The recent decision by its board to close Seattle nonprofit Unitus and shift its resources to "other strategic areas" prompted Adam Sorensen, a consultant working for the International Finance Corporation, to write a response questioning the actions. Here's his personal perspective:

Adam Sorensen, a Seattle native, is a microfinance consultant currently working in South Africa.

Unitus, the Seattle-based, non-profit microfinance organization announced 'Mission Accomplished' on the eve of July 4th by closing its offices in Seattle, Bangalore and Nairobi and dismissing its 45 staff members. Like the infamous declaration by George W. Bush in 2003, the decision by the Unitus board of directors is hardly justified. Despite the definitive claims of success, the closure of Unitus has only raised confusion about the organization and questions about the state of the microfinance industry.

The Chairman of Unitus, Joseph Grenny, who is also a Unitus co-founder, shocked the microfinance industry by declaring that Unitus' "central premise... has been validated - capital markets have embraced microfinance to the extent that there are tens of billions of dollars in microfinance capital now available." Although the recently-appointed, now-departing CEO of Unitus has not publicly commented on the closure, the longtime COO, Ed Bland, added that Unitus had become "unnecessary" in the microfinance industry, equating the growth of for-profit microfinance providers with the availability of commercial capital.

The declaration of victory refers to Unitus' goal to reduce poverty by rapidly accelerating the provision of microfinance to the poor using commercial capital. Until the declaration, the goal appeared far off. The Unitus web site accurately stated that "even after 30 years of industry effort, there remains a huge gulf between the supply and demand for microfinance services. Millions of families are still without access, and at current growth rates, the gap will not be closed for decades." Unitus tackled this challenge by raising capital and then channeling it to microfinance providers in developing countries, while providing consulting assistance to improve their growth and productivity.

By all accounts, Unitus executed its strategy well in India, with far less traction in other parts of the world. Since 2001, when it began hiring professional staff out of a converted bungalow in the shadow of the Microsoft campus, Unitus raised $40 million in donor funding to support 12 microfinance providers in India, three elsewhere in Asia, four in Latin America and three in Africa.

To fund the growth of microfinance providers, Unitus also created and spun-off two for-profit investment management and advisory firms, which mobilized a total of $30 million from investors, many of whom sought various blends of financial and social returns. In India, Unitus has partnered with well-managed providers that have achieved very rapid growth and demonstrated the viability of for-profit microfinance, including SKS Microfinance, which is due to issue an IPO for $250 million to $300 million in coming weeks. Elsewhere, Unitus has had less success introducing new sources of capital and driving growth, with significantly lower impact on the growth of providers outside of India.

While its contributions should be lauded, the Unitus' board's claims that a wave of commercial capital washed over the industry is unsubstantiated and dubious. Outside of India, Unitus' limited activities mirror the limited penetration of commercial capital in the microfinance industry. Globally, the microfinance industry remains financed primarily from subsidized sources, with truly commercial capital (i.e. non-subsidized) limited to a few large, profitable microfinance providers, many of which previously received donor funding.

According to the World Bank's Consultative Group to Assist the Poor, donors and investors each provided roughly 50% of total funding to the industry in 2009. Of investors' share, half was invested by the German government and four development banks - all public institutions - and another large, but unspecified slice was sourced from social investors. Regionally, subsidized funding is even more important in less-developed regions like Sub-Saharan Africa, where donors provide 75 percent of total funding in Sub-Saharan Africa.

As a non-profit advocating for commercial capital, Unitus unsurprisingly branded itself as a different kind of non-profit in the microfinance industry and the philanthropic world. It promised better results by bringing commercial discipline and business practices cultivated by the leading companies that it often recruited from. In keeping with its brand, Mr. Grenny has spun the closure of Unitus as a carefully planned, cutting-edge decision that was 18 months in the making and will bring better results for donors and greater impact on the poor.

For a non-profit organization preparing to close its doors, Unitus has recently taken a number of "innovative" actions including:

• October 2009: Hiring a new CEO with a long resume in microfinance
• April 2010: Announcing a $15 million partnership with the US government's Overseas Private Investment Corporation and Citigroup
• May 2010: Advertising staff positions for fundraising and regional offices
• May 2010: Announcing two new partners (Grama Vidiyal, India and AMK, Cambodia) for its social performance management initiative
• June 2010: Holding a fundraiser with the local microfinance community in Seattle

At an industry level, the trouble with the Unitus board's declaration and the unwinding of the organization is that there are serious issues facing microfinance providers, donors and investors. These issues challenge Unitus' view of the microfinance industry and its impact on the poor.

First, the 2007-08 commodity inflation bubble, followed shortly by the financial crisis and widespread economic distress, has pierced the oft-repeated assumption that microfinance is unaffected by the macroeconomic environment. Second, the rapid growth of microfinance providers, especially commercial players, in countries like Bosnia and Morocco has shown how uncontrolled microcredit extension can destabilize the industry at a national level. Finally, these difficult circumstances are compounded by an existential threat from a string of randomized-control trials have called into question the impact of microfinance as a strategy for poverty-reduction. Cumulatively, these developments demand the participation of Unitus as a proponent of commercial capital to spur the rapid growth of microfinance to reduce poverty - not a victory lap.

Although I have never donated to, invested in or worked for Unitus or its affiliates, I do have an interest in the microfinance industry. Since leaving the U.S. in 2005, I have worked in various roles to promote microfinance, from volunteer to manager to investor. While these experiences may qualify me as a member of the much-maligned 'international development complex', it is the interests of the poor and less-fortunate across the world that I hope to represent by questioning Unitus' departure from microfinance. If anything, I believe the economic hardships of the past three years have taught us that growth and opportunity are not guaranteed anywhere in the world. Without Unitus, there is one fewer reason why the poor and the less-fortunate may have access to microfinance tomorrow.

Granted, at least the Unitus board didn't splash their announcement across an aircraft carrier.

Seattle nonprofit Unitus' operating cost of between $600,000 and $700,000 a month was a factor in the board's decision to shutter operations, said Joseph Grenny, Unitus board chairman.

The abrupt announcement two weeks ago stunned employees and supporters, and has prompted some donors to question the decision.

Grenny said the decision was made by a unanimous vote of the five- member board of directors in Utah days before the announcement, but the discussion about changing direction had gone on for more than a year.

Next month the board will announce more specifically what its plans for the new direction will be, Grenny said.

When it was clear that Unitus would be pursuing a different strategy, the board asked, "Do we need an organization that has this kind of expense rate to pursue those options?" Grenny said. "To continue on for months and slowly drip that out would be fiscally irresponsible."

Unitus supports 22 microfinance institutions and plans to "quickly wind down any ongoing engagements in a prudent manner that prioritizes the best interests of their clients," Grenny said.

KEN LAMBERT/SEATTLE TIMES

Vikram Akula, founder and CEO of SKS Microfinance in India, appeared at a Unitus reception and fundraiser in Seattle.

As for foundations and individuals that have funded its work, such as the Omidyar Foundation, "the board takes its stewardship very seriously to ensure those funds are deployed for their original purpose -- philanthropic purposes that help the poor gain economic self-reliance," Grenny said. On its latest financial report, Unitus had about $11 million in net assets.

"We will have conversations with Omidyar and every one of our significant supporters about what funds are remaining and what those will use to accomplish," he said.

Today is the last day of work for most of Unitus' 45 employees; about a dozen will remain through end of August and a few through the end of the year.

SKS Microfinance, one of the earliest lenders to the poor that Unitus backed, plans its initial public offering in India in the next weeks.

