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Microfinance

Unitus, We Stand; Divide Us, We Fall

An external agency should review the circumstances surrounding the Unitus decision to terminate its 10-year commitment to microfinance.

“He that is of the opinion money will do everything may well be suspected of doing everything for money”—Benjamin Franklin, 17th-century social entrepreneur and co-founder of the United States.

This, in a nutshell, is the apprehension driving many of the critics and critiques of Seattle-based Unitus, a nonprofit that on July 2, 2010, unexpectedly abandoned its microfinance work in favor of a yet-to-be-named new poverty alleviation mission.  The almost instant blowback came on July 9, 2010 in the Chronicle of Philanthropy with phrases like “decision to wind down its sole program shocked. … Is [there] a more sinister reason lurking behind the positive spin…? The announcement …came just before the long July 4th weekend which to some observers calls to mind a ‘bury the news’ ploy used frequently by for-profit corporations.”

By all accounts, Unitus will not be winning any PR awards for deftly handling the media relations rollout of its decision. But handling the media with the tin ear of a British Petroleum executive is not the same as fouling the Gulf Coast. Ineptitude in media relations does not constitute nonprofit malfeasance. If it did, most nonprofits would be in jail.

What truly matters is what can be learned from Unitus’s storied history as a leading microfinance institution and its recent change of mission. There is much to consider.  While this blog raises a number of policy concerns and even goads Unitus in places, in my view Unitus has earned the benefit of the doubt. The overarching story here is that microfinance increasingly finds itself on the sharp edge of making money by providing a public service. Like for-profit HMOs who finance healthcare, but make it hard to access the care; or for-profit energy companies who power our lives, but pollute them too; or for-profit automakers who build job-creating plants in local communities, but later close them down—microfinance will no longer operate in an unexamined vacuum.

Nonprofit leadership is, first and foremost, about trusteeship. A nonprofit board holds in trust the donor dollars received, the social capital of its brand, the human capital of its staff, and the unwavering responsibility to defend the mission to which all the organization’s stakeholders have committed themselves.

The concerns, broadly summarized, are that Unitus acted capriciously and without due care for the handling of charitable donations, that windfall profits from the recent SKS IPO are linked to the decision to fold, or that some ill-considered organizational behavior is being, if not covered up, then badly explained. But suspicion and rumor are not facts. No hard evidence substantiates any of these concerns. Moreover, without question, the Unitus leadership has historically been motivated by a public interest steadfastly devoted to poverty alleviation. That is my view.

This is why the World Bank’s Consultative Group to Assist the Poor, the State of Washington Attorney General, or some other external agency should review the circumstances surrounding the Unitus decision to terminate its 10-year commitment to microfinance. An independent agency with the skills to conduct a financial and legal audit will put to rest the untoward rumors, clear the air, and re-establish the Unitus brand.

Nonprofits and for-profit social enterprises alike put forward three fundamental and intertwined cases to garner financial support: One, the organization is working on a pressing problem that needs solving or improving, in this case poverty. Two, the organization has a theory of social change and problem solving, which works and even works uniquely. Three, the organization’s leadership team and staff are talented, imbued with integrity, dedicated to the mission, and effective. Let’s examine each in turn.

To examine these questions, read Jonathan Lewis’s full story on Unitus, which was first published as a blog in serial form at Social Edge.

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COMMENTS

  • BY Judy Berger

    ON September 3, 2010 08:49 AM

    My many experiences developing leadership education programs for health care and philanthropy leaders validates the points of this thoughtful article.  Now evaluating community service leadership in the health sector, I have learned that one of the most powerful gifts of effective leaders is not what they can do alone, but rather what they can inspire others to do together.

  • Samantha Morshed's avatar

    BY Samantha Morshed

    ON September 4, 2010 10:23 PM

    I’ve read the blog as well as the full story in the link.  I didn’t previously know of the closure of Unitus but I really appreciate your very balanced overview of the situation.  I would add two points to this.

    Firstly, I am a sceptic of microfinance and as such think that there may be very good reasons why Unitus chose to move away from this model of poverty alleviation.  A well known Indian film maker has just released a new movie which tackles the whole issue of mf debt among the rural poor in Indian and the not so rare suicide instances that have prevailed.  Certainly from my experience in Bangladesh mf has been both wrongly sold and over sold to a population not in a position to refuse what looks like a windfall when it first comes.  And it’s not just in the Asian subcontinent, a good friend of mine in the Balkans who has successfully run an mf NGO for many years has recently started a debt counselling initiative alongside to try to help with some of the problems caused.  It’s not that mf is a problem in itself but definitely there are widespread issues in many countries with its implementation.  It’s really important that countries with less well developed mf industries look at this and avoid similar mistakes.  Maybe the Unitus board understand some of this.

    Secondly, I think that it would be a mistake to have an external agency review the decision made by the Unitus board.  Clearly it was a difficult decision, which is why some members resigned.  In social business there are no easy decisions;  there is rarely right and wrong but just a plethora of greys.  Those of us who go into the field do so because we care and as such many decisions are made according to the moral compass of those at the top.  These decisions can be difficult to explain and even more difficult to defend since clearly among all this grey, emotions are involved.  There are no mission statements or policies that can ever cover all eventualities and as such as a donor or investor in social business you look at the track record of those at the top in order to assess if you are aligned morally and ethically. 

    Social business seems to have attracted an intellectual lot and indeed there are far more people discussing, critiquing, and mooting social business than there are social entrepreneurs.  Labouring over the intricases of moral decisions will neither help take social business forward nor will encourage more social entrepreneurs into the field.  We should celebrate the work they have done for the past 10 years, trust that the board has made the right decision according to their moral compass and wait for the next phase of Unitus and their new strategy to emerge.

  • Christy Collins's avatar

    BY Christy Collins

    ON September 5, 2010 10:29 AM

    “Nonprofit leadership is, first and foremost, about trusteeship. A nonprofit board holds in trust the donor dollars received, the social capital of its brand, the human capital of its staff, and the unwavering responsibility to defend the mission to which all the organization’s stakeholders have committed themselves.”

  • katecochran's avatar

    BY katecochran

    ON September 8, 2010 09:09 PM

    I think that Jonathan has provided a thoughtful and fair account based on the information that have been provided to the public. As a former member of Unitus’s leadership team, I would welcome a deeper look at all the circumstances surrounding not just the odd and abrupt ending, but the many interesting and challenging choices the organization faced in working in largerly unchartered territory. The story of the ending has been dominated by the board’s decisions and communication choices, but the story of the organization deserves a fuller telling.

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