Wednesday, October 26, 2011

Geoff Davis Returns to Kiva's Board of Directors!

Written by Fiona Ramsey

Kiva is honored to announce Geoff Davis has rejoined Kiva’s Board of Directors!

Geoff Davis is well-known within the microfinance space, having worked with Muhammad Yunus and Alex Counts in creating the Grameen Foundation, serving as CEO at the microfinance accelerator Unitus, Co-Founder of Unitus Equity Fund, working with several microfinance institutions on the ground, and of course first joining Kiva’s Board of Advisors back in 2006, before Kiva was even a year old!

We are thrilled to welcome Geoff back on board, bringing with him more than fifteen years of microfinance experience and expertise. To reintroduce Geoff to the Kiva community, we asked him a few questions to help you get to know him better.

Geoff Davis

Kiva: Your background ranges from building companies as an entrepreneur, including web and bio-tech companies, to working at and running microfinance and social enterprises, and today you are involved in organizations and companies that touch on environmentally and socially friendly waste management, social innovation and microfinance.

At what point did your focus shift to social enterprises, and was there an event or experience that really drove that shift for you?

GD: There was.

I had grown up loving business and loving entrepreneurship. I had even started a business in elementary school where I bought Red Vines licorice in bulk and sold them at school for twenty cents each, and thought it was the coolest thing ever. I tripled my money in a week as a 10 year old! I loved the idea of markets, and business, and entrepreneurship.

At the same time, my grandfather was one of the early administrators of the Peace Corps, so I had that ethos as well, and I knew that eventually I wanted to do something to do good in the world. Like many people I figured I would go through a business career, do well, amass some wealth and use that money to do good in the world.

The experience that shifted me away from that track started when I went to Mexico in the early 90s to start a microcredit program. In college, I had started a company that I sold shortly after graduating. Once the company sold, I decided to go down to Mexico to start a microcredit program and see how it all worked. At that time, nothing much was written on microfinance, it was largely unknown. I had heard about microfinance and thought it was totally cool, this combination of entrepreneurship, business, and helping people: the best of all worlds.

In Mexico I worked with an NGO that was an agricultural extension, helping very poor rural farmers improve their agricultural yield. They had wanted to add a microcredit component, so we teamed up and I helped build out their microcredit structure. I didn’t know it at the time, but I was doing something very different in that I designed it to cover its costs. It just seemed like an obvious thing to do, as an entrepreneur, even though the program was set up as a nonprofit. The program was successful, and it did cover its costs, and I was able to witness microfinance for the first time. It took microfinance out of the theoretical and made it very concrete, very real.

When I came back from Mexico I joined a biotech startup and was doing international business development for them, having a ton of fun. I was still involved in what was going on in Mexico on the side, but considered that as something cool I would always be a part of, but not the core of what I would do. One day I was just thinking through my life’s plan, thinking that I was young, I had a great potential career ahead of me, and I seemed to know how to do things in business and start-ups.

I was thinking about this in a quiet moment, just pondering things, when I had this lightning bolt thought that did not feel entirely my own, that said “You can spend your entire life doing something about that suffering. Instead of using the skills that you have to amass wealth, and then using some of that wealth to help people, you can use those same skills to do good in the world right now. Period. That can be your focus.” And you know, putting this into words is hard because it was like an existential thing, this jolt, but at the same time I somehow felt connected… I could imagine the three billion people in the world who live on less than $2 a day, who don’t have enough to eat, who wonder if they’re going to be able to buy medicine if their kids get sick. It felt silly to spend 10, 20, 30 years amassing wealth to only then try to do something about it. So I said “Ok, I’ll do it.”

Kiva: You have an extensive background in microfinance, including serving as the CEO and President of Unitus, and co-founding the Unitus Equity Fund.

For those who aren’t familiar with Unitus, tell us a little about Unitus’ original program of microfinance acceleration.

