Why Every Social Entrepreneur Should Be Paying Attention to SKS & Unitus

This is a guest post from Tim Ogden. Tim is Editor-in-Chief of Philanthropy Action, a journal for donors, and Executive Partner of Sona Partners, a thought-leadership communications firm. Follow him on Twitter: @philaction and @timothyogden.

By Tim Ogden

TO3 Today, the world’s second microfinance IPO happened: SKS shares went on the market in India. All expectations are for a highly successful IPO similar to the blockbuster IPO of Compartamos in Mexico two years ago. Strangely tied into the SKS IPO is the demise of Unitus, a non-profit founded to help MFIs improve operations, grow faster and attract commercial capital. A few weeks ago, the board of Unitus declared “Mission Accomplished,“ announced it would be laying off its staff and examining a future direction for the organization focused on other poverty interventions. Unitus was a significant donor to and investor in SKS with both charitable and for-profit dollars.

The SKS IPO has produced largely the same rhetoric as the Compartamos IPO: Mohammed Yunus complains about profiting from the poor while polishing his halo and a few other experts point out that meeting the financial needs of the global poor requires access to commercial capital markets.

But that discussion is well worn and a distraction from the real issues that are raised by the SKS IPO and the Unitus shutdown. In the two organizations we are for the first time, I believe, seeing what the endgame for social entrepreneurship can look like.

Both SKS and Unitus majored on social entrepreneurship language: they explicitly targeted using commercial capital to meet social goals. This is somewhat distinct from Compartamos, whose founders tended to speak about pursuing commercial goals for their own sake, not primarily as a means to a social end. Just as important both organizations used the standard social entrepreneurship playbook, founding a nonprofit organization and funding themselves initially at least with charitable donations.

These charitable donations into the risky venture of microfinance have succeeded by most reasonable measures. SKS makes quality financial services available to a huge number of clients, while charging very reasonable interest rates given the cost of serving the clients it targets. Unitus was one of the first organizations to invest in MFIs to help them access commercial capital and to evangelize microfinance investments to the commercial capital markets. As the Unitus board noted in the announcement of its shutdown, a huge amount of commercial capital is now flowing to microfinance, some would argue too much.

That success in turn, as contemplated in the dreams of social entrepreneurs, has made it possible for the founders of Unitus and SKS to do well because they did good. But that’s where the story begins to get murky. That murkiness is based in a number of transactions that were necessary for SKS to take commercial capital and for Unitus to prove the commercial capital model. Along the way, the clients who owned 40 percent of SKS, have had their share diluted without it being clear exactly how they will benefit. Unitus, the non-profit, spun off the Unitus Equity Fund, a for-profit private equity fund, and seems to have given the for-profit some share of its investment in SKS. Members of the Unitus board who approved the creation of the for-profit fund spun out of the non-profit are almost certainly (though its difficult to determine for sure) investors in the Unitus Equity Fund who now stand to benefit from the SKS IPO.

Adding significantly to the murkiness is the strange tale of the Unitus shutdown. Seemingly announced in a way as to minimize attention, the story has gotten very convoluted. Apparently most donors and staff were utterly surprised by the move. The chairman of the Unitus board issued a statement trying to answer some of the very reasonable questions; several of his answers were almost immediately refuted by reporting done by Clay Holtzmann of the Puget Sound Business Journal.

That brings us to some big questions, that to date, many social entrepreneurs have been able to ignore. While we were all talking in theory about social entrepreneurship and using market mechanisms for social ends, and bringing capital and scale to poverty alleviation and other worthy goals, we could blithely ignore some thorny issues. After all, why worry about about the “doing well” part when no one had yet “done well?“ It’s happening now, though, and that’s why social entrepreneurs, their funders and policy makers need to be paying attention.

The three big questions that haven’t yet been answered in the SKS/Unitus situation are relevant to everyone in the space:

1) Who ultimately does well here?

2) What role did nonprofit funds have in enabling the people doing well to do so very very well?

3) And the biggest question of all: What responsibility do the people who took charitable funds have once they start personally doing well?

The social entrepreneurship space is still the wild west—everyone is making it up as they go along. I suspect that is going to change as the details about SKS and Unitus slowly trickle out.

To help you follow along, I’ve created this round-up of articles about the two organizations: A Guide to the Unitus/SKS Story.


  1. Can you be more specific with your implication, Tim? Are you doubting the improved lives of the millions of SKS customers (and employees)?

    Or, are you concerned that investors in SKS and the Unitus Equity Fund have become insanely wealthy in this IPO, or via other investments?

    Articles like this are somewhat troubling to me, because they distract people (potential donors, employees, and others who are interesting in becoming involved) from the massive improvements being brought to life by the efforts of organizations like SKS and Unitus. Many of them are doing it on a volunteer, or reduced-wage, basis and if your articles aren’t fair and balanced (clearly stating the massive benefits), can plant truly unnecessary seeds of doubt.

