The recent decision by its board to close Seattle nonprofit Unitus and shift its resources to "other strategic areas" prompted Adam Sorensen, a consultant working for the International Finance Corporation, to write a response questioning the actions. Here's his personal perspective:

Adam Sorensen, a Seattle native, is a microfinance consultant currently working in South Africa.

Unitus, the Seattle-based, non-profit microfinance organization announced 'Mission Accomplished' on the eve of July 4th by closing its offices in Seattle, Bangalore and Nairobi and dismissing its 45 staff members. Like the infamous declaration by George W. Bush in 2003, the decision by the Unitus board of directors is hardly justified. Despite the definitive claims of success, the closure of Unitus has only raised confusion about the organization and questions about the state of the microfinance industry.

The Chairman of Unitus, Joseph Grenny, who is also a Unitus co-founder, shocked the microfinance industry by declaring that Unitus' "central premise... has been validated - capital markets have embraced microfinance to the extent that there are tens of billions of dollars in microfinance capital now available." Although the recently-appointed, now-departing CEO of Unitus has not publicly commented on the closure, the longtime COO, Ed Bland, added that Unitus had become "unnecessary" in the microfinance industry, equating the growth of for-profit microfinance providers with the availability of commercial capital.

The declaration of victory refers to Unitus' goal to reduce poverty by rapidly accelerating the provision of microfinance to the poor using commercial capital. Until the declaration, the goal appeared far off. The Unitus web site accurately stated that "even after 30 years of industry effort, there remains a huge gulf between the supply and demand for microfinance services. Millions of families are still without access, and at current growth rates, the gap will not be closed for decades." Unitus tackled this challenge by raising capital and then channeling it to microfinance providers in developing countries, while providing consulting assistance to improve their growth and productivity.

By all accounts, Unitus executed its strategy well in India, with far less traction in other parts of the world. Since 2001, when it began hiring professional staff out of a converted bungalow in the shadow of the Microsoft campus, Unitus raised $40 million in donor funding to support 12 microfinance providers in India, three elsewhere in Asia, four in Latin America and three in Africa.

To fund the growth of microfinance providers, Unitus also created and spun-off two for-profit investment management and advisory firms, which mobilized a total of $30 million from investors, many of whom sought various blends of financial and social returns. In India, Unitus has partnered with well-managed providers that have achieved very rapid growth and demonstrated the viability of for-profit microfinance, including SKS Microfinance, which is due to issue an IPO for $250 million to $300 million in coming weeks. Elsewhere, Unitus has had less success introducing new sources of capital and driving growth, with significantly lower impact on the growth of providers outside of India.

While its contributions should be lauded, the Unitus' board's claims that a wave of commercial capital washed over the industry is unsubstantiated and dubious. Outside of India, Unitus' limited activities mirror the limited penetration of commercial capital in the microfinance industry. Globally, the microfinance industry remains financed primarily from subsidized sources, with truly commercial capital (i.e. non-subsidized) limited to a few large, profitable microfinance providers, many of which previously received donor funding.

According to the World Bank's Consultative Group to Assist the Poor, donors and investors each provided roughly 50% of total funding to the industry in 2009. Of investors' share, half was invested by the German government and four development banks - all public institutions - and another large, but unspecified slice was sourced from social investors. Regionally, subsidized funding is even more important in less-developed regions like Sub-Saharan Africa, where donors provide 75 percent of total funding in Sub-Saharan Africa.

As a non-profit advocating for commercial capital, Unitus unsurprisingly branded itself as a different kind of non-profit in the microfinance industry and the philanthropic world. It promised better results by bringing commercial discipline and business practices cultivated by the leading companies that it often recruited from. In keeping with its brand, Mr. Grenny has spun the closure of Unitus as a carefully planned, cutting-edge decision that was 18 months in the making and will bring better results for donors and greater impact on the poor.

For a non-profit organization preparing to close its doors, Unitus has recently taken a number of "innovative" actions including:

• October 2009: Hiring a new CEO with a long resume in microfinance


• April 2010: Announcing a $15 million partnership with the US government's Overseas Private Investment Corporation and Citigroup


• May 2010: Advertising staff positions for fundraising and regional offices


• May 2010: Announcing two new partners (Grama Vidiyal, India and AMK, Cambodia) for its social performance management initiative


• June 2010: Holding a fundraiser with the local microfinance community in Seattle

At an industry level, the trouble with the Unitus board's declaration and the unwinding of the organization is that there are serious issues facing microfinance providers, donors and investors. These issues challenge Unitus' view of the microfinance industry and its impact on the poor.

First, the 2007-08 commodity inflation bubble, followed shortly by the financial crisis and widespread economic distress, has pierced the oft-repeated assumption that microfinance is unaffected by the macroeconomic environment. Second, the rapid growth of microfinance providers, especially commercial players, in countries like Bosnia and Morocco has shown how uncontrolled microcredit extension can destabilize the industry at a national level. Finally, these difficult circumstances are compounded by an existential threat from a string of randomized-control trials have called into question the impact of microfinance as a strategy for poverty-reduction. Cumulatively, these developments demand the participation of Unitus as a proponent of commercial capital to spur the rapid growth of microfinance to reduce poverty - not a victory lap.

Although I have never donated to, invested in or worked for Unitus or its affiliates, I do have an interest in the microfinance industry. Since leaving the U.S. in 2005, I have worked in various roles to promote microfinance, from volunteer to manager to investor. While these experiences may qualify me as a member of the much-maligned 'international development complex', it is the interests of the poor and less-fortunate across the world that I hope to represent by questioning Unitus' departure from microfinance. If anything, I believe the economic hardships of the past three years have taught us that growth and opportunity are not guaranteed anywhere in the world. Without Unitus, there is one fewer reason why the poor and the less-fortunate may have access to microfinance tomorrow.

Granted, at least the Unitus board didn't splash their announcement across an aircraft carrier.