GD: Well, after this experience I left the biotech firm, moved to Washington DC, and worked with Muhammad Yunus and Alex Counts in setting up the Grameen Foundation – in 1997 – and did that for a number of years, which was great. Then I went back to graduate school, at Harvard, because the Kennedy School, which had a joint program with the Business School on Social Enterprise. This basically looked at how to apply business principles to social problems, which was what I had been doing, and wanted to keep doing.

I spent time thinking about microfinance, and in particular how to scale microfinance, because only 10-12% of the poor in the world had access to financial services at that point. Eventually I had this idea that if we could run a microfinance institution like a for-profit company – meaning that it would break even and potentially even make money – we should be able to finance it like a for-profit company. And if we could do those two things, we should be able to grow it like a for-profit company, enabling us to do something about the millions of people living in poverty who could benefit from microfinance but didn’t have access to it. The goal was that the number of people being helped by microfinance would be dramatically increased, scaling our fight against poverty.

Those ideas were swirling around when I met Mike Murray, who had been trying to do some things to impact poverty on a large scale, and eventually we started Unitus as a microfinance accelerator in 2001. The whole idea was to show that microfinance could be run profitably, and still have a focus on the poor, and positively impact the poor, and that it could grow much faster than it was.

We did that by combining best practices from venture capital, investment banking, and strategy and operational consulting, to grow microfinance institutions. We did a lot of analytical work around growth constraints within microfinance, and developed a rigorous methodology for analyzing and overcoming growth constraints. We would find the high potential MFIs that should be growing very rapidly – meaning that they were in a high density population area, with a good regulatory environment, and a fantastic team with a scalable product – and we would partner with them to unlock that potential, to accelerate their growth. We focused on getting them access to the capital that they needed, and building the capacity that they needed. The consulting arm of Unitus would build the strategic and operational capacity, a lot of HR work, management information technology, etc., and the venture arm and the investment banking arm would help them get the money that they needed.

The idea was that we would not change the world on our own with microfinance, but that if we could do this successfully several times – accelerate a microfinance institution to reach more of the poor – and publish the results, other people would start doing it and there would be a lot of copycats. And that is what ended up happening.

(Editorial note: Geoff Davis co-wrote a paper “Leading Growth in MFIs: Key Attributes and Characteristics”, published in 2006, which goes into more detail about the way Unitus identified MFI constraints to growth. Click here to download.)

Kiva: Is there a microfinance borrower whose story has most stayed with you throughout the years?

GD: Yes, in fact it is the story of the very first woman to receive a loan through the microcredit program I worked on in Mexico.

There was one woman in particular who was very interested in the program, and she was the first one to get a loan once we had the program up and running. When she applied for the loan, she came up and said, “I’d like thirty-five dollars please.” I thought “Thirty-five dollars? What are you going to do with thirty-five dollars? How are you going to make money on this?” She said, “I sell goat cheese in the market, and pasteurized goat cheese sells for twice the price as unpasteurized cheese. I am going to buy a specialized thermometer that will allow me to know when my milk has reached pasteurization temperature, so I can pasteurize my cheese and make more money.” I thought this was brilliant.

She started repaying right away, and a few weeks later I saw her again, and I asked her “How is your business going?” She said “It’s going great! I used to make 65 cents a day, now I’m making one dollar and 50 cents each day.” I thought this was amazing, and I asked her, “What are you going to do with all that extra money?” Now, every time I had seen her she had on the same outfit, the same shirt, the same skirt, same shoes, dirty and with holes, and it was so obvious that she only had one change of clothes, that I had even wondered how she washed them. Did she wrap a blanket around her while they were drying? I had also been to her home which had a thatched roof and dirt floor, she cooked on an open fire in the corner, and pigs came in and out at will. There were a lot of things I could imagine her spending the money on.