Unitus Equity Fund, the for-profit arm of the Seattle organization, has a stake in SKS, which could end up benefiting Unitus.

Grenny called the SKS IPO "a validation of what we set out to do," in accelerating the amount of capital devoted to microfinance.

"The willingness to stop when something is accomplished isn't done much in the nonprofit field... organizations that don't contribute much continue on," he said. "Painful as it is, we're trying to do the right thing by the donors' intentions."

Microfinance nonprofit Unitus said this morning it is closing its Seattle headquarters and laying off more than 40 employees after almost 10 years of operation.

Unitus, which provides capital and expertise to microfinance institutions in developing countries, has staff and field offices in Bangalore, India, and Nairobi, Kenya, which will also be closed.

The move came as a surprise to many, as Unitus in October had hired Brigit Helms, an executive with the International Finance Corp.in Jakarta, to serve as CEO after an extensive search, and has programs and partnerships underway.

"We now feel that there is greater need for our capital and energy in other areas," board Chairman Joseph Grenny said in a statement. Capital markets have embraced microfinance, with tens of billions of dollars in capital annually for the working poor, validating the group's core aim, he said.

Unitus had net assets of $11.3 million at the end of 2009, according to its audited financial statement. It received $6.4 million in contributions and grants.

In 2006, Unitus also launched Unitus Equity Fund, a separate for-profit entity to bring private capital investments into microfinance. Its second fund, now called Elevar Equity, had raised $70 million earlier this year.

"The fact that we have become largely unnecessary in the microfinance arena is fantastic news and is a tribute to our generous, enlightened donors and the phenomenal staff at Unitus, who worked tirelessly to validate and refine the microfinance model, and advance the operations of our partners," Unitus President Ed Bland said in a statement on the group's website.

Unitus said it will shift its remaining assets into "new early-stage, poverty-focused philanthropic activities," which it hasn't yet identified.

Former Unitus board member Geoff Woolley will head the "reinvented organization," Bland will continue as acting president and COO, and Helms will be a key adviser during the transition, the group said.

Unitus said it has directed $40 million in donations and almost $30 million in investment capital to strategic microfinance partners in Asia, Africa and Latin America.

It sounds a bit like an X PRIZE for telecom.

The U.S. government and the Gates Foundation have created a $10 million fund to give cash awards to companies that start new mobile financial services in Haiti. In the short-term the program aims to speed the delivery of cash to earthquake victims by humanitarian agencies and overseas remittances. In the long term the goal is to lay the groundwork for advanced mobile banking services that leapfrog conventional banking.

Modeled on the success of services such as Kenya's M-PESA, mobile money is considered safer than cash and can encourage savings.

The first company to launch a mobile money service in the next six months will receive $2.5 million, and the second operator launching within 12 months will receive $1.5 million. Another $6 million will be divided between the operators that perform the first 5 million transactions, based on the number they carry out.

USAID Administrator Rajiv Shah teamed up with his former employer on the project.

The Gates Foundation is putting up the $10 million, while USAID said it will offer $5 million worth of "technical and management assistance and other funding," through its existing Haiti Integrated Finance for Value Chains and Enterprise (HIFIVE) project.

More than a third of Haiti's bank branches, ATMs, and money transfer stations were wiped out in the earthquake, causing cash shortages. Even before the quake, less than 10 percent of the population had ever used a commercial bank, Shah said.

One company planning to compete for the prizes is Voilà, a subsidiary of Bellevue-based Trilogy International Partners. Pierre Liautaud, vice president of product development at Trilogy, said that Voilà is actively pursuing mobile banking initiatives in Haiti.

The company has operated in Haiti for a decade and worked closely with the Gates Foundation to help them understand the Haitian market and the challenges of executing mobile money programs there, he said.

Mobile phones are far more common in Haiti than landlines, but only about 40 percent of the population has a mobile phone, though the number has been growing fast in recent years. The three mobile service providers are Digicel, Comcel (Voilà), and Haitel.

If you're curious about microcredit, tomorrow evening looks like a good opportunity to learn more about it from an interesting mix of speakers, in one of the first such forums to be held in Snohomish County.

While government aid and grants from large foundations goes into programs to relieve poverty, a growing channel of unofficial support comes from individuals in Puget Sound, who are contributing small donations and even investments from retirement funds into pools of money that reach individuals all over the world in the form of small loans.

A free public Microcredit Forum -- with Global Partnerships CEO Rick Beckett, Fabric of Life Foundation Founder Carol Schillios and U.S. Representative Rick Larsen is planned to discuss how microcredit works as a solution to poverty.

DEAN RUTZ/SEATTLE TIMES

Carol Schillios, owner of the Fabric of Life store in downtown Edmonds.

Several local non-profits engaged in microfinance, which includes credit, savings, insurance and other financial tools, have announced partnerships recently with commercial banks and technology companies. Locally Washington CASH has seen a surge of interest in its training programs and small loans for entrepreneurs since the recession.

Seattle nonprofit Unitus signed a deal with the Overseas Private Investment Corporation (OPIC), and Citi to set up a $15 million credit facility for microfinance institutions (MFIs) -- the local partners that actually loan funds to borrowers.

The money will go toward helping institutions that aren't big or established enough to attract commercial capital to grow and provide more loans.

The Grameen Foundation, which has a Technology Center in Seattle, received $1.23 million from the MasterCard Foundation and $500,000 from the Cisco Foundation to expand an open source software platform designed specifically for microfinance institutions. That software, called Mifos, was developed in Seattle to help providers of microcredit automate their loan operations.

The grants will help institutions using Mifos connect to mobile payment systems and track progress.

Vittana, a Seattle non-profit that applies the concept of micro lending to student loans, reached important milestones this month -- people lending $25 or $50 at a time through Vittana made more than $150,000 in loans to nearly 200 students around the world. A group from online real estate company Redfin, for example, has loaned $893 to six students in Paraguay.

Created by two former Amazon.com employees, Vittana helps fill a niche that for all its success, microcredit had not addressed. Micro loans typically go to people operating small businesses, but loans for college had no such source of funding. Some students have already landed jobs and started to repay the loans, said CEO Kushal Chakrabarti.

Richard Henriques, senior vice president of finance at Merck, was named chief financial officer at the Bill & Melinda Gates Foundation today.

Henriques starts work April 19 in Seattle, overseeing financial planning, impact assessment and the foundation's program-related investments. The foundation has 818 employees and made $3 billion in grants last year.

He replaces Alexander Friedman, a former investment banker who left the foundation earlier this year to return to the private sector.

Henriques has been with Merck for 27 years, according to his online profile. He worked in a number of financial positions, from an analyst in its manufacturing division to corporate controller. His work involved strategy, productivity improvements and cost savings as he managed the pharmaceutical giant's resources across 30 brands and 100 countries.

He earned an MBA from Wharton in 1981 and has served on the boards of three non-profits in Philadelphia over the last year.

His depth of experience "will be integral as we continue to manage our growth and assess our progress," Gates Foundation CEO Jeff Raikes said in a statement. "His leadership will be critical as we look for new opportunities to maximize the impact of our work around the world."

An equity fund focused on poverty? Sounds odd, I know. But Chris Brookfield, who managed funds for Unitus, and his partners at Elevar said today they have raised $70 million to invest in companies providing services to people at the bottom of the economic ladder. Elevar told me a bit about the fund last June.

Seattle-based Elevar will invest in companies involved in microfinance and other services targeted at the working poor in countries such as India, Mexico, the Philippines and Peru.

