Does Microfinance offer a low risk investment opportunity, with maximum impact for small entrepreneurs?

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UNITE USFOR A BETTER WORLD

September 2005

UNITE US

FOR A BETTER WORLD

Triple Bottom Line

Investing Conference

October 2005

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Introduction to Microfinance

• 1970s: Microfinance Institutions (MFIs) are born in places like Bolivia and Bangladesh

• 3,000+ MFIs offer small $50-$150 loans at reasonable interest rates. Borrowers use to improve businesses

• Borrowers often sign up in groups, securing each other’s loans

• Borrowers repay principle and interest with extremely low delinquency – repayment rates exceed 95%

• Proven results/development tool:– Businesses grow; increase family income, access to

health care, medicine– Children attend school, improved housing, nutrition– Increased borrower self-esteem

• Industry expanding to provide savings, insurance, remittance, and other financial products

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Huge Unmet Demand

Source: Unitus estimates, based on research from The World Bank

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Most Microfinance Institutions (MFIs) are Small

Source: Unitus estimates, based on research from the Microcredit Summit

The MFI industry has failed to develop a systematic growth model

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Why Don’t MFIs Grow?

Lack of Capital

• Negatively perceived as unprofitable and undisciplined

• Most are unregulated nonprofit organizations, prevents

– Building equity base– Optimizing use of commercial

debt for leverage– Capturing savings deposits

• Limited access and familiarity with local capital markets, except for the few top-tier MFIs

Lack of Capacity

• Weak corporate governance

• Lack of management depth

• Absence of management and strategic planning systems

• Insufficient business infrastructure

– MIS/Accounting– Technology– HR

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How Unitus Accelerates MFI Growth

Capital

• Assist with transformation to regulated financial institution

• Invest equity to– Meet minimum regulatory capital

requirements– Bolster balance sheet to support

leverage through debt

• Facilitate access to local capital markets through

– Catalytic debt– Relationship building

• Strengthen MFI operating capacity with initial grants

Capacity

• Improve corporate governance

• Expand depth of management

• Strengthen reporting and strategic planning processes

• Facilitate capacity-building consulting projects to improve

– MIS/Accounting– Technology– HR

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Unitus Acceleration Model

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Unitus Acceleration Model: Select

Employ proprietary tools to• Identify favorable markets for

microfinance– Regulatory / legal environment– Economic and political stability– Accessible capital markets– Competition– Poverty density

• Select highest-potential MFIs– Potential for rapid, large-scale,

profitable growth– Strong, socially-minded

management– Focus on serving poor clientele

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Unitus Acceleration Model: Consult

Capacity-building to prepare MFIs for rapid, long-term, profitable growth• Improve corporate governance

– Ensure local board oversight; Unitus board participation

• Expand depth of senior management– Evaluate organization structure– Assist with establishment of hiring and training systems

• Strengthen reporting and strategic planning processes– Implement Monthly Management Reporting and Balanced Scorecard– Support adoption of industry best practices (e.g. CGAP reporting standards)

• Facilitate capacity-building consulting projects– Improve MIS/Accounting systems and technology– Implement performance and human resource management systems– Expand product offering for target customer base

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Unitus Acceleration Model: Invest

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Results from MFI Partner SKS India

• Increased five-year borrower growth goals from 100k to 300k

– Current projections at >600k

• Assisted transformation to regulated for-profit institution in 2005

• Spurred access to local capital markets through catalytic debt

• Assisted with CEO and CFO hiring processes

• Guided implementation of monthly management reporting package

• SKS awarded 2004 CGAP Financial Transparency Award

400%+ growth in less than 2 years

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Results from Unitus MFI Partners

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Announcing New Strategic Partnership

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Think of Unitus as…

• Microfinance Experts– Extensively studied microfinance and analyzed 30+ year history of

successes and failures– Determined when, where and how to have the greatest impact– Continues researching and implementing best ways to alleviate poverty

via microfinance

• Microfinance Venture Investors– Selecting only the highest-potential MFIs – Focusing on accelerated, profitable growth– Providing consulting expertise and oversight– Not tied or limited to any MFI brand or network

• Hear from our MFI Partner, SKS Founder Vikram Akula:– http://www.unitus.com/resource_mediaresources.asp#videos

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UNITE USFOR A BETTER WORLD

September 2005

UNITE US

FOR A BETTER WORLD

Triple Bottom Line

Investing Conference

October 2005