But she looked at me like I was asking the craziest question in the world, and said “Let me explain it to you. No one in my family’s history has ever gone to school. And now we can afford the bus fare to send my son to school, we can pay for his school uniform, which is required, and we can buy the materials – the paper and pencils – which we’ve never been able to afford. So now, for the first time in my family’s history, one of us can go to school. We are sending my son to school in three weeks.”

My jaw dropped. Thirty-five dollars had completely transformed this family’s life, and the lives of all the generations to follow. That was transformational not only for that family, but also for me. And I loved that she made that decision. Around this time in my life, I was thinking a lot about development, what ‘development’ meant, how it could be defined, and because of this experience I realized that development is simply choice. It’s expanding the freedom of choice. That woman had that extra money and she could have spent it on 50 different things, but she chose to spend it on something that would most benefit her children and her family. There was no NGO or government program telling her to send her kids to school, she was the one that said “This is what I want to do.” That was really impactful for me, that she now had the opportunity to make that choice on her own.

Kiva: You have served as a member of Kiva’s Board previously, at a time when Kiva was very young and your contributions as microfinance expert were invaluable. Kiva has grown a great deal since 2006, and you have gone on to do many other things since then. Was there a particular reason or opportunity that excited you to rejoin the Board?

GD: At first, when Matt and Premal reached out to me to ask me to rejoin, I literally said “You guys are doing fine, you don’t need me. It was great early on when I could help out, but you’re doing awesome now.” But the more we talked and the more I understood, the more excited I got.

I rejoined the Board for three reasons, on three different levels:

Personally, I really like Matt, Premal and the other Board members as individuals, as business leaders, as thinkers, and as social entrepreneurs. I enjoy spending time with them. I am enriched when I am around them.

Secondly, for the impact that is being created. The impact on the ground – the women and their families that are being benefitted by the $250 million, soon to be a billion – that’s big impact and a big structural change in the global financial system.

But what really excited me was the opportunity for Kiva to become a platform that is broader than simply traditional microfinance. Now Kiva works well: we know how to find partners, grow them, get loans disbursed to them. So the opportunity to now expand into green energy, water, health, housing, education, and to do more in the US, as well as to do more in other countries that haven’t previously been reached, that is really exciting for me – the opportunity to really view this as a platform for purpose-driven capital.

I have also expanded beyond microfinance now, and I am working in other areas, and I think Kiva really has the potential to really change the way the world works. From the individual level – I want to make a contribution – to the way businesses are funded, the way businesses grow, the way we think about business. To break down this artificial dichotomy between making money and doing good in the world. To really become a platform to magnify the impact that an individual has on the world.

Kiva: You are also serving on the Board of Directors at Vittana. How do you expect these roles to complement each other?

GD: I see these roles as highly complementary.

Microfinance is already well established: microfinance institutions know how to do microfinance, and there are lots of MFIs around the world and that makes it relatively easy for Kiva to find partners. But education microfinance is not the same thing. Some people think that credit is credit, right? But there is a big difference between a credit card and a mortgage; if you think of them like products, they are very different products in the way they’re designed, sold, and serviced. So in the education microfinance space, what we’re learning is that the back-end work with MFIs is very important in helping them with the product design, the launch, the pricing, and the servicing.

So what Vittana is really doing is creating education lending systems. Part of the way that’s funded is through a peer-to-peer model like Kiva, but that is one of multiple mechanisms that is being used to finance them. What’s really happening is building educational lending systems on the ground. Vittana is blazing new trails in educational lending in the same way that Kiva did in unlocking a new source of microfinance debt capital, and in that way I see these two board appointments as very complementary.

Kiva: Why do you Kiva?

GD: I Kiva, therefore I am.

We are extremely excited that Geoff has rejoined the Kiva team, sharing his wealth of microfinance experience with us. Geoff is excited to more directly engage with the Kiva community in an online sharing of ideas, and we are exploring different options, including a webinar. Stay tuned, as we hope to engage Geoff in a dialogue with the Kiva community soon.