wallydownundy

Geoff Davis leads Unitus and is sharing perspectives on global poverty.  Quick question: Have you ever met someone who lives on $2 per day? Davis is an entrepreneur who used the sale of a successful business to start a micro-finance company.  He asked the question: How can you use business skills to solve poverty issues?

We see disease, unemployment, lack of nutrition - and poverty is the core.  But if we take a “Problem” mindset then you see short term solutions.  But Davis took a “Solutions Mindset” and set up mirco-financing firm Unitus.  She used the proceeds to send her child to school - the first child in her family’s history to attend school.  This started the cycle to get her family out of poverty. 

BUT - many problems.  Over 10,000 micro-finance institutions around the world - most with under 2,500 clients.  A highly fractured market - but one with huge potential. 

Unitus was started to bring many of these together (Unite + Us).  Wanted to ramp up growth considerably, and also change from a “donor model” where people give and don’t contribute.  Now the goal was to partner with many small micro-finance companies to grow 100%. 

Unitus launched a private equity fund to provide more funds for the micro-finance companies.  They also offer technology, HR, business systems to help. 

Now work with 17 joint ventures serving 2.5 million households (growing 140% per year). 

What’s micro-finance? Most loans are $100 to $500 loans for productive purposes, such as purchase of bamboo to weave baskets, or buy a water buffalo to make milk.  Traditional loans are made on personal liability - but in micro-finance you ask for group liability.  Make the group of friends or neighbours sign on together to borrow funds.  The repayment rate is 95% whereas in the USA credit card repayments are 93%. 

Geoff’s first loan was to a woman for $35 - she wanted to buy a thermometer to pasteurise goat’s milk and sell the milk for double the price.  She went from making 70 cents per day to $1.40 per day. 

To date there are many success stories, such as SKS India.  The involvement of Unitus has led to a dramatic growth in the families they can serve. 

Trends in micro-finance:

1. Start of “For Profit” micro-finance - but using the prfitable business model to enhance their ability to better serve their communities. 
2. There’s been a growth of commercial investors (Citigroup is one). 
3. The capital markets are kicking in with a firm in Mexico launching and now with a US$2.5 billion market capital.  (This is no longer the purview of philanthropists - this is going mainstream and creating a distribution channel). 
4. There’s a whole ecosystem - credit companies, payment firms, companies that know how to work with the poorest of the poor and launching new products (crop insurance, life insurance, savings products)

“Capital is starting to see poor people as having inherent value,” said Davis.  Economic empowerment means starting to see value in a poor woman in Africa - that’s a dramatic reversal.