Today, the world’s second microfinance IPO happened: SKS shares went on the market in India. All expectations are for a highly successful IPO similar to the blockbuster IPO of Compartamos in Mexico two years ago. Strangely tied into the SKS IPO is the demise of Unitus, a non-profit founded to help MFIs improve operations, grow faster and attract commercial capital. A few weeks ago, the board of Unitus declared “Mission Accomplished,“ announced it would be laying off its staff and examining a future direction for the organization focused on other poverty interventions. Unitus was a significant donor to and investor in SKS with both charitable and for-profit dollars.

The SKS IPO has produced largely the same rhetoric as the Compartamos IPO: Mohammed Yunus complains about profiting from the poor while polishing his halo and a few other experts point out that meeting the financial needs of the global poor requires access to commercial capital markets.

But that discussion is well worn and a distraction from the real issues that are raised by the SKS IPO and the Unitus shutdown. In the two organizations we are for the first time, I believe, seeing what the endgame for social entrepreneurship can look like.

Both SKS and Unitus majored on social entrepreneurship language: they explicitly targeted using commercial capital to meet social goals. This is somewhat distinct from Compartamos, whose founders tended to speak about pursuing commercial goals for their own sake, not primarily as a means to a social end. Just as important both organizations used the standard social entrepreneurship playbook, founding a nonprofit organization and funding themselves initially at least with charitable donations.

These charitable donations into the risky venture of microfinance have succeeded by most reasonable measures. SKS makes quality financial services available to a huge number of clients, while charging very reasonable interest rates given the cost of serving the clients it targets. Unitus was one of the first organizations to invest in MFIs to help them access commercial capital and to evangelize microfinance investments to the commercial capital markets. As the Unitus board noted in the announcement of its shutdown, a huge amount of commercial capital is now flowing to microfinance, some would argue too much.

That success in turn, as contemplated in the dreams of social entrepreneurs, has made it possible for the founders of Unitus and SKS to do well because they did good. But that’s where the story begins to get murky. That murkiness is based in a number of transactions that were necessary for SKS to take commercial capital and for Unitus to prove the commercial capital model. Along the way, the clients who owned 40 percent of SKS, have had their share diluted without it being clear exactly how they will benefit. Unitus, the non-profit, spun off the Unitus Equity Fund, a for-profit private equity fund, and seems to have given the for-profit some share of its investment in SKS. Members of the Unitus board who approved the creation of the for-profit fund spun out of the non-profit are almost certainly (though its difficult to determine for sure) investors in the Unitus Equity Fund who now stand to benefit from the SKS IPO.

Adding significantly to the murkiness is the strange tale of the Unitus shutdown. Seemingly announced in a way as to minimize attention, the story has gotten very convoluted. Apparently most donors and staff were utterly surprised by the move. The chairman of the Unitus board issued a statement trying to answer some of the very reasonable questions; several of his answers were almost immediately refuted by reporting done by Clay Holtzmann of the Puget Sound Business Journal.

That brings us to some big questions, that to date, many social entrepreneurs have been able to ignore. While we were all talking in theory about social entrepreneurship and using market mechanisms for social ends, and bringing capital and scale to poverty alleviation and other worthy goals, we could blithely ignore some thorny issues. After all, why worry about about the “doing well” part when no one had yet “done well?“ It’s happening now, though, and that’s why social entrepreneurs, their funders and policy makers need to be paying attention.

The three big questions that haven’t yet been answered in the SKS/Unitus situation are relevant to everyone in the space:

1) Who ultimately does well here?

2) What role did nonprofit funds have in enabling the people doing well to do so very very well?

3) And the biggest question of all: What responsibility do the people who took charitable funds have once they start personally doing well?

The social entrepreneurship space is still the wild west—everyone is making it up as they go along. I suspect that is going to change as the details about SKS and Unitus slowly trickle out.

To help you follow along, I’ve created this round-up of articles about the two organizations: A Guide to the Unitus/SKS Story

Given that stories about the SKS IPO and the Unitus shutdown, how the two are interrelated and what it all means for the social entrepreneurship community are spread across the web, I thought it would be useful to publish a mostly comprehensive guide here. Please suggest anything that I’ve missed in the comments. I’ll add to it as I see new material.