KEN LAMBERT/SEATTLE TIMES

Chris Brookfield, left, then Unitus Equity Fund's investment director, with Veena Mankar, director of Swadhaar FinAccess, at a 2007 reception in Seattle.

Elevar is the second fund of Unitus Equity Fund, initially run as a for-profit arm of Unitus, a Seattle-based non-profit organization. Elevar is now independent of Unitus, though it remains a strategic partner, Brookfield said.

Besides microfinance, Brookfield said Elevar will also seek to invest in financing low income housing, agriculture and information services. The idea is to bring more commercial capital into development.

Improving incomes of billions of poor people -- the so-called "Next 4 Billion" -- has benefits for companies here, too. Economic growth in developing countries "is the strongest opportunity for long-term business growth," according to this report by the IGD, since the poorest two-thirds of the world's population represent $5 trillion in purchasing power. The more development can be supported through investment, the less dependent countries will be on foreign aid. The majority of poor countries don't attract much private investment, so it will be interesting to see whether a socially motivated fund can create a path for it.

"Our strategy is to challenge discrimination and democratize the distribution of opportunity by investing in companies providing high volume, low cost services to the poor and their communities," Sandeep Farias, managing director at Elevar, said in a statement.

The anchors of the new fund are Legatum and Omidyar Network.

Elevar's portfolio includes microfinance institutions SKS Microfinance, Ujjivan, Grama Vidiyal, Madura Microfinance and Swadhaar in India; Grupo Crediexpress in Mexico and FINSOL in Brazil.

Elevar has also invested two non-financial services companies in India: Moksha Yug Access, which builds trading infrastructure and market links between rural communities and larger commercial markets, and Comat Technologies, which provides Internet connectivity in rural areas for government services and education.

A microenterprise program that mentors Latina women to become successful food vendors in local farmers markets was among the 66 non-profits awarded a total of $4.6 million in grants by the Paul G. Allen Family Foundation today.

The Hacienda Community Development Corporation in Portland received $200,000 to expand its Micro Mercantes program. In Seattle, the White Center Community Development Association also received a $200,000 grant to develop a green jobs initiative. That program aims to use federal stimulus funding to train young adults in home weatherization and related skills. It even has its own hip hop video Got Green?

The latest grants reflect a focus on strengthening the social safety net for people living on the financial edge and supporting longer-term programs for people with low incomes to build economic stability, the foundation said.

"During one of the most dramatic economic downturns in history, we remain committed to helping our nonprofit partners and the communities they support respond and adapt to these growing challenges," said Susan M. Coliton, the foundation's vice president.

Other grants included $400,000 to the Washington State STEM Education Foundation in Kennewick. That grant helps fund professional development for teachers at Delta High School, a new high school focused on science, technology, engineering and mathematics in the Tri-Cities region.

Local arts grants included $25,000 to the Seattle Chamber Music Festival for marketing initiatives to increase ticket sales and expand its 2010 Summer Festival audience, and $50,000 to the Northwest African American Museum to develop a marketing and outreach program to promote the museum.

Food from vendors in the Micro Mercantes program is getting good reviews in Portland. Maybe it will be expanded to Seattle's numerous farmers markets if it's not already in the works.

With the success of microcredit, poor people have access to more loans than ever before. But many are still stashing savings in a lock box, storing it with a "money guard" or pooling it in an informal savings club because they have no other options.

Many banks and other institutions don't make savings accounts available to the poorest borrowers.

Today the Bill & Melinda Gates Foundation is contributing $38 million in grants in a push to help leading microfinance institutions (MFIs) offer clients safe and affordable places to save money.

"We see it as a major step to drive change and help broaden the microfinance business model to include savings," said Bob Christen, the foundation's director of Financial Services for the Poor.

GRAMEEN FOUNDATION

Members do banking at ACSI, a microfinance institution in Ethiopia's Amhara region, which depends largely on agriculture. ACSI provides savings accounts for more than 586,000 people.

Six grants will help 18 institutions expand their portfolios and make savings accounts available to 11 million people in Africa, Asia, and Latin America over the next five years. The challenge of finding ways to reach poor savers is being met with the help of motorcycles, PDAs, mobile phones and even soap operas.

The largest grant, $9.8 million, will go to the Grameen Foundation to begin a Microsavings Initiative with partners in Ethiopia, India and the Philippines to test and fine tune models for savings for people at the bottom of the economic ladder -- those living on about $1.25 per day.

Even at that level, people are putting away small amounts -- often pennies at a time -- and using sophisticated balancing acts to stretch their capability. But the informal savings methods often lead to financial losses.

Many of the poorest people live far from cities, so the cost of traveling to a bank is too high. It's also expensive for banks to create branches in remote areas where the number of clients is limited and their deposits small.

A $5.8 million grant to ACCION International will focus on agent banking, mobile banks, and access to savings accounts over mobile phones. A $3.3 million grant to World Vision will help it offer savings accounts to rural farmers and poor people in Ethiopia through mobile technologies, including equipping savings offers with PDAs and motorbikes to travel to clients in outlying communities.

Collecting more savings deposits from local customers could help the microfinance institutions reduce their reliance on external funding from commercial banks, becoming more like community banks in the United States, said Kate Druschel Griffin, director of the solutions for the poorest initiative at the Grameen Foundation.

GRAMEEN FOUNDATION

The microfinance institution ACSI holds a meeting for clients in Ethiopia's rural Amhara region.

"For us it's how do we make sure we are enabling the poor households to have tools they need to work their way out of poverty," she said. Grameen's initiative aims to reach 1.45 million new savers over three years. Besides a safer place to store assets, clients can earn interest -- ACSI, Grameen's partner in Ethiopia, provides 5 percent interest on regular savings accounts, and between 5.25 and 5.5 percent on time deposits.

The Grameen Foundation has begun using a tool called the "progress out of poverty index" to measure the impact of credit and savings programs on borrowers. The index measures a range of non financial indicators, such as housing type and sanitation type to see whether living conditions improve.

An $8.5 million grant will go to Women's World Banking (WWB), a network of leading microfinance institutions and banks dedicated to the economic empowerment of women.

The grant will help WWB to create new savings products and services for nearly seven million low-income people in Latin America, Africa and Asia.

WWB will use the money to support its network members invest in market research, product design, marketing and sales and service delivery methods. The members are Banco ADOPEM in the Dominican Republic, WWB Colombia, Kenya Women Finance Trust, and Kashf Microfinance Bank in Pakistan.

"As the microfinance industry matures, we are seeing the beginning of a major shift from a focus on credit to an emphasis on savings," said WWB president and CEO Mary Ellen Iskenderian, adding that demand for savings among the poor is increasing.

WWB found that poor people save between 10 to 15 percent of their monthly household income, using it to pay for childrens' education, health emergencies, housing and marriage.

Since women tend to be the savers in a poor household, designing savings products for them is critical, WWB said.

Using a creative approach, WWB will launch a TV soap opera in the Dominican Republic, part of a financial literacy campaign to bring attention to the benefits of savings. WWB said it seeks to change cultural attitudes and behaviors related to money and will work with Puntos de Encuentro, a Nicaraguan NGO that has used TV serial drama to successfully affect social change.

"Loans or credit were the model for the first 30 years of microfinance," said Iskenderian. "Savings is the future."

You know things are out of whack when an investment bank is considering forcing its employees to donate to charity.

That plan is reportedly in the works at Goldman Sachs, with bonuses, some as high as eight figures, being paid to bankers this week.

Expected bonuses at Goldman Sachs average about $595,000 per employee, while employees of JPMorgan Chase average about $463,000.

