Lunch with Kate Cochran, Unitus

Kate Cochran is the VP of Resource Development for Unitus, an NGO focused on achieving scale in microfinance by accelerating those MFI's that have the markets and potential to grow by a factor of at least 10 (from serving tens of thousands to serving hundreds of thousands). She was in the Bay Area for a panel presentation at the World Affairs Council, and offered to meet with me and Margarita Quihuis to talk about our Reuters projects and how Unitus might help us and possibilities for working together.

Unitus is a relatively recent NGO, started in 1999 by a professor and a group of 5 business people with an interest in poverty eradication. Their method is to find successful MFI's that have lots of potential. They consider market opportunity and competition (a recent study for Bangalore estimated 500,000 potential borrowers currently served by 2 MFI's with a total of 20,000 accounts). They look at the the management team, what they have achieved and what they might achieve. And they look at the infrastructure (especially IT systems) that the MFI has in place.

Once Unitus finds a worthy MFI, they typically make an investment of $2 - 4M, partially a grant for capacity building, and partially as an equity investment. Unitus becomes a partial owner of the MFI, and takes a seat on the board. They collaborate on a plan to grow the organization to meet the needs of the borrowers.
One key step along the way is to help the MFI change their status from a non-profit to a for-profit, showing that, run properly, a MFI can be a sustainable, profitable venture.

We asked Kate about the biggest challenges facing the growth of these MFI's. Among her responses:

• Financial Engineering: She felt that there were huge opportunities to connect capital with borrowers if we could just come up with the right structure. Unitus is starting a think tank (aka "Bankers without Borders") to address this sort of innovation. Mike Murray, chairman of the Unitus board (and formerly a key person on the first Mac team and early exec at Microsoft), is spearheading the effort. Kate offered to introduce us to Mike.
  
  
• Credit Reporting: How do you assess the credit risk of individual borrowers or the overall risk of a portfolio of loans when your clients don't have a previous banking relationship?
  
  
• IT Systems: Unitus made an investment in SKS India partially on the basis of its strong IT systems. Kate thought that the systems that they're using should be broadly applicable, but re-use is currently being held up as intellectual property issues are worked out between SKS and Grameen Foundation USA Technical Center. Kate offered to introduce us to technical contacts at SKS and Grameen Foundation USA.
  

The conversation continued for a full hour, covering a range of topics from the role of diaspora and expats living in the US (whose dollars and votes can greatly influence the political process in their home countries) to the use of governmental postal services (like India Post) for the "last mile" delivery of services to the raising of equity funds for MFI investing and the opportunity to show the feasibility of having a private-only equity fund.
Kate was exceptionally helpful, and offered to stay in touch as we further refine our project plans, including potentially meeting up on her next planned trip to California (Oct 21?).