Unitus Microfinance: Case Study

First of all, I would like to thank you for this case. This is the most interesting exam I ever had.
I see 2 different layers in this case: the problem of Unitus with debt/equity decision and the problem of microfinance industry at all. I consider these 2 problems as highly connected to each other: the understanding of the overall microfinance industry will help in solving the problem of alternatives choice. Therefore I will firstly focus on microfinance industry understanding (what are the problems here, the contemporary situation etc.), then I will explain how industry issues influence the decision process and alternatives comparison, and after all I will choose the best solution up to my mind.
The goal of Unitus is to raise funds. Therefore to crack this case we need to put ourselves in position of future investor or borrower. Both of them will first of all want to understand, where they are investing in.
Microfinance
The first feature of microfinance that comes to one’s mind is its huge growth potential. As stated in the case, only 20% of overall demand for microfinancing is being met. 420 million people don’t have access to microfinance according to Exhibit 5. Microfinance is believed to be rather helpful in improving people’s lives. Using the small credits, clients start their small businesses improve and their living standards which should lead to increase of life conditions in the whole country. The experience can also attract international companies to open plants and fabrics there as lack of skilled working power is one of the main constrain in FDI. However there is no clear evidence on the real impact of microfinancing on macro level. Moreover MFIs are not transparent at all, which is a huge disadvantage from investor’s point of view. Investors want to know the business they are investing in.
Secondly, there are a lot of troubles with institutional development of the countries, where microfinancing is implemented. Such problems as corruption,