Big banks are undoubtedly taking preemptive measures to ward off further public rage following the massive taxpayer bailout, and this is a year when non-profits could certainly use all the help they can get.

RON EDMONDS/ASSOCIATED PRESS

JP Morgan Chase & Co. Chief Executive Officer Jamie Dimon, left, and Goldman Sachs Chief Executive Officer Lloyd Blankfein, leave the White House in Washington, after a meeting with President Barack Obama.

But rather than channel more money into pet causes for image repair, a more fundamental issue needs addressing.

That is the enormous disparity between the rich and poor, which by some measures is now the widest since just before the Great Depression. In this new Gilded Age, reducing that gap could do a lot more good than contributions to charity.

It benefits society in fundamental ways by improving health and raising life expectancy, while reducing crime, suicide, drug addiction, teenage pregnancy and mental illness, British epidemiologists Richard Wilkinson and Kate Pickett argue in their new book "The Spirit Level: Why Greater Equality Makes Societies Stronger."

An interesting and thorough review of the book is here.

In the U.S., the recession has widened the income gap because income declined most for middle-class and poor Americans, and poverty soared.

This week, the Financial Crisis Inquiry Commission will hold its first public hearings with top bank executives to begin dissecting the causes of the economic crisis. Meanwhile a campaign is taking aim at big banks by encouraging people to move their money out of them and into community banks and credit unions.

Bankers who perform well should be rewarded -- after all, the wealth they create often does help shareholders and the economy. But as they debate what to do with all the bonuses, evidence suggests that giving back isn't as powerful as taking less.

The Grameen Foundation today named David Edelstein as the new director of its Seattle-based Grameen Technology Center.

Edelstein had been the director of information and communication technology innovation at the center, and like his predecessor, also has experience at Microsoft.

The Grameen Foundation and Microsoft are getting ready to announce a new initiative this week to use technology in support of financial services for the poor.

GRAMEEN FOUNDATION

The man above is a Village Phone operator in rural Uganda. At 15 to 20 cents per minute, mobile phone calls are expensive, but they save villagers from walking miles or taking a long bus ride to the nearest public phone.

The two are planning a series of education and mentoring forums and other activities to help microfinance institutions strengthen their technology management capabilities. It's part of an effort by Grameen to help microfinance institutions understand how technology can enhance their work.

One of the signature products of Grameen is the Village Phone, which local entrepreneurs rent to villagers for pennies a call.

Grameen also has a partnership with Google in Africa for its AppLab, using mobile phones to help people in poor communities without Internet access get information about farming, health and trading by SMS.

Mobile phones, which are becoming commonplace in many developing countries, have proven to have a number of promising applications, including mobile banking and medical diagnostics. The M-PESA system in Kenya, developed to help borrowers receive and repay money for micro loans, now has more than 6 million subscribers.

Edelstein's experience includes helping build AppLab and focusing on affordable technology products and business strategies for people in developing countries at Microsoft and at McKinsey & Co.

He replaces Peter Bladin, founding director of the Technology Center who is now the foundation's executive vice president for programs and regions.

In the current jobless recovery, people are running out of unemployment benefits before they find job openings. Some may look to starting a small business of their own, but who would loan them money without a track record? Certainly not banks.

For such local entrepreneurs, the answer has been non-profits like Community Capital Development. CCD has provided $26 million to more than 1,000 previously "unbankable" local businesses, including Plum Bistro, Bedrock Industries and Utilikilts.

CCD-backed businesses create and sustain hundreds of local jobs, most of which go to people with low-to-moderate incomes. For entrepreneurs with a solid business plan and 10 percent of the capital, CCD provides a fixed-rate loan over five years plus free business counseling and subsidized accounting and marketing services. It charges 9 percent interest on loans.

CHRIS MUNFORD

Bedrock Industries, which turns recycled glass into art, is one of CCD's success stories.

But CCD ultimately relies on banks for capital to lend. In the current economy, that has dried up, and Chief Executive Jim Thomas worries about the fallout on struggling enterprises.

"They can't go to a bank," he told me over lunch recently. "They'll struggle along but they won't be able to grow. They'll go to the credit cards, which are at least 18 percent. they'll end up paying interest only. At interest only, you can never reduce that debt."

Another blow was losing Washington Mutual, which was one of CCD's top lenders. The new owner, JPMorgan Chase, does not lend to CCD. Washington Mutual was closed by the government a year ago in the largest bank failure in U.S. history. Its assets were sold to JPMorgan for $1.9 billion.

Meanwhile, CCD is down to microloans, funded by the Small Business Administration. The trouble is borrowers can get only one, and it's usually not enough to get a business off the ground in the U.S.

The problem is much bigger than CCD. The entire industry of Community Development Financial Institutions, a category of firms known as CDFIs that provide credit, financial services and training to under served markets, has been hit hard by the credit crunch. The segment that serves the least advantaged is suffering from a problem brought on largely by the mistakes and greed of bigger banks and Wall Street, now the beneficiaries of billions in bailout money.

Janet Ozarchuk, vice president and treasurer of the Local Initiatives Support Corporation (LISC), said her institution received some help recently from Bank of America. But banks in the first two quarters of 2009 didn't lend a single dollar to CDFIs, she said.

"The grant dollars have hung in there, but a good part of funding comes from banks," she said. "That has just been devastated."

"We have one of the strongest balance sheets of any non-profit," Thomas said. "We are not leveraged. But we cannot borrow money because it's not available."

Some efforts have begun to address the problem.

Community development non-profits may be able to raise capital from foundations' Program Related Investing (PRIs). In the current economy, foundations are exploring ways to make more social impact with their assets. PRIs can be used to guarantee loans and bring other investors and banks into the deal, said Ozarchuk.

Last month Senators Jeff Merkley (D-OR) and Barbara Boxer (D-CA) introduced legislation to extend credit to small businesses by allocating existing TARP funds to community banks.

Banks that get such federal help would be required to generate new credit equal or greater to the amount of capitalization received from the federal government. By the end of 2010 the bank would be required to increase overall business loans outstanding by at least 5 percent over the lowest level reached in 2009.

Untested borrowers are a higher risk. Many banks, whether commercial or community or even credit unions, are interested in making low interest loans for community development non-profits "only because they have some legal obligations to fulfill," says CCD's Chief Operating Officer Hongqing Chen.

The bill has the potential to be effective "if and only if it requires a certain percent of new business loans be made to distressed communities and low to medium income borrowers," she said.

Brigit Helms, a Seattle native described as a development and microfinance expert with a risk-taking spirit, will join local non-profit Unitus as its new chief executive officer.

ANDREW HELMS

New Unitus CEO Brigit Helms is a Seattle native returning home from working in Indonesia.

Helms worked previously at the International Finance Corporation (IFC), an arm of the World Bank, in Jakarta, where she was responsible for developing a five-year strategy involving $15 billion in investments. Before that she spent 10 years working at the Consultative Group to Assist the Poor (CGAP).

She said the field of microfinance faces some of its greatest challenges and opportunities right now.

"The challenge now is to explosively scale and increase access to the millions in need," Helms said. Bold and creative microfinance organizations need to take risks to help make financial services accessible to the large numbers of people still living in poverty, she added.

She joins Ed Bland, who is Unitus' president and chief operating officer. Unitus had been operating without a CEO since the departure of Geoff Davis last year.

Helms has a Ph.D. in Development and Agricultural Economics from Stanford University and master's degrees from Stanford and Johns Hopkins School for Advanced International Studies.

Alexander Friedman, chief financial officer of the world's largest private foundation, says he's leaving next year to pursue other interests.