1) AP story on the SKS IPO and the general debate

2) WSJ story on the SKS IPO and the general debate

3) Unitus Announcement from July 2nd

4) “Closure of Popular Poverty-Fighting Charity Raises Big Questions“ by Ben Gose in the Chronicle of Philanthropy

5) Unitus Update (Tactical Philanthropy post on the email sent out by Joseph Grenny of Unitus to answer questions about the shutdown)

6) “Unitus donors seeking answers about switch“ by Clay Holtzmann in the Puget Sound Business Journal

7) “High Profile Donors Asking Questions About Profits That Could Be Coming to Charity Unitus“ by Clay Holtzmann at Porfolio.com

8) “Unitus-linked investors see return estimate on India firm rise“ by Clay Holtzmann in the Puget Sound Business Journal

9) “Unitus fund to cash out on Indian IPO“ a blog post by Clay Holtzmann where he links to a number of his sources including a searchable version of the SKS IPO documents and some Unitus annual reports.

10) “SKS IPO Opens Today, Reactions Mixed“ by Arjun Kashyap of Microfinance Insights

11) “Why Every Social Entrepreneur Should be Paying Attention to SKS and Unitus“; my post on the larger issues and questions for the social entrepreneurship community.

12) “Betting on the Poor“, a post from Matthew Bishop and Michael Green, authors of Philanthrocapitalism

13) “Who Inflated the Microcredit Bubbles?“, a post from David Roodman of CGD a few months ago that is a helpful tonic in thinking about how we should assess the flow of commercial capital into microfinance

14) A Unitus/SKS funding flow chart courtesy of Clay Holtzmann

Last week’s 18th International AIDS Conference in Vienna brought some mixed news. 

First some good news: A vaginal microbicidal gel was found to be 39 percent effective at preventing HIV infection in women volunteers in a trial in South Africa. Effectiveness rates rose to 54 percent for those who used the gel most diligently.  These results have generated a great deal of enthusiasm after many years of stymied efforts to find pharmaceutical prevention aids. Past trials of microbicides and vaccines have produced disappointing results, despite the volume of prevention funding that goes into research and trial for pharmaceutical approaches. Part of what is truly promising about the gel is that a woman can insert it 12 hours before having sex and her partner likely won’t even know about it. It will be years before the gel is commercially available, however, and more testing will need to be done to determine the right dosage, effectiveness of combination medications and other outstanding issues.

Another randomized trial sponsored by the World Bank tested the effect of conditional cash transfers on HIV infection rates among young girls in Malawi. The poor girls and their families in the treatment group were given payments of up to $15 a month, so long as the girls went to school. More of the girls stayed in school in the treatment group that in the control group, but a bonus was that at the end of the study the HIV infection rates among those who received payments was less than half the rate of participants who received no cash payments (NB: The study write up did not clarify what the infection rate was across treatment and control at the outset of the study, and so I am assuming they actually included bio-marker data in the baseline—a possibly large assumption. I am following up and will report back!). The operating assumption was that the girls who received payments were less likely to have sex with older men in order to receive gifts or cash. The CCTs shifted their economic calculations, and protected them from the much higher infection rates that older men in Malawi have.

This good news comes at a time of relative despondency in the battle against HIV/AIDS. Funding from major government and individual donors has declined dramatically during these lean economic times. Despite significant successes in bringing treatment to more infected people, the virus continues to spread, with far more people becoming newly infected than there are resources to treat them. We have written often about the importance of prevention in the fight against AIDS, but that battle is still being fought, without many unequivocal successes. Even countries with relatively controlled epidemics are seeing some depressing statistics: Infection rates among people over 55 in both the United States and the United Kingdom more than doubled between 2000 and 2007, a consequence of high divorce rates and complacency.  These results offer some light in the dark—two potential approaches toward effective prevention.

Here’s my latest for Harvard Business Review’s “The Conversation” blog. I make the point that, contrary to conventional wisdom, the US is not very good at social innovation and that the major social innovations of the last 20 years have all originated elsewhere. I’ll expand on the HBR post soon; in the meantime, please comment with your thoughts here or there.

