April 7

Sriram Gutta

What’s Next in Financial Services for the Poor? An Interview with Brigit Helms, CEO of Unitus

Editor’s Note: In his first post as Staff Writer, Sriram Gutta shares an interview he recently conducted with Brigit Helms, CEO of Unitus, one of the most active players in the mobilization of commercial capital to underserved markets. Full disclosure: Sriram works for Unitus out of Bangalore, India.

Sriram Gutta, How would you describe your experience in development finance? What brought you to Unitus?

Brigit Helms, Unitus: Well, I worked from a number of different angles when it comes to development finance and harnessing the power of the private sector for development. You could say the question haunting me throughout my career has been how one can make sure that private enterprise and business are part of the solution when it comes to reducing poverty.

Early on I started with very macro picture of trade and investment promotion, asking how bigger companies might be able to get involved. Then I moved into the rural space and looked at farmers and how to link farmers to markets, and after a while I found microfinance. That was back in 1995 when I joined CGAP as one of the founding members. What was really exciting about microfinance is it is something that really works, and was what really what got me going into development finance. For the last four years I worked with the International Finance Corporation, looking at many other dimensions of development and finance, but felt the pull of microfinance pulling me back.

What brought me to Unitus is twofold. First of all, I love the energy, the entrepreneurial spirit and the agile way that Unitus can respond to what’s happening in the market. Second, I love the fact that almost no one else in this entire organization has the same kind of pedigree that I have. It’s not an organization filled with development specialist or microfinance specialists, but rather people who have been highly successful in business, in finance, in consulting and in technology who are very deliberately placing their attention and energy on development problems and finding solutions to poverty. So for me those are the very exciting aspects of Unitus where I feel we are well poised to make a difference. In your view, how has the industry evolved since the early 1990’s?

Brigit Helms:

It has evolved significantly. First of all, twenty years ago there were just a few examples, maybe a half a dozen, of commercially-viable microcredit-in the ’90s the model was very much about how to replicate those existing methodologies across the planet. I used to call it the “have methodology will travel strategy. It’s very supply driven , a championing of the formulas that have worked — it’s Grameen, it’sFINCA, it’s ACCION, individual loans, whatever it is — and the idea was to crank the machine that wallpaper the world with those kinds of credit instruments. It does work and there is a lot of space for growth in that domain, however, what increasingly people are starting to realize is that poor people may need a broader range of financial services than just the one sort of working capital loan for microenterprise. The realization is that not all poor people are entrepreneurs, but all people need access to financial services to help them take control of their financial lives.

I would say in the early 2000’s people started to understand the microcredit market from the client side, as opposed to only thinking about it from the MFI perspective. That’s been a huge shift and it’s still happening in the market place. If you look at very influential book like ’Portfolios of the Poor’ you will see that poor people, even people living under $2 a day, already are managing an array of financial instruments to help them take control of their financial lives, but those instruments are not very reliable, they can be high cost and they’re mostly in the informal sector.

So increasingly we’re starting to understand that the real job of microfinance is to ensure that clients get that range of financial services that they need at an affordable price and distributed in a convenient and reliable manner, but also that those services can be provided on a commercially-viable basis as well. What do you think the future of microfinance looks like?

Brigit Helms: Well, I already explained the kind of evolution of microfinance from more of a supply driven to a demand driven, and now I think that the future of microfinance is going to be all about marrying those two pieces. This means figuring out first and foremost what are the financial services that poor people actually need and demand. Secondly, we need to figure out how to provide those services on a reliable and commercially-viable basis in order to have very large scale impact.

We know a lot about clients and what they need. What we know less about is how to meet the demands of those clients when you start moving beyond microcredit. So, the point is how do you reduce the costs and improve the distribution networks of these financial services to get them out to the large numbers of clients that still remain unserved.

I’ll give you an example. Today there are 2.2 billion people in rural areas that have no access to financial services at all. At the same time, it is estimated that by 2012 there will be 1.7 billion people with a cell phone, but no bank account. And you can bet that those two areas are overlapping. So the question then becomes how to leverage this booming technology of ubiquitous cell phone across all countries and leverage that to reduce the cost of delivering the financial services people need in their homes and in their places of business. That is really, I think, one of the questions that will be answered over the next 5 to 10 years. What has been the role of Unitus in microfinance industry so far, and how do you see Unitus evolving in the future?

Brigit Helms: Well, I got to tell you something. Make a confession. I was working in microfinance in India in the late 1990’s and early 2000’s and it was a very difficult environment to work in and if someone would have come to me and said that this sort of pipsqueak, up-start organization was going to help catalyze the introduction of commercial microcredit into India, I would have thought they were just a little bit crazy.

And low and behold, ten years later, in fact, you know, the job is done. I’m not saying Unitus is solely responsible for it, but it played a very important catalytic role where by our partners in India are now reaching 10 million people there’s almost 30 or 40 million that are getting access to credit via commercial players.

So in my mind, the idea now for Unitus is to say ok, what is the equally crazy and slightly impossible thing that we can dream up and try to do for the next phase? How do we re-create the kind of success that we’ve had over the last decade in the one that’s coming. Where do you think commercial capital could be playing a bigger role?

Brigit Helms: I think that one of the challenges that we have in the microfinance industry today is that there is quite a lot of commercial capital and, maybe, more commercial capital than there are commercial opportunities.

The problem is not so much about what commercial capital should be doing more of, but rather how to mobilize that next level down from commercial capital, the social capital, the more patient capital, the longer term funds, the funds that can tolerate a bit more trade-off between financial return and social return. I think that’s the space where we need to invest in a lot more innovation in order to achieve that tipping point of pre-commercial opportunities that can deliver that range of financial services to poor people. Give us your best guess – what will be the headline on NextBillion on an April morning in 2015?

“Universal Access Achieved: Ubiquitous Carpet of Touch Points Allow Poor People To Transact From Home.”

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