortable questions regarding the exit.
Why was the non-profit operations shuttered so abruptly?
First, let's clear up one of the most prevalent misconceptions currently making its way through the rumour mill: Unitus is not ceasing its non-profit operations - we are only shifting away from micro-credit banking. Our overarching mission was never exclusively tied to micro-lending, but rather to the larger vision of poverty alleviation and empowerment of the working poor in India and elsewhere. Accordingly, our goal was to demonstrate the commercial viability of micro-credit in the hope of increasing access to the lifeblood of capital for untold millions of working poor. Now that a large and growing contingent of commercial lenders have entered the field, alongside non-profit players such as Grameen, ACCION and Opportunity International, it is time for Unitus to shift our energy and talent to other high-impact poverty-alleviation activities.
Unitus and its subsidiaries may make about $70-80 million from the SKS IPO. What would have happened to the money if the non-profit was still continuing? And what happens now that Unitus is exiting micro-credit?
As I mentioned above, there will be a non-profit Unitus going forward. All the money coming to Unitus - and its board members - will go to non-profit, poverty-alleviation activities.
One charge against Unitus - especially its board - is that it blurred the line between for-profit and non-profit operations. For instance, some Unitus board members were also on the board of subsidiary Unitus Equity Fund's (UEF) investment committee, on the board of MFIs that UEF was investing in, and even held equity in these companies. Similarly, the company was using its grants to later pick up equity in the microfinance organisations it was funding. What would you say about that?
We definitely have some misconceptions to clear up here. While it is true that Unitus board members have been on the UEF board, they were there only to use their expertise to help guide the funds - never to establish special insider rounds. No Unitus board member has ever obtained equity in any MFI through donor grants, nor obtained any special privileges. Unitus helped bring such major players as Sequoia and Vinod Khosla to the field and participated with these strategic partners as limited partners. All investments - by Unitus and its board - were done through fund managers, rather than directly.
Several Unitus board members have invested in UEF I and/or Elevar Equity II (another Unitus fund). In every case, the board members did so either through charitable family or community trusts or with personal funds, with a public guarantee that all proceeds would be re-invested in charitable causes. They put in millions of dollars of risk capital, with a commitment not to derive any personal financial benefit from their capital. This is extraordinary, and too often ignored amid the flow of rumour and misinformation. The bottomline is that these investments were made - as were all investments in Unitus and its affiliate organisation by the board - to empower the poor, not to enrich the individuals on the board.
Going back to the decision to exit micro credit, hadn't the board approved work in two new areas - mobile banking and lending to micro and small enterprises in April? After all, in late March, Unitus had inked an 8-year deal with Citi and the US' Overseas Private Investment Corporation to provide debt funding to smaller MFIs. Even Unitus ex-employees found the exit abrupt.
Candidly, it sounds like there may have been a disconnect between the staff at our Seattle headquarters and our India office. The board actually did examine SME lending and mobile banking, but ruled them out. We concluded that these were areas that are increasingly becoming the domain of commercial organisations and, therefore, not an optimal use for scarce donor dollars - though many of our strategic partners are pursuing these areas. The Unitus non-profit is currently exploring job-creating livelihood development (i.e. - the creation of new and better jobs, traditional and entrepreneurial, for the rural and urban poor), low-cost housing, education, healthcare and other efforts in need of validation. We hope to play a similar role in one or more of these areas as we did in microcredit - that of demonstrating their viability and encouraging others to participate in providing these transformational activities.
Zerodha (Trading & Demat Account)
RHP