Friedman, CFO of the Bill & Melinda Gates Foundation, announced his intention to leave early next year in an e-mail today to colleagues at the foundation, calling the move a personal decision.

A former investment banker at Lazard, Friedman said he would most likely return to the private sector, but he is also considering government and non-profit work.

He presided over a period of rapid, sometimes tumultuous growth after billionaire investor Warren Buffett pledged to give the foundation most of his fortune, then estimated at more than $30 billion. Over the past year Friedman has had to steer the foundation's budget through the economic crisis, and he recently launched its first foray into program related investing, which I wrote about here.

"I was really brought in to help the organization scale," he said in an interview, adding that when he started in March of 2007, the foundation had less than half of its current payout (now about $3.5 billion) and about a third of its current headcount (now 781 employees).

"The real thing is I made a personal decision when I came here that it would be a tremendous honor to work with Patty [Stonesifer] and Bill and Melinda [Gates] as the foundation doubled in size, and that was an exciting challenge for me and we have pretty much done that."

Friedman would not say if he was considering any specific offers but said he wanted to give the foundation time to plan for his departure.

"I feel great about the experience here and super positive about the organization," he said.

Friedman said he will remain at the foundation until about February to make sure the 2010 budget is finalized and work handed over to the next CFO "as responsibly as possible." He said he intends to stay in the Seattle area "for the foreseeable future."

"To resort to a CFO-like phrase for a moment, my 'bottom line' is that I came here to try and accomplish a set of discrete goals and to contribute to the development of strong strategies and operational procedures," he wrote in his email to colleagues.

"I am proud to have been part of the team that strove for these goals and made real progress on our collective agenda. Now, it is with great excitement that I begin to think about what comes next."

Update: I wrote a little more about this partnership in my story today. What's at the heart of this effort seems to be identifying the most urgent health needs of Pro Mujer's clients in Nicaragua and then using microcredit to create a model to finance solutions that are both affordable for the clients and sustainable for the non-profit. Currently the health programs are subsidized by the financial arm.

The partners say they hope the model can be applied anywhere.

"Microfinance alone, healthcare alone or education alone cannot solve all of the issues of poverty," remarked David Valle, CEO of Esperanza International, a Bellevue-based non-profit that is integrating microfinance, healthcare and education in the Dominican Republic and Haiti. "But when these solutions are combined...now you have something powerful!"

______________________________________________________________________

Local non-profits Global Partnerships and PATH will work together on a global health initiative using microfinance to reach women in Latin America.

The two will work with Pro Mujer, an organization that funds microcredit cooperatives in Latin America and combines small loans with other services, such as business training and regular health checkups. More details on the partnership are expected next week.

Microcredit, with networks reaching millions of people in developing countries, is thought to be a promising way to distribute health solutions and other services to the rural poor.

One innovative program by Pro Mujer provides health screenings using a van retrofitted with consultation rooms and staffed by medical personnel. Global Partnerships CEO Rick Beckett described the mobile health clinics in a recent presentation about Pro Mujer's work to provide cervical cancer testing to its borrowers in Peru.

The health screenings increased the number of women tested from one third to about 95 percent over four years, and revealed treatable tumors that could prove fatal if undetected.

Global Partnerships has committed about $52 million toward microfinance in Latin America and is working to help Pro Mujer find a financially sustainable way to fund such health programs.

It's a natural fit for PATH, which could contribute its health systems expertise for the developing world, along with potential technology and commercial partners.

The founders of a new Seattle non-profit called SaveTogether think so.

They are pairing low-wage workers in the U.S., many of them working moms, with people willing to help them save small amounts at a time to reach their goals of education, home ownership or opening a small business.

A saver starts with $25, a donor chips in $25 and a non-profit matches that with another $25, tripling the saver's original amount. So savers can earn two more dollars for every dollar they save.

Sandra is one of the clients of SaveTogether, saving $120 a month to expand her hair salon business in San Francisco.

The non-profit operates a Kiva-like online model, relying on the generosity of strangers to help people profiled on the site realize their dreams. Other Seattle-based efforts that build on Kiva's success with peer to peer online philanthropy include Vittana, a non-profit started by former Amazon employees that helps fund educational loans, and Jolkona and See Your Impact, which help young people get involved in philanthropy by making small donations and tracking their progress.

SaveTogether co-founder and CEO Dylan Higgins likens it to a 401(k) match for low-wage workers.

Convincing donors to help people they don't know save money could be a challenge, Higgins acknowledged. But it's about encouraging responsibility, he said.

"These people have already taken steps to better themselves and you are helping speed the process."

After law school at the University of Washington, Higgins worked as a fellow for microlending Web site Kiva in Ghana, where he got the inspiration for the project.

The Spokane native remembers being struck by the number of borrowers who had trouble finding a way to save, while at the same time he saw the economy in the U.S. on the verge of collapse because of an overindulgence in credit.

"I was amazed how these two apparently different worlds were reacting in a similar way," he said. "They both needed savings to come to the forefront again. It was an amazing epiphany for me. I studied economics as an undergrad and was always frustrated that Americans were poor savers."

SaveTogether aims to build on the success of Individual Development Accounts, matched savings accounts for working poor who are trying to buy their first home, pay for college or start a small business. IDAs are supported by organizations such as the Corporation for Enterprise Development (CFED) and are funded by government and private sources. Seed funding for SaveTogether came from CFED.

Caroline is a nursing student saving to complete her studies at a university in Boston. She arrived in the U.S. from Uganda last year.

Recently I have been writing about new programs by the Gates Foundation and others that recognize savings as an essential part of financial well being and help people build assets. One study showed that low-income Americans who participated in matched savings programs weathered the recession relatively well. Almost none of them lost their homes.

The same study, while giving Washington state good marks overall, said the state could improve its low rates of micro enterprise and small business ownership by making capital more widely available through micro loan programs, restoring funding for Individual Development Accounts and training more entrepreneurs.

The non-profit is helping people such as Sandra, a single mother of five in San Francisco who runs her own salon and is saving to expand it; Andria, a 20-year-old who is the main breadwinner in her family and is saving for college tuition; and Raymond, a Native American father of two in Spokane who is saving to open a business.

Dylan Higgins is CEO of SaveTogether.

Robert Friedman, CFED's founder and chairman, said he has witnessed matched savings programs change the lives of poor working families for almost 20 years. He now supports several of SaveTogether's featured savers. They are screened and selected by the partners, including Neighborhood Assets of Spokane and Opportunity Fund of San Francisco.

SaveTogether has tried to build in a kind of fraud-protection system. It collects the matched funds from donors, holding them until the saver reaches his or her goal. SaveTogether then disburses the funds to the local non-profit partner and they release the funds directly to the vendor. For example, the organization writes the check to the university, not the student, or to the mortgage company, not the home buyer. This ensures that the saver uses the matching funds for the specified purpose, Higgins said.

Higgins and his partners were looking to work with a non-profit in Seattle, such as Washington CASH, but the United Way of King County no longer administers the individual development account programs and has transferred the operation to the YMCA to help foster youth save.

"For all those other uses of matched savings for business, homeownership and education, it remains to be seen what kind of market we will have in King County," Higgins said.

For now SaveTogether is working with organizations in Spokane, Boston and the Bay Area and hopes to expand around the country and eventually overseas.

Pro Mujer, an organization that funds microcredit cooperatives in Latin America, also provides women's health screenings, using a special van retrofitted with medical consultation rooms and staffed by a nurse and doctor.

The vans travel into remote parts of southern Peru, combining financial help with preventative health care and education.

