Center for Social Innovation

Established in the mid-1970s, microfinance provided tiny loans to poor families to help them start to expand small businesses. Thirty years later, the practice had helped more than 80 million people lift themselves out of extreme poverty. The practice had grown into a global industry comprised of more than 3,000 microfinance institutions.

Early pioneers of microfinance, such as Muhammad Yunus of Grameen Bank, had become celebrities of sorts, receiving scores of humanitarian awards, including the the 2006 Nobel Peace Prize. Similarly, the microfinance movement itself had become so well-known that it invited comments from mainstream cultural icons such as Bono, lead singer of the band U2, who said: "Give a man a fish, he'll eat for a day. Give a women microcredit, she, her husband, her children, and her extended family will eat for a lifetime."

Despite these accolades, Geoff Davis and Mike Murray believed that while microfinance was an important social innovation, it was dramatically underperforming relative to its potential because it had yet to achieve adequate scale. They pointed out that less than 20 percent of the world’s demand for microfinance was being met. Murray observed, “Usually, an industry that had those dynamics would have been closed down.”

Prompted by their vision of microfinance’s potential they founded Unitus, Inc., a nonprofit focused on accelerating the growth of the microfinance industry so that vastly more people could gain access to the capital they needed to generate an income, raise their standard of living, and fulfill their basic needs. 

This case explores dynamics in the microfinance industry, describes the Unitus business model, and sets up an important decision facing the company: whether or not to expand the amount of capital it can provide to its microfinance partners through the creation of a debt or equity fund.

• Microfinance