By the way, you may have noticed that we haven’t been posting much lately. But it’s the World Cup! What did you think we would be doing?

It’s often discussed that philanthropy has a fad problem. Philanthropic attention tends to gravitate to the “new”, and even when these “hot” areas show success, they are infrequently carried to scale. In other cases, donors simply declare victory and move on, leaving programs that require on-going funding to spiral downward into failure.

Agriculture is one area that has been a victim of philanthropy fads. Investment poured into the sector during the 1960s and 1970s and yielded perhaps the greatest success in the history of global philanthropy: the green revolution. But the success of the green revolution in Asia led many funders to focus on other sectors, believing the problem was solved. As a result, investment in agriculture and agricultural research declined and progress on improved varieties of global staple crops slowed—and the green revolution never reached Africa.

Recently there has been some movement on this front. The Gates Foundation in particular has become vocal about agriculture in Africa in particular, initiating the Alliance for a Green Revolution in Africa and bringing other funders on board.

But the neglect of the agricultural sector has exposed us all to a counter-revolution, a brown revolution. This brown revolution could plunge the world into another era of massive food insecurity, and not just in Africa. You see, while philanthropy is subject to fads, nature isn’t. The bacteria and viruses that afflict staple crops continued to innovate while the attention of philanthropy and development agencies wandered. Thus we have the emergence of virulent strains of crop diseases and pests that are immune to the various improved seed varieties and agricultural chemicals developed during the green revolution. If you look at the emergence of these various diseases and pests together, the picture is quite frightening.

First, two diseases of bananas have begun spreading rapidly around Africa. There are no known varieties of bananas or plantains resistant to either Banana Bunchy Top Disease or Banana Xanthomonas Wilt, caused by a virus and a bacteria respectively. Thus, according to the International Institute for Tropical Agriculture, the diseases have the potential to “wipe out” the banana and plantain crops in Africa.

Another common staple crop around the world is cassava (also known as manioc and yuca among other names)—it ranks third globally as a source of calories, behind only wheat and rice. Cassava crops across the continent (and ultimately around the world) are threatened by the rapid spread of a new virus known as brown streak. The virus renders the cassava crop useless, even as animal feed, and according to experts its spread is “unprecedented.“ Note that another cassava disease led to a major famine in the 1920s.

If the cassava and banana crops fail, there’s always wheat right? In fact, the global wheat crop is threatened by the emergence of a new variant of stem rust, known as Ug99 (because it was first seen in Uganda in 1999). A few weeks ago, scientists in South Africa reported that Ug99 had appeared in South Africa, the first time it’s been seen outside of East Africa and Iran. Even worse, the new rust has become even more virulent since it emerged. Now that it’s in South Africa, the rust can much more easily spread to the Middle East and South Asia as it can hitch a ride on prevailing wind currents. As the rust spreads—killing up to 80 percent of a wheat crop—farmers around the world will have to replace the varieties of wheat that they use. The only problem is that there are no known varieties of wheat that are resistant to this new variant of stem rust.

The threats to global agriculture are not limited to the developing world. In the United States, farmers and scientists are increasing alarmed about the rise of RoundUp-resistant weeds. One of the major gains in agricultural productivity in the US and China has been the use of what are known as RoundUp-ready crops. These are varieties of staple crops that have been genetically engineered to be be immune to a cheap and relatively safe herbicide, RoundUp. This immunity meant that farmers could spray their entire fields with herbicide and kill just the weeds, not the crops—and that has led to gains not only in productivity but also has limited soil loss and chemical runoff from farms (since tilling is not necessary). The emergence of “superweeds” means that this strategy will no longer work, productivity will fall and costs will rise. Quoted in a New York Times story on the issue, Andrew Wargo III, president of the Arkansas Association of Conservation Districts, says, “It is the single largest threat to production agriculture we have ever seen.“

Overall, it’s a very scary picture. Hopefully counteracting this new brown revolution will become a new fad in philanthropy. We’ll need all the investment we can get to fight back against the brown revolution.

