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Unitus Inc, a US based non-profit microfinance institution, has announced the launch of Unitus Capital, a financial advisory firm that will become a conduit between social entrepreneurs and capital market investors. The company will be based in Bangalore. The firm has also announced that Unitus Capital has received a seed funding of $5.5 million from private investors which include WEGA Support GmbH, Robert Gay of H&G Capital Partners (formerly of Bain Capital), and William S. Price III, founding partner of Texas Pacific Group. Unitus Capital will operate as a for-profit organisation, unlike the latter.
There are a few advisory firms in the social investment and microfinance space primarily launched by the affiliates of MFIs. Intellecap, based in Hyderabad, is an advisory firm in the MFI space. While Washington-based Grameen Foundation, Chennai-based IFMR Trust and Citigroup have formed Grameen Capital India (GCI), a firm that will offer fee based investment banking services to MFIs in India. Unitus Capital will also work as an intermediary between capital market investors and social entrepreneurs.
Unitus has a significant presence in India through its Unitus Equity Fund. The fund, whose investors include former eBay co-founder Pierre Omidyar and Dubai based Legatum Capital, has invested in several MFIs in India. These include Bangalore-based Ujjivan Financial Services Pvt. Ltd, Grama Vidiyal Microfinance Pvt. Ltd, Hyderabad-based Swayam Krishi Sangam Microfinance, among others.
“The microfinance industry is at a crossroads. While the sector has seen private capital investments more than triple over the last three years, lack of financing remains perhaps the most significant challenge for hundreds of high-growth, high-quality MFIs and social enterprises,” said Eric Savage, Managing Director of Unitus Capital.
According to a 2007 Deutsche Bank study, the estimated total loan volume from MFIs stands at $25 billion worldwide. The amount of funding required to provide financial services to the world’s unbanked is estimated at more than $250 billion, with the number of microfinance institutions worldwide estimated between 7,500 and 10,000. This sector has seen a lot of investments in India.
Earlier this year Lok Capital LLC, an India focused microfinance venture capital fund, had announced an investment of $1.25 million in Satin Creditcare Network. Sequoia Capital India had also invested $11.5 million in Hyderabad based MFI SKS Microfinance. Large banks like ICICI Bank has also announced microfinance initiatives.