COURTESY OF PRO MUJER

Women in Peru get health care during meetings of their microcredit group in a program of Pro Mujer, a non-profit supported by Seattle-based Global Partnerships. The van combines mobile banking with health services to rural areas..

It's based on a simple fact that people who are poor tend to get sick, and people who are sick easily become poor, or deeper in debt. Rick Beckett, CEO of Global Partnerships, gave the example of Pro Mujer's work at a talk last night about the future of microfinance.

About 150 million people around the world have borrowed money through the system of microcredit pioneered by the Grameen Bank. Once the model showed promise, investors started flocking to it.

The last decade has seen an explosion of commercialization, exemplified by Compartamos, a lucrative Mexican bank that started as a non-profit but ended up going public in 2007 and now charges more than 80 percent interest on microloans.

Commercialization is necessary for raising the amount of money needed to get microcredit to the millions who could benefit, Beckett said. But the profit-motive also leads lenders to bypass the poorest people.

Commercial capital goes to the most profitable microfinance institutions. It turns out that poor people at the bottom are not as profitable as others farther up, and it's easier to make money in dense urban areas than in rural ones, he said.

The situation has parallels with healthcare in the U.S. "Economic incentives are very powerful," he said. "You can make a lot more money in health care if you serve healthy 65-year-olds than sick 89-year-olds."

Beckett, who had an earlier career as an investor and led the healthcare practice for McKinsey & Co, said the U.S. needs "vibrant, well capitalized insurance providers that have a different economic motivation" and "socially motivated, probably non-profit insurance coverage."

Likewise the microfinance industry needs organizations like Pro Mujer that make a profit but reinvest it in the effort to improve lives.

Pro Mujer's mobile medical clinics provide cervical cancer testing. Before joining the organization, only about one-third of the women had ever had a gynecological exam. Eventually 95 percent of them had been tested. In Nicaragua, Pro Mujer helped give 9,000 tests over four years, which detected tumors in 700 women who otherwise would not have known they needed treatment.

Global Partnerships is now working on a business enterprise for Pro Mujer so it has a long-term source of funding for the healthcare services. The Seattle non-profit has committed about $52 million toward microfinance in Latin America.

Testing for cervical cancer in developing countries is getting some help from Merck and QIAGEN. The companies said today they would collaborate on a new program to increase access to HPV vaccination and HPV DNA testing in some of the poorest areas of the world, calling the partnership the first time a vaccine manufacturer and a molecular diagnostics company are addressing the burden of cervical cancer together with a comprehensive approach.

Their commitments were announced at the annual meeting of the Clinton Global Initiative.

We hear a lot about the promise of microcredit, small loans to help low income people start businesses and improve their lives. The concept has caught fire among philanthropists who see it not as a handout but as a way to help people help themselves.

In the Seattle area, nearly two dozen non-profits are dedicated to microfinance -- loans and other financial services for the poor.

PHIL COALE/ASSOCIATED PRESS

Americans who bought homes through the IDA program have been very good at keeping them.

In talking with Bob Christen of the Gates Foundation for my story today, he told me the reality of microcredit hasn't lived up to its promise to lift poor people out of poverty, despite the $2 billion a year being spent on it. He made a strong case that the picture is more complex than just loans, and savings should be a much bigger part of the solution. Savings helps individuals, enterprises and economies get through uncertain times.

The same thing may apply in the United States, where savings is finally making a comeback. Americans' savings rate dropped to negative territory in 2005, but has since reversed that trend, rising to almost 7 percent in May and averaging about 5 percent so far this year.

New research shows that low-income Americans who participated in matched savings programs weathered the recession relatively well. Almost all of them held on to their homes, said Andrea Levere, president of the Corporation for Economic Development (CFED). She presented the findings this week at an annual conference of Philanthropy Northwest.

Last year, CFED surveyed about 750 low-income home owners who had received an Individual Development Account sometime over the past five years. An IDA, similar to a 401K match, is a grant that matches the monthly savings of working-poor families trying to buy their first home, pay for education or start a business.

Only one of the homeowners had foreclosed. CFED repeated the study using courthouse records of properties and found a foreclosure rate of less than 2 percent.

"This is wealth creation done right," Levere said. Participants saved money for a down payment, received intensive financial education and fixed rate long-term mortgages, all requirements of the IDA program.

JIM SIMON

People who once lived in a Kenyan slum are able to purchase their own homes built by the microfinance organization Jamii Bora.

Housing is also at the center of an innovative but risky program in Kenya started by the non-profit microfinance group Jamii Bora Trust, which Jim Simon wrote about here. The women involved said loans alone aren't going to get people out of poverty. Jamii Bora provides street beggars and others small loans to start businesses, but only if they first save half the amount themselves.

In the U.S., about 83,000 people have received individual development accounts, Levere said. Banks had an incentive to participate because they could sign loans with families buying homes through the program.

Washington state has become a hotbed for similar "asset building activities," she said. The Asset Building Coalition got off the ground in late 2006 and promotes financial literacy, saving and access to mainstream banking, in addition to the Earned Income Tax Credit and other benefits.

While poverty is traditionally measured by income, Levere prefers to measure assets -- the net worth of a household that helps it withstand crises.

The question is whether or not a household could exist at the poverty level for three months if its main source of income went away. Under that definition, almost a quarter of Americans fall under the poverty line, she said.

Considering the high cost of education coupled with the recession, this may be the first generation that is less educated than the one before, Levere said.

Since people need more support to save for education, entrepreneurship and home ownership, she thinks it's a good idea if "every child born in America started with an account."

The Bill & Melinda Gates Foundation is making its largest grant to date in the financial services space -- $35 million to help set up a global network to help the poor gain access to savings accounts and other financial tools.

The grant announced today will create the Alliance for Financial Inclusion, a coalition of bankers and policy makers from developing countries, aiming to expand savings accounts, insurance and other financial services to people living on less than $2 a day.

The alliance is based in Bangkok and managed by the German development organization Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ), the recipient of the Gates grant.

The Gates Foundation has invested $350 million so far in financial services for the poor, a relatively new program for the world's largest private philanthropy. Gates started with a broad approach that included credit and insurance, but has narrowed it down in the last year to focus mainly on savings.

Microcredit, making very small loans to poor entrepreneurs, has captured the world's attention and billions of dollars in donations and investment.

Savings accounts are at least as important as credit, but efforts to expand savings are not being funded, says
Bob Christen, who directs the Gates Foundation's financial services initiative.

Not everyone is an entrepreneur -- among the poor are legions of maids, day laborers, factory workers and others who don't run their own businesses, he said.

The problem for many low income people is they have no safe place to put their money. Banks don't consider it cost effective to take the tiny amounts they are able to save. And many microfinance organizations that give out loans are not licensed to take deposits from the public.

The newly funded alliance will share information about innovative ways to help people save money, such as allowing retail stores, post offices and mobile phone networks to receive deposits and process bank transactions. "We believe virtually everyone could use a deposit account," Christen said.

Can Vittana prove there is a viable commercial market for educational loans outside the U.S.? Amazon.com veterans are betting it can.

The Vittana Foundation is a fledgling non-profit that aims to bring student loans to developing countries through person-to-person micro-lending.

While microcredit has made great strides, says Vittana CEO Kushal Chakrabarti, it hasn't lifted poor entrepreneurs into the middle class. That's usually left to the next generation, so the first chance borrowers get, they send their kids to school. He wants to make that step easier.

KRISTI HEIM

Kim Rachmeler (left) is a former Amazon.com executive who now advises and invests in the educational non-profit Vittana, started by Kushal Chakrabarti (right) and Brett Witt. .