Co-founder of the Abdul Latif Jameel Poverty Action Lab Abhijit Banerjee expresses the viewpoint of, and need for, patient optimism in Forbes India:

“Politicians prefer not to be told that they need to wait three years before they can launch their flagship programme; journalists prefer stories about grand successes to qualified endorsements; donors want to eliminate poverty today, and being told that we don’t know how to, puts a pall on the proceedings. But in the end these are our resources that are being wasted, our hopes that are being betrayed. And all these people are meant to be our agents. We have to convince them that we want evidence rather than emotions, measured success rather than failed miracles, trial rather than error.“

For every 100 people living with HIV/AIDS currently on anti-retroviral medications, there are 250 new infections, according to UNAIDS, the UN agency. This statistic was the crux of a piece from the Times last week that headlined the failure to control AIDS infections in East African countries such as Uganda, where infection rates are the highest in the world.

The joint efforts of donors and pharmaceutical companies to make generic anti-retrovirals available en masse created a great deal of hope in the early 00’s that infections rates might decrease for the following generation. But more limited investments in prevention have failed to keep the number of infected at stable levels. Now, donor ability to maintain, let alone increase, funding for anti-retrovirals is threatened as foundations and individual donors continue to feel the repercussions of the financial crisis. With more people getting sick every day, clinics and hospitals are forced to turn away people in desperate need.

There can be no silver lining for suffering of such immense scale. We can recognize, though, that the approaches of the past have not worked. In the absence of the dreamed-for technological prevention solution (vaccines, for examples), behavioral prevention needs more funding and focus.

This week in Washington the Hudson Institute’s Center for Global Prosperity released the fifth annual Index of Global Philanthropy. The Index offers a comprehensive look at the ways in which individuals and organizations contribute financial resources to the developing world, from philanthropic giving to remittances. There are sections on both U.S. giving and on donations that come from non-U.S. developed countries (Full Disclosure: Tim and I wrote this year’s section on international giving). The Index serves as a useful resource in the discussion about funds that go to anti-poverty efforts. For a long time that discussion focused exclusively on official development assistance offered by rich-country governments. The Index shows instead that private philanthropy, foundation grants, corporate donations, and giving by religious organizations and universities to the developing world amount to more than twice as much as those countries receive in official aid.

A few weeks ago I wrote a post criticizing the reaction of microfinance organizations and the City of New York to rigorous evaluations of their programs. This week, I’ve seen two pieces of writing in reaction to evaluation of programs that I think provide positive examples.

First, Chris Dunford and colleagues at Freedom from Hunger, a charity involved in “microfinance plus” (because microfinance services are bundled with vocational training or other forms of assistance) and which has participated in a number of rigorous evaluations, write about their reaction to the microfinance impact studies. The authors espouse a realistic view of what is possible with microfinance—a lens that allows them to view the results of the impact studies as positive rather than negative—and a realistic view of the role of various kinds of evidence and data. Their perspective is well worth reading and should be a model for other microfinance charities.

Second, Jean Case of the Case Foundation writes about dramatically changing the direction of PlayPumps, a clean water initiative which uses merry-go-rounds to pump water from bore holes. Once upon a time, everyone thought PlayPumps was a terrific idea. Children in rural villages get to have fun while the community gets clean water. In practice, the scheme didn’t work very well in many situations. The systems turned out to be quite expensive, difficult to service and required children to “play” on the merry-go-round for several hours at least. As Case writes, once evidence mounted that things weren’t going so well, the foundation and PlayPumps didn’t dig in their heels and publish more photos of smiling children on merry-go-rounds (which was a real option since the idea appeals so strongly to donors—the organization could easily have continued raising funds for years). PlayPumps essentially handed over its intellectual property to a larger organization which has been able to make PlayPumps just one of a portfolio of options for beneficiaries to choose from based on local context.

There are two examples, at least, of how to react well to rigorous evaluation.