    It isn’t that I’m not interested in seeing ‘who benefits’ and the financial impact of those benefits — but, you didn’t really do any digging to unearth those facts — instead, you insinuated that money grubbers must be out there, and by extension, they’re probably those people involved with SKS and Unitus, and the like. I’d rather see writers uncover the facts, rather than gossip around the water cooler.


    Dave Schappell
    Founder and CEO, TeachStreet
    Advisor, Vittana
    Former VP Marketing & Fundraising, Unitus

  2. Clay Holtzman says:

    You may want to start by reading some of the news coverage that Tim has linked to (see A Guide to the UNitus/SKS Story link). I think then you will see there is a substantial body of reporting that supports some of Tim’s observations.
    Obviously, the issue of Unitus and its links to SKS is worth noting, especially in the wake of the IPO. To label it as “gossip” is a distortion of the truth. Perhaps you could set the record straight and share some first-hand observations about what Unitus disclosed to its donors about the Unitus Equity Fund?

  3. Tim Ogden says:


    As Clay notes (thanks Clay) there is a substantial body of reporting already done–and a substantial amount of refusal to clarify facts by Unitus–on this issue. If there is rumor, gossip and innuendo, the blame for that primarily lies with Unitus.

    Since the ends do not justify the means, in many ways the benefits to SKS customers are also irrelevant. (I’d also point out that the post is at pains to make the point that SKS has benefited its clients). It’s also true that the amount of money made by the various parties is irrelevant.

    In my mind what is relevant is what happens when the boundaries between for-profit and non-profit worlds are crossed. In this case specifically, both for-profit and non-profit funds were directed by the same group of people to a particular institution. The people who directed those funds will be benefiting (it matters not to what degree) personally.

    Is that OK? I don’t know the answer, but my moral intuition tells me it is not. What I do know is that in the social entrepreneurship space we’ve never really wrestled with the question. And now we have to.

    My biggest concern is that the very important questions get buried in a false debate about over for-profit vs non-profit mechanisms, or as you say, by the size of the payouts.

  4. I’m sorry I ever commented — I won’t make the mistake again. As I told you when we first spoke, Clay, I last worked at Unitus in 2006, 4 years ago — I’m sure there are people more well-versed in the donor disclosures that me — I’m sorry if they aren’t responding to your inquiries.

    Tim — as a reader, it’s not my duty to read all of your reference sources. You article is littered with inferred negativity, with phrases like “strangely tied into”, “largely the same rhetoric”, “the endgame”, “majored on social entrepreneurship language”, “standard social entrepreneurship playbook”, “some would argue too much”, “are almost certainly (though its difficult to determine for sure)”, “seemingly announced in a way as to minimize attention”, etc.

    I’m sure this is a topic that’s great for discussion. I’ll leave it to the folks who are much better writers than I, and who like to endlessly discuss and debate things, rather than those who actually step in the arena and strive valiantly to improve the world (bad quote of T. Roosevelt).

    Have at it.



  5. Hey Dave,
    Sorry you’re unhappy with the back and forth. As the author of Tactical Philanthropy and curator of the guest posts, I do try to find people with divergent, but well researched views. I do think Tim’s arguments are valid, while they may or may not be correct.

    As I note here, Geoff Woolley of Unitus will be guest posting as well.

    Whether you decide to ever comment again or not, I do hope you’ll stick around and read the divergent views presented here. I reject the idea that you need to either debate or do. I think debate and the exposure to ideas that are unfamiliar and challenging are key elements in helping “doers” do the right thing.

  6. Tim Ogden says:


    If you’re not too busy striving valiantly, I’d suggest you take the time to read David Roodman’s discussion of the role of critics and playwrights (which begins just under the heading of “Long Version”): http://bit.ly/91GvJT

    Alternatively you might simply consider that the two bedrocks of functioning and efficient markets are trust and information.

    When the people in the arena don’t provide information and undermine trust, it hurts us all. Especially those of us who are in the arena but in a much less public way. Denigrating the people who seek information so that trust can be restored is counterproductive to say the least.



  7. Sean — agreed — debating & doing aren’t mutually exclusive. It’s when posts come with decided tones that they push my buttons.

    Tim — thanks for more snark. And another link to a long article — I’ll get right on that. Oh, and your article started as denigration, as I read it — I only responded. For that, I’m sorry.

    I do agree with the trust/information bedrock — it’s just sometimes not as easy as directly answering all of the questions that YOU WANT to have answered — sometimes there are SEC guidelines that prevent answers. Sometimes there are facts that can’t be disclosed. Sometimes things don’t have easy answers. I’m sorry you don’t have all of your answers yet — I hope you get them. Because I DO think that figuring out some of the answers to “what happens when social entrepreneurs succeed” will be worthy of the search.

