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Rinne

The document discusses microfinance and the role of law and legal counsel. It provides an overview of how microfinance intersects with various legal areas like transactions, debt, equity, and regulations. It also discusses the different roles of international versus local legal counsel. The document then focuses on the organization Unitus, which partners with microfinance institutions around the world to expand access to financial services for the poor. It outlines Unitus' selection process for partnering with MFIs and describes some of Unitus' legal needs.

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The Mechanics of Microfinance University of Pittsburgh School of Law February 13, 2009
Today’s Panel Microfinance, Law & Legal Counsel: The Basics Unitus Fonkoze Kiva
Microfinance & Law Many ways in which microfinance and law overlap Transactions Debt, Equity, Structured Finance, IPOs Fund Formation, Partnerships, Joint Ventures Foreign Investments, Foreign Exchange Online Retail Opportunities (Kiva, Microplace, MyC4) Non-profit, For-profit and “hybrid” structures MFI “transformation” (thinking of MFIs as financial institutions) Corporate governance Tax IP Labor
Microfinance & Law Microfinance laws and regulations vary widely among countries Significant impact on how MF is conducted, what is permitted, by whom and to what effect Keep in mind different roles and responsibilities of international (U.S.) and / versus local counsel (see below) The skills and type of advice provided to MFIs are in many ways the same as those found in traditional financings. What provides additional value to the microfinance sector is knowledge of what makes the sector unique (e.g., character collateral, interest rate issues).
Microfinance & Legal Counsel Two-Step International MFI Financing Step 1: International Investor  MFI (governed by U.S. / European Law) Step 2: MFI  Micro-Borrower (governed by local law) International (U.S.) law firms can get involved in many ways Transaction counsel for microfinance transactions Limited (‘fractional’) in-house counsel to microfinance investment funds, organizations and related vehicles Business Development (Microfinance Clients) Attorney Education Today: Microfinance (Sub-)Practice Groups Having local counsel that is knowledgeable about the microfinance sector and relevant in-country laws is also key Investee Countries, FDI, Geographic Expansion, MFI and Investor Outreach, Policy-Making and Governmental Support
About Unitus Our Mission: Advance innovative, market-based solutions in the fight to eradicate global poverty Our Strategy: Aggressively expand the availability of sustainable financial services to the poor We select and partner with early-stage, high-potential microfinance institutions (MFIs) around the globe We provide the strategic, technical and financial support that enables MFIs to grow faster, reaching more of the world’s poor Our Impact: Fastest growing network of poor clients Since our first partnership in 2002, the Unitus network reaches more than 4 million of the world’s poor with affordable financial services through 22 MFI partners 14 MFI partners in India, 1 in each of Indonesia, Philippines, Cambodia, Kenya, Argentina, Brazil and 2 in Mexico.
The Unitus Model Arranging Structuring Advisory Relationship Management Meet Key MFI Needs Through Advisory and Capital Market Services Selection Process Provide “One Stop” Relationship Management and Support Provide Peer-to-Peer Learning Through Best-In-Class Networking Select High Caliber MFIs Operations Technology Strategy Capital Markets Advisory Services Microfinance Institution Networking and Contacts + + MFI MFI MFI MFI
Partnership Results Unitus partners, on average, more than double their client base every year and significantly outperform industry peers
Unitus MFI Selection Priorities Goal: identify high-potential MFIs with good management teams in underserved markets. Unitus employs proprietary tools to: Identify favorable markets for microfinance Regulatory / legal environment Economic and political stability Accessible capital markets Competition Poverty density Select highest-potential MFIs Potential for rapid, large-scale, profitable growth (> 100% yr/yr, reaching > 100,000 clients) Strong, socially-minded management Focus on serving poor clientele Desire to transform into a regulated financial institution
Unitus MFI Selection Process Two to five day on-site due diligence process preceded by extensive desk due diligence Based on industry contacts, research, conferences, etc. A rigorous selection process, a volume of experience Razor sharp criteria applied systematically, based on experience Assessed = 500+ MFIs Desk due diligence = 173 MFIs On-site due diligence = 36 MFIs Closed deals with 22 MFIs
Where We Work Unitus has 22 partners, in 8 countries Go Forward Target Geographies: East Africa, Southeast Asia, China
(A Sampling of) Unitus’ Legal Needs Structure and launch new initiatives Non-profit, for-profit and “hybrid” structures International investment criteria External counsel and specialized expertise (especially re: non-profit and tax laws) are key Corporate governance and compliance Board of Directors Conflicts of Interest Risk & Audit HR and Employees / Labor Issues Other Reporting Requirements Engage with MFIs and local counsel as needed India Kenya
Resources The Microfinance Gateway http://microfinancegateway.com/ Consultative Group to Assist the Poor (CGAP) www.cgap.org International Development Law Organization (IDLO) www.idlo.int/microfinance A4ID (U.K.-based international legal community) www.a4id.org WAM (Women Advancing Microfinance) http://wam-international.org/