Making small loans to poor entrepreneurs has been so successful (at least financially) that it has spawned microfinance institutions around the world and investment by commercial banks such as Citibank and Deutsche Bank.

Student loans, however, are not common outside the U.S. and Europe.

"There isn't capital flowing in because the model isn't being proven, and the model isn't being proven because capital isn't flowing in," said Chakrabarti, 26, a former Amazon.com engineer.

He and fellow Amazon.com veteran Brett Witt are hoping to use Vittana to show that loaning money to students in developing countries for education is a good investment.

And their former colleagues and managers are backing them.

Kim Rachmeler spent 10 years at Amazon.com as a vice president and senior executive responsible for everything from worldwide customer service to global supply chains.

She has been a big supporter of sites such as DonorsChoose and Kiva. With Vittana she saw a chance to get involved early on as a major backer.

Rachmeler joined Amazon when it had only 500 employees, building the company and striving to prove the online retail model.

Back then "everything we did was betting the company," she said.

After retiring from Amazon.com two years ago, she said "I don't have that shot of adrenaline every day," but backing a non-profit technology venture with big ambitions, "I get to experience a little bit of that again. It's an opportunity to make the world a better place."

The challenge is helping Vittana grow big enough to be self sustaining during the worst recession anyone has experienced.

Former Amazon executive Joel Spiegel is also supporting Vittana, along with his wife, daughter and son, who is one of the non-profit's seven volunteers.

In an art gallery near South Lake Union, several dozen people gathered recently to listen to Chakrabarti pitch the Vittana concept in an effort to raise more funds.

He tells them the story of a student in Peru putting himself through law school by working a year, then studying a year, then working another year to save tuition.

"People find amazing ways of scraping it together," he said. "Some people make it; some people don't."

Vittana offers loans to send a student to school for a year in Peru, Nicaragua or Paraguay for less than $1,000. It works through local microfinance institutions (MFIs) such as Fundacion Paraguaya, to administer the loans. The money cycles from the individual lender to Vittana to the MFI to the student and back. The MFI charges borrowers interest on the loan of about 10 to 15 percent APR to cover its operating costs.

People attending the presentation wanted to know how long it would take to be repaid (in three years lenders get back the loan amount but without interest), and how Vittana can stay in business since it's not taking a cut of the loan. Vittana plans to support its operations through donations, which it will request and handle separately from the loans, similar to Kiva's model.

The non-profit has already drawn interest and investment from Facebook, which chose Vittana to participate in its incubator program.

"People have this image of what a poor person looks like." said Chakrabarti. "They should be wearing rags. They should be living in huts."

That's not always the case, he said. Students Vittana has helped fund have jobs at radio stations, they spend time on the Internet, they study banking and chemistry, and they dream big.

For a group of recent business school graduates from the University of Washington, job hunting in the current economy proved grueling.

So they decided to give up searching and start their own non-profit -- Lumana Credit, which provides micro loans and business training to entrepreneurs in rural Ghana.

COURTESY OF LUMANA

Lumana founder Samantha Rayner (left) and Beaulah Tettey, a local staff leader (center), present Comfort Afornorpe with a certificate for completing entrepreneurship training in Ghana.

Samantha Rayner, 21, started the effort last year with $3,000 and an idea to help Atorkor Village in Ghana with a microloan project. She spent the summer working on a pilot program to train 30 local entrepreneurs and provide each with a small loan.

Lumana Credit has partnerships with the Atorkor Development Foundation in Ghana and Village Volunteers, a Seattle non-profit that connects volunteers with grassroots organizations in Ghana, Kenya, India and Nepal. Lumana gives borrowers access to funds and manages repayment of loans through Anlo Rural Bank in Ghana.

With a team of nine people, Lumana is expanding and introducing the organization to potential supporters, volunteers and others in Seattle. Lumana will hold a fund raising event at 7 p.m. tonight at BoConcept Seattle.

This afternoon the micro-lending site Kiva will be hosting an open conference call to get feedback on its pilot program in the United States.

The program has generated mixed reactions and a protest led by a Seattle lender who thinks Kiva should stop featuring borrowers from the U.S. The U.S. loans deviate from Kiva's original mission to help the poorest, said Tom Behan.

"New Kiva loans are facilitating the richest country on the planet in making loans to itself," Behan said.

Kiva spokeswoman Fiona Ramsey said the non-profit expected the move to be somewhat controversial.

At the same time, "We never saw ourselves as just a platform for Americans to loan to developing countries," she said. "We've received emails for years from people who say that charity begins at home -- why aren't you giving me an opportunity to do that?"

One positive outcome has been the high degree of interest and engagement of Kiva users who feel strongly about the issues, Ramsey said.

Kiva is working through two microfinance partners: ACCION USA and the Opportunity Fund. Those organizations select entrepreneurs to post on the Kiva site. Recent U.S. borrowers have ranged from a New York homeless man to a San Francisco architect.

Each partner has caps on the number of loans it can post. Even if they each reached the limit, the U.S. loans would not exceed 5 percent of Kiva's total global portfolio, Ramsey said.

Right now the partners are going through an adjustment period, Ramsey said, getting direct feedback from Kiva users about the types of borrowers and projects they would like to see. She summarized the reaction along these lines:

"The homeless guy -- that story brought me to tears," she said. "The architect -- I'm not buying it."

Brett Mennella, a senior at Bellevue High School (at right), helped start the school's Microfinance Club, which focuses on learning about the global effect of microcredit. The club raised more than $130,000 in the last two years to support microloans, and decided to invest the money in Esperanza International, a global microfinance institution based in Bellevue founded by former Mariners catcher David Valle. This is the second post he's filed from the Dominican Republic, where he is doing volunteer work.

________________________________________________________________

After another day in the country, I have gained even more insight into the Dominican culture and frustrated economic situation. I attended another Esperanza International microcredit bank meeting this morning that was regrettably not as efficient as the meeting I went to yesterday.

The meeting took place in a bank leader's home in Hato Mayor, the town where I am staying. All 25 associates were present or had an excused absence except one woman. Unfortunately, this particular woman did not send her money with another associate, so the other women in her bank had to cover 1,000 pesos (about $28) for her before anyone could leave.

This was a very uncomfortable situation because all the other women had been responsible and made their biweekly payments, but they also had to support their fellow associate who had failed them. This group solidarity model is the main reason micro loans have such a high repayment - more than 98 percent worldwide, and a very similar rate here in the Dominican Republic.

BRETT MENNELLA

Carmen Mota received a microloan from Esperanza International to support her small shop in Hato Mayor, Dominican Republic.

Borrowers know the importance of education. All the people I have talked with so far assured me that their children are going to finish high school, and many have said that they want their children to attend a university. However, affording a university education is a completely different issue.

I interviewed several entrepreneurs, including a woman named Carmen Mota. She was extremely proud of her business and wanted to take me there to show me how she was making her living. Next to her house she had a small "colmado," or food stand, which she operated with her husband and brother. She gave me a soda and valiantly refused to accept any money from me in return, even though she was already living on so little. She was saving to put a cement floor in her business to replace the existing one made of dirt.

This type of generosity and the overall sincerity of the Dominican people continue to inspire me.

BRETT MENNELLA

Pascual Nieve, 57, has received seven microloans from Esperanza International, which he used to develop his horse saddle business.

Although the people here are all very sociable, the men and women associated with Esperanza and other such organizations seem to be exceptions from the vast majority of the population in terms of their independence, economic stability and plans for the future.

