Mysterious microfinance firm re-emerges | 

Flickr, TW Collins

Clay Holtzman, in his new blog Nonprofit Kingdom, notes that a year ago the Seattle microfinance firm Unitus closed its doors, laid off most of its staff and didn’t really tell anybody (including some major donors) why it did so.

Unitus, which had claimed its primary mission was to help poor people, also happened to have made a lot of money — having invested in an Indian company, SKS Microfinance, which had pursued this anti-poverty financing scheme as a for-profit venture.

Here’s a New York Times piece on the controversy about SKS making money while fighting poverty. Here’s what I wrote at the time Unitus closed its doors and a more recent post I did on the broader implications of all the weirdness. Here’s another post from last year that Clay cites as a good overview by Philanthropy Action.

Now, as Clay notes, Unitus has been resurrected as Unitus Labs. Here’s what Clay says:

Many wondered what the new mission would be, and why Unitus had to close so quickly. Unitus recently unveiled its reorganization plan, and while the charity will use a different approach to reduce poverty, its new business strategy appears very similar to the one that sparked an international controversy last year.

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Yunus Watch: Microfinance pioneer further piled on | 

World Economic Forum

Muhammad Yunus

I’m sorry to reveal a bias here, but all these attacks and critiques of the Bangladeshi economist and Nobel Peace Prize-winning pioneer of microfinance, Muhammad Yunus, appear to be so obviously opportunistic (if not an outright smear campaign), I can’t figure out why smart people just keep piling on.

As I’ve written about before on this blog, Yunus has come under heavy attack — accused of being a crook, of libeling politicians (is that possible?) and all sorts of wrong-doings — after publicly taking a stand against those who would make a profit off providing loans to the very poor.

The latest example of piling on comes from Matthew Bishop, a top business editor at The Economist and author of the popular book (and blog of the same name) “Philanthrocapitalism.” Continue reading

Former microfinancier Unitus issues vague statement on closure | 

Flickr, TW Collins

The local microfinance firm Unitus, which abruptly closed up shop and laid off its employees this summer after coming into a financial windfall, has issued a long-awaited statement that it had promised would explain its actions.

It is a statement, but not that explanatory — either on why the organization closed so suddenly and what they intend to do with profits some individuals earned on an investment that was supposed to be about helping the poor.

Maybe that’s why they issued it today, a month later than promised, since people are frantically focused on the holidays and unlikely to pay much attention to anything else. Am I being cynical? Sorry about that.

As Clay Holtzman of the Puget Sound Business Journal notes today in his column Unitus Board: Still Weighing Options, the statement lacks answers to some of the more disturbing questions about personal gain at Unitus and, almost half a year later, still doesn’t even really explain why they urgently decided to close/reorganize:

Five months after abruptly announcing plans to shut down and reorganize their Seattle-based microcredit charity, the four founding board members behind Unitus are still determining their next step.
Clay’s story is the best summary out right now, so read that and some of his earlier detailed posts on the Unitus transformation. He and Kristi Heim of the Seattle Times (who is on vacation right now), have done an excellent job of covering this story and trying to puzzle out what’s going on at Unitus.
Here are some of my earlier posts not focused so much on Unitus as it is on the overall crisis in microfinance, which stems from a concern it is becoming a get-rich scheme for some rather than an anti-poverty scheme as originally devised by Nobel Laureate Muhammad Yunus.

Microfinance, subprime loans and baseball | 

Flickr, TW Collins

Is Microfinance the New Subprime?

That’s the provocative title of a new article in the Harvard Business Review by financial journalist Barbara Kiviat and New York University economist (and author of Portfolios of the Poor) Jonathan Morduch.

The subtext of the question is the implication that, like those sub-prime mortgage loans in the U.S. that turned out to be a catastrophic house of cards, some approaches to microfinance are starting to also look like another way for financial whizzes to make money off poor people.

I’ve been posting for the past few weeks on this increasingly heated debate surrounding “profit-maximizing” microfinance and the resulting turmoil in the field. It’s a debate that many organizations in Seattle, where microfinance is big, are watching keenly. Continue reading

Turmoil in microfinance continues | 

Flickr, TW Collins

The struggle for the image, if not the soul, of microfinance continues.

Overview: Microfinance was created to help the poor by Muhammad Yunus, who won the Nobel Peace Prize for the scheme. Since then, many others have adopted it and some have changed the approach to become more profit-oriented — arguing that this will lead to more investment in microfinance funds and thus more money for the poor.

Not surprisingly, you gotta be careful mixing the profit motive with helping poor people. Yunus is not happy with this trend. Others think it’s a needed change. Continue reading

Microfinance backlash: Identity crisis, evolution or greedy mission creep? | 

Seattle is big on microfinance, but what is it?

The short answer is that microfinance is a set of financial services such as small loans for the poor aimed at helping people get themselves out of poverty.

Sounds fairly straightforward, right? In reality, there’s a fight for the soul of microfinance going on and some of that battle has been playing out here at home.

There has been an explosion of “profit-maximizing” microfinance organizations lately which some say threatens to undermine the credibility of this anti-poverty scheme — if not its fundamental social purpose. But the proponents of profit-driven, commercial microfinance say it is the only way to really grow these services, to reach the many millions more in need of help.

Flickr, TW Collins

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Unitus Move is Divisive for Microfinance Movement | 

As Bob Dylan once said, something is happening here but we don’t know what it is.

Honestly, I can’t for the life of me figure out the meaning of the closure/restructuring of the Seattle non-profit microfinance organization Unitus. But it could be a watershed moment for the anti-poverty movement so it’s worth paying attention. Seattle is big on microfinance and social entrepreneurs.

Here’s the gist so far as I can tell:

  • Just before the 4th of July, the high-profile, non-profit Seattle-based microfinance organization Unitus shut down and booted its employees. The organization refused to comment much, but did declare it had succeeded in putting an end to poverty (just kidding). Eventually Unitus’ board chairman issued this peculiar, unenlightening statement.
  • Meanwhile, a giant Indian microfinance company, SKS, announced this week that it was seeking to raise an additional $354 million by offering itself up for sale to shareholders (in an IPO).
  • Unitus had invested something like $6 million in SKS and now stands to make $70 million due to the IPO. Clay Holtzman of the Puget Sound Business Journal wrote this story, and many others pertaining to the Unitus shut-down and its SKS links.
Muhammad Yunus meets Seattle fans

by Tom Paulson

Muhammad Yunus meets Seattle fans, at Town Hall May 2010

If Muhammad Yunus was dead, he’d be rolling in his grave! As it turns out, the 2006 Nobel Peace Prize winner who founded the microfinance movement is still alive and kicking — especially at those who use microfinance mostly to make money with service to the poor as, at best, a by-product.

”This is pushing microfinance in the loansharking direction,” Yunus said of the SKS decision.

Others contend that it’s just fine to make money off the poor, even charging them interest rates as high as 70 percent – so long as the profit-making leads to more loans.

Yunus, who is a frequent visitor to Seattle because of the many organizations here working on microfinance, has grown increasingly concerned that microfinance is becoming just another get-rich scheme (gilded in do-gooder lace) for some in the “sick” financial industry.

Whether this criticism will soon be leveled at Unitus or not remains to be seen.

Here’s another site, Philanthropy Action, closely following this story.