MICROCAPITAL BRIEF: Unitus CEO Joseph Grenny Answers Questions Regarding Change in Strategy, Use of SKS Microfinance Initial Public Offering Proceeds

Mr Joseph Grenny, CEO of Unitus Inc., a US-based international nonprofit organization, recently responded to concerns regarding its announcement that it will be discontinuing its microcredit operations and regarding the use of its proceeds from the initial public offering of SKS Microfinance. As reported by MicroCapital on July 8, 2010, Unitus Inc. announced that it plans to discontinue its microfinance activities, which has led to concerns in some circles regarding the fate of charitable funds provided to Unitus Inc. by donors. Unitus Inc.’s operations consist of both a nonprofit microfinance organization as well as a for-profit investment fund, the Unitus Equity Fund.

Responding to the concern about Unitus closing its microcredit (nonprofit) operations abruptly, Mr Grenny notes that Unitus is not ceasing those nonprofit operations, but only shifting the company’s focus. Unitus’ vision is that of poverty alleviation and empowerment of the working poor, and as there are now many other organizations which provide microlending, Mr Grenny believes it is the appropriate time to re-focus the company’s efforts on other poverty-alleviation activities. Mr. Grenny stated that the expected proceeds from a potential sale of its share of SKS Microfinance will be used for nonprofit, poverty-alleviation activities. The details regarding a potential sale of SKS Microfinance shares have not been disclosed.

Another criticism of Unitus is that it reportedly commingled for-profit and nonprofit operations and used donor grants for making equity investments in the microfinance institutions that it was funding. Mr Grenny states that although Unitus board members served on both the boards of the for-profit and nonprofit operations, this structure was used only for the board members to provide expertise to both operations and that no board member had personal equity in partner microfinance institutions. Mr Grenny noted that several Unitus board members did invest in Unitus’ for-profit operations but that these investments were made with personal funds with a guarantee that all proceeds would be re-invested in charitable causes.

Mr Grenny concludes by stating that the nonprofit Unitus is currently exploring other poverty-alleviation activities such as job creation, low-cost housing, education and healthcare, and hopes that as Unitus did with microcredit, Unitus will demonstrate the viability of these activities and encourage others to participate in them.

Unitus Equity Fund reportedly owns approximately 3.7 million shares that have an estimated total value of USD 70-80 million in SKS Microfinance, an Indian microfinance institution which recently launched an initial public offering. This value compares to the fund’s initial investments in SKS Microfinance made between 2006 and 2008 that total USD 6 million. As of 2009, Unitus reported total assets of USD 19.4 million.

By Jennifer Shevock, Research Associate

About Unitus Inc.:
Unitus Inc. is an international nonprofit organization based in the United States that originally aimed to accelerate the growth of microfinance to alleviate poverty. As of July 2010, Unitus is planning to refocus its efforts away from microfinance toward other unspecified “poverty-focused philanthropic activities.”
As of 2008, Unitus worked with 23 microfinance institutions in India, Southeast Asia, East Africa, South America and Mexico. Unitus also participates in the Unitus Equity Fund, which is managed by Elevar Equity Advisors. As of 2009, Unitus has total assets of USD 19.4 million.

About Unitus Equity Fund:
The Unitus Equity Fund is affiliated with Unitus Inc. and managed by Elevar Equity, and it was established to encourage the development of a commercial equity market to serve the microfinance industry. The fund seeks to earn a return commensurate with risk while investing in organizations working to alleviate poverty. Total committed capital when the fund opened in 2006 was USD 24 million. No current financial information is available for Unitus Equity Fund.

About SKS Microfinance:
SKS Microfinance is an Indian microlender that delivers microfinance products through a group lending model to impoverished women in India. It is a for-profit non-banking finance company which converted to a public limited company in May 2009 and launched India’s first microfinance initial public offering on July 28, 2010. Equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. Its total assets as of March 31, 2009, were USD 596 million with 3.5 million active borrowers, and it reported return on assets of 3.68 percent and return on equity of 18.72 percent.

Sources and Additional Resources:
“’SKS IPO proceeds will go to non-profit work’” August 13, 2010.
http://economictimes.indiatimes.com/Interviews/articleshow/6302294.cms

MICROCAPITAL BRIEF: “SKS Microfinance IPO Experiences Strong Demand, Total Share Offer 13 Times Oversubscribed” August 9, 2010. https://www.microcapital.org/microcapital-brief-sks-microfinance-ipo-experiences-strong-demand-total-share-offer-13-times-oversubscribed/

MICROCAPITAL BRIEF: “Unitus Equity Fund Investment in SKS Microfinance Valued at $60m, Partial Exit Expected This Week” July 30, 2010. https://www.microcapital.org/microcapital-brief-unitus-equity-fund-investment-in-sks-microfinance-valued-at-60m-partial-exit-expected-this-week/#more-6243

MICROCAPITAL BRIEF: “SKS Microfinance Launches India’s First Initial Public Offering (IPO) by a Microfinance Institution” July 29, 2010. https://www.microcapital.org/microcapital-brief-sks-microfinance-launches-india%E2%80%99s-first-initial-public-offering-ipo-by-a-microfinance-institution/

MICROCAPITAL BRIEF: “India’s SKS Microfinance Sets Price for Pending IPO, Offers Discount to Retail Investors” July 22, 2010.
https://www.microcapital.org/microcapital-brief-india%E2%80%99s-sks-microfinance-sets-price-for-pending-ipo-offers-discount-to-retail-investors/#more-6053

MICROCAPITAL BRIEF: “SKS Microfinance, a Microfinance Institution (MFI) in India, Announces Intentions to Sell Shares From July 28 to July 30” July 13, 2010. https://www.microcapital.org/microcapital-brief-sks-microfinance-a-microfinance-institution-mfi-in-india-announces-intentions-to-sell-shares-from-july-28-to-july-30/

MICROCAPITAL BRIEF: “Unitus to Discontinue Microfinance-Related Activities to Focus on Other Poverty Alleviation Strategies, Will Release 40 Staff Members in India, Kenya, United States” July 8, 2010. https://www.microcapital.org/microcapital-brief-unitus-to-discontinue-microfinance-related-activities-to-focus-on-other-poverty-alleviation-strategies-will-release-40-staff-members-in-india-kenya-united-states/

MICROCAPITAL BRIEF: “India’s SKS Microfinance IPO Could Trigger Trend in Microlending” June 16, 2010. https://www.microcapital.org/microcapital-brief-indias-sks-microfinance-ipo-could-trigger-trend-in-microlending/

MICROCAPITAL BRIEF: “Initial Public Offering (IPO) of India-based Microfinance Institution (MFI) SKS Microfinance Raises Questions about Ethics within the Industry” April 13, 2010. https://www.microcapital.org/microcapital-brief-initial-public-offering-ipo-of-india-based-microfinance-institution-mfi-sks-microfinance-raises-questions-about-ethics-within-the-industry/

MICROCAPITAL BRIEF: “SKS Microfinance Limited, Microfinance Institution (MFI) in India, Files to Raise $250m in Initial Public Offering (IPO)” March 29, 2010. https://www.microcapital.org/microcapital-brief-sks-microfinance-limited-microfinance-institution-mfi-in-india-files-to-raise-250m-in-initial-public-offering-ipo/

MicroCapital Universe: Unitus Inc.: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Unitus+Inc.#Description

MicroCapital Universe: Unitus Equity Fund/Elevar Equity: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Unitus+Equity+Fund+I

MicroCapital Universe: SKS Microfinance: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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