I’ve been in Denver for a few days at the Council on Foundations annual conference. I’ve been unable to post updates as I did at the Global Philanthropy Forum because the technology infrastructure available here is, frankly, terrible. There is no wireless anywhere in the conference venues, leaving me with only my phone to access the wider world. That has been limited by the fact that it’s virtually impossible to find an available power outlet, so even use of the phone has to be rationed. While this may sound like whining (and it is at least in part whining), I think it also reflects on the state of the Council on Foundations. There have been several sessions on technology and social innovation here at the conference, and yet no one seems to have taken into consideration network access for conference participants. The conference itself is immeasurably poorer because it has cutoff the significant conversations that happen via social media at most conferences these days.

With that said, some brief thoughts, which I hope to follow-up with more detailed posts over the next few weeks.

* Last week, I was very discouraged at the Global Philanthropy Forum during the conversation about metrics and measurement. During the session there it was obvious to me that a majority of the attendees didn’t understand measurement, what it was capable of and how it could be used. Here at the Council on Foundations I have been somewhat re-energized on this question, most specifically by Paul Carttar, the newly appointed head of the Obama Administration’s Social Innovation Fund (SIF). It’s very obvious that Paul understands measurement much more so than many in the sector do, and he characterizes the SIF as a catalyst for the development of more and more reliable evidence. At the same time, he is careful to note that evidence is not a binary question: “no evidence” and “proven” are not the only categories. Evidence, in Paul’s phrase, is a “dynamic continuum”—a much more helpful way of looking at the field. Given that the best evidence is only going to be available in limited contexts for a long time, an understanding of progressing along a continuum toward better and more reliable evidence is the frame that I believe the sector needs to adopt. At the same time, it needs to also understand that much of what has passed for data in the sector is simply not evidence, and is not on the continuum at all. This is data that is selectively gathered, filtered in reporting and subject to all sorts of biases in its handling and dissemination. If the SIF can take the sector a few steps forward in the understanding of measurement and evidence, than it will be $50 million well spent.

* Following up on that point, the other place I have been encouraged is seeing some real examples of evidence and data being used to guide decision-makers in education. The American educational system’s crisis seems to have woken up a core group of funders and non-profits that shooting in the dark based on hunches and good intentions is no longer good enough. In two separate presentations, school districts presented astounding gains over the last five years—gains based on bringing the group of interested parties together around data about school performance, college performance, teacher performance and identifying exactly where the system was working and where it wasn’t and bringing the best practices from the working areas to the broken areas. More to come on this point in future posts. It occurs to me that the education sector could be the “gateway drug” for philanthropy as a whole to recognize the power of decision-making and funding based on evidence.

* On the downside, there is some disappointment at a lack of questioning assumptions. I’ve stuck mostly to the education presentations because I was intrigued by the use of data that these sessions promised. In the sessions, while impressed by the data being gathered and used, I also was quite surprised that everyone seemed to take for granted that the goal was to get more students into and graduating from college. Everyone was very alarmed at statistics presented about American college graduation rates. What no one brought up is that the cost of a college education has risen dramatically in the last 20 years—and more importantly, the returns to a college education have fallen significantly. In some sense American teenagers are reacting quite rationally and rejecting a high cost, low return investment. So the question about why the returns to a college education are falling—and the quite possible answer that college educations no longer deliver the skills needed by students to succeed—never gets asked. I wonder how much help we’re giving the current generation of high school graduates by pushing very hard to get them expensive college degrees that may no longer be relevant today or in the future.

* Finally, one of the key phrases I heard here in the last few days that will keep me thinking for quite a while is “equality of opportunity for non-profits.“ There is always a lot of talk at philanthropy conferences about equality of opportunity for beneficiaries. But Paul Carttar of the Social Innovation Fund turned this idea on its head by suggesting that equality of opportunity is the reason why we need to catalyze the creation of evidence. As Paul points out, the key success metric of most non-profits today is hiring a charismatic Executive Director who can tell good stories. If a non-profit has such an ED then success is almost guaranteed, regardless of what the non-profit actually does. Thus, non-profits who don’t have such an ED don’t have equality of opportunity when it comes to funding. Evidence-based decision making puts all non-profits on an equal footing, where they have equal opportunity to access funding. So perhaps foundations should consider that the best way to create equality of opportunity for beneficiaries is to start by creating equality of opportunity for non-profits.