  8. Tim Ogden says:

    Post the NYT story today and the exchange with Dave, I’ve written another post to clarify my thoughts and concerns: http://bit.ly/a8Ybiw

  9. John Goldstein says:

    I appreciated what was a thoughtful post from Tim. I also appreciate his perspective on the importance of sorting through the details in a fact-based way. My only concern is that the media and public at large can sometimes be very good about focusing on provocative trees in a way that leaves the forest reasonably neglected. The higher level observations at the top – that this is a very interesting case to dig into, that this is beyond the Compartamos debate, etc. – are important. I was a bit surprised that the three critical questions listed at the end seemed a bit less insightful (at least relative to the things I am interested in) than the first part of the piece and focused on the more “gotcha” journalism side of this story.

    I guess it feels like the conversation, armed with facts all around, could be pushed to the next level in a really exciting way that teases into how necessary/problematic are non-profit and commercial entanglements in getting social enterprises like this to this kind of scale? Given there may be some inevitable messiness, how is this handed best? This is where I will say that I had a small element of Dave’s reaction to pieces of the tone of the piece which felt (and this may have just been my read) as if it implied some soft of skullduggery. Tim’s comment in the replies about ends not justifying means such that, in his eyes, “in many ways the benefits to SKS customers are also irrelevant” is, in my eyes, a debateable one. For my two cents, that question would, to be honest, be a great one to flesh out and advance as a lens for this conversation. Having the core assumption that ends do not justify means and that certain process or organizational failures would obviate other benefits gives a perspective to the post that inadvertently steers the conversation in a specific way that, in my view, may lead away from some conversations I think would be fascinating.

    Broadly, I realize my comments are quibbles of tone and nuance, but I think it does, to a degree, matter. In our field (and I can be quite guilty of this personally), we spend a lot of time having sequential monologues between triumphalists and hole-pokers (to use wildly oversimplified labels). In that sense, I think knowledgeable, fact-based folks (like Tim whose smarts on all this stuff, at least based on which of his writings I have read, I have tremendous regard for) have a somewhat unfair burden to inform the conversation (which this post begins to do in a way) and advance it in as constructive a manner as one can (not as sure this does it as well as it could).

    More broadly, thanks to Sean and Tim and Dave for what is an important conversation.

  10. I think Dave Schappell was absolutely right to raise the issue of what exactly is the benefit of the additional supply of microfinance brought about by all these Wall Street-style innovations. Because there if there is NO benefit, then this adds hugely to the case being made against the Wall Street-style antics of both SKS and UNITUS. The problem for Mr Schappell is perhaps that, having raised this issue in the way that he did (something like ‘there is a big impact on the poor, so lets stop quibbling about how it was achieved’) , I think he actually gets the wrong end of the stick.

    There is actually much evidence pointing to a strong negative impact of microfinance in India, and so further growth will simply not help. In Andhra Pradesh, the home state of SKS, a very serious ‘microcredit bubble’ has been created these last few years thanks to the commercialisation-driven increase in microfinance. Growth at all cost has been the operating philosophy of SKS and others like it. Accordingly, multiple microloans have been rising very fast indeed, while distress asset sales (especially of family land) to repay microloans, rather than default, have been rising very fast too. Far too many of the hapless individuals having been encouraged by such as SKS to try to borrow their way out of poverty, now find that they have actually ended up in even deeper poverty than before, thanks to their tiny microenterprise failing (which most do after a year or so, especially in such crowded product markets as exist in India today). Inequality has been growing too as the poor sell to the rich their family assets at fire-sale prices.

    There is particularly strong evidence to show that the unsuitably of microfinance to small-scale farming in particular has produced a poverty disaster. Around 82% of small farmers in microfinance ‘saturated’ Andhra Pradesh in the late 1990s were found to be in serious financial trouble, compared to ‘only’ 49% in the rest of India. With microdebt so expensive, and with meaningful productivity gains impossible on the smallest farms, incomes not surprisingly began to decline – indeed, between 1993 and 2003 rural incomes FELL in Andhra Pradesh by 20%. In 2004 the government of Andhra Pradesh had to convene a government commission to look into the growing level of farmer microdebt, and it effectively counselled against poor farmers using microfinance in future to try to escape their situation!

    Of course, Mr Akula has carefully avoided all these microfinance ‘over-supply’ related issues, presumably because they would cut the legs from under the stated rationale for the IPO – ‘we need more microfinance and the IPO is the perfect way to do it’. His letters to various local and international newspapers to the effect that India’s heroic poor were strong enough to repay their growing bundle of microloans, and so we should not worry about them, was to me a quite sickening example of self-interest masquerading as concern for others.

  11. milford bateman told his comment “‘we need more microfinance and the IPO is the perfect way to do it’” I think your absolutely wrong, because you don’t know the reality of India inside. If you want to know the reality you should ask the MFI clients. how much their suffering and some the MFI clients were succeeded. Do you know how are his clients? Do you know what is the % of Indian real poverty? Do you know how many Andhra Pradesh people known SKS? Do you think it is transparency & accountability? I am the Victim of all these things?