For those seeking a way out of poverty, taking out a microloan or other source of financial assistance has had another, more subtle benefit -- it teaches them how to dream.

The culture itself seems to be a bit confused. Technology comes off as a surprisingly high priority in society. Men, women and children watch hours of television each day and music is always blaring out of home radios and cars. Kids have cell phones at such a young age you would think you were living in the States. Still their families struggle to eat every day.

The unemployment rate of 15.4 percent, according to The World Factbook, is not representative of the real number of people without jobs. Three or four people often work a one person job just to be doing something productive. There are men on "motos," mopeds and street-designed dirt bikes, on every corner when most people can walk anywhere within the city limits in about 20 minutes.

BRETT MENNELLA

Shacks with walls and roofs made of corrugated metal in a village in the Dominican Republic.

Another problem that I see as probably the most detrimental in the long run is the lack of variation of businesses in the economy. Everyone seems to run a colmado, fantasia or clothing store, none of which require skilled labor. One woman told me that she started a colmado because "everyone lives on this earth and everyone has to eat." This simple thinking seems to work because although many people are only just getting by, these businesses are still bringing in an income.

If the Dominican Republic wants to push into the modern world economy, it needs to develop business variation or possibly find new successful cash crops. The economy is heavily reliant on sugar cane, but thousands are out of work when there is not a harvest. The development of the nation is dependent on the people as well as the government and all of its systems. Poverty is obviously not a quick fix here, or anywhere else for that matter.

Kiva.org, the Web site that ignited the online micro-lending phenomenon, took a bold new direction last month when it decided to offer loans to borrowers in the United States.

It was a significant step for an organization started to help the poorest borrowers in the world gain access to credit. Kiva CEO Matt Flannery talked a bit about his reasoning here, saying that poverty has become borderless, especially in light of the global recession.

The decision has come under fire from some long-time Kiva supporters, including Tom Behan, a retired advertising executive from Seattle who has made dozens of loans to people in more than 20 countries through the site.

Behan is spearheading an effort to get Kiva to stop lending to people in the U.S. and "return its original mission; that of making loans where needs are the greatest, not the least."

So far 421 people have joined the group of Kiva lenders opposed to what they call "a shameful deviation from Kiva's core mission." The unhappy Kiva lenders expressed their frustration with the illustration at right.

"Kiva built its reputation on alleviating poverty in the Third World," Behan said. "It started out with a pure intention of helping a different segment of the population: the bottom of the bottom."

Of 1,645 people who have responded to a poll on the issue, 48 percent said they support Kiva's decision to allow loan requests in the U.S., while 43 percent oppose it, and about 10 percent are undecided.

"I'm not denying the need in the United States for assistance," Behan said. "I've started small businesses myself, and I've got family members right now that are out of work."

But he cited a recent loan request from a San Francisco man with a degree in architecture who wanted to try his hand at Web design and needed $7,000 to do it.

"That's $7,000 which previously would have been available to perhaps 7-10 other borrowers in developing countries," Behan said.

Other Kiva users say the decision doesn't harm anyone, since lenders can vote with their wallets and choose to fund loans in poor countries instead.

With the recession tightening credit, Kiva spokeswoman Fiona Ramsey said the U.S. loans are a way to "give opportunities to entrepreneurs who really need it right now, and give lenders a chance to help those in their backyard, not just those in other parts of the world."

Have an opinion? Kiva has scheduled a community conference call July 15 at 2 p.m. Pacific, when anyone can call in and offer feedback on the issue. Details are here under the July 8 entry.

Brett Mennella, a senior at Bellevue High School (at right), helped start the school's Microfinance Club, which focuses on learning about the global effect of microcredit. The club raised more than $130,000 in the last two years to support microloans, and decided to invest the money in Esperanza International, a global microfinance institution based in Bellevue founded by former Mariners catcher David Valle. This is the first of several posts he'll be filing from the Dominican Republic, where he is doing volunteer work.

_____________________________________________________________________

Despite its growing economy, the Dominican Republic is only a tourist destination for most of the Western world. It has 1,288 kilometers of coastline, much of which is made up of brilliant sandy beaches and resorts. However, more than 30 percent of the country lives below the poverty line of $2,326 in annual income according to USAID, and a majority of the others are not too far above it. I have been in the Dominican Republic two weeks now and most of what I have seen is far from the lucrative tourist lifestyle.

I spent my first week with the Bellevue High School Microfinance Club. We have loaned to over 1,400 people to date in the San Pedro area through Esperanza and were able to visit many of these people during our stay. We also worked on a school in a very small town outside of San Pedro for two days, which is not easy to say the least in 95 degree heat with 75 percent humidity.

I am currently staying with a host family in the town of Hato Mayor, home to about 100,000 people, which is a very populated area relative to the rest of the country. It thrives around the town park, the center of social interaction, and the various Christian churches located throughout the town. The poverty of the Dominican Republic is apparent in the deteriorating streets and undeveloped buildings.

The public water system often shuts off for days, even weeks at a time. Despite this, there is relatively easy access to water and almost all homes have big rainwater collectors on their roofs which they then chlorinate and can use for household activities.

There is a large supermarket in town and dozens of other "colmados," which sell a variety of food from fresh fruit and bread to soap and cleaning supplies.

These are the realities of Dominican life that I have been able to experience during my stay here.

This morning I visited an Esperanza microcredit bank meeting in Bejucal, a small, poor community about 45 minutes outside of Hato Mayor. I rode there in a "Gua Gua," the Dominican term for a van or bus. This one normally seats 12 people, but the driver had somehow managed to pack 24 of us into the vehicle.

All bank meetings start at nine in the morning and associates are required to attend these biweekly meetings to make their payments. In this particular meeting, some associates did not show up so they sent their payment money with others in the same bank.

Attendance is very important in the world of microcredit because its solidarity is based on ideals that all people in the group should support each other and are accountable for each other. Their absence was a problem that is a constant focus in microlending because it does not encourage the trust and responsibility needed for a microcredit bank to be successful.

I interviewed a man named Juan Sosa, who was the main connection between the Esperanza officials and the bank. He buys and sells cacao, a plant native to the tropical Americans and Caribbean, and is currently paying back his ninth and largest loan thus far with Esperanza, about $425. He is married and has two daughters, ages two and nine, and two sons, ages three and eight. He plans to take out another loan after he has paid this one back in order to continue developing his business. His goal is to buy a cement house because the one he is currently living in is wooden, making it susceptible to hurricanes which plague the region annually.

However, this is not the norm for microfinance or for the Dominican Republic. Many people are only able to make minor, subtle changes to their life, but they are at least able to do so thanks to microfinance and other philanthropic causes. They might put a cement floor in their house when they have been sleeping on dirt all their lives. Or maybe they can start buying meat when their diet normally only consists of rice and plantains.

Poverty here is not only rooted in the low income that people take home each year. The education, health care, transportation and other government systems are all underdeveloped and do not seem to be improving anytime soon.

From what I have seen so far, this seems to be a classic case of "the rich getting richer and the poor getting poorer."

The Seattle non-profit Global Partnerships has dollars to invest, but the microfinance institutions (MFIs) it's trying to help need money in local currencies. In the case of Honduras, it's easy to see why that gap is dangerous.

Global Partnerships has made several loans to organizations in Honduras, in dollars, and those organizations in turn lend money to poor entrepreneurs in local currency, the lempira. The ongoing political crisis has pushed an already weak Honduran currency to the edge of a major depreciation. In that case, the local organization will have to pay back possibly twice as many lempira as it borrowed, and pass the costs on to its borrowers.

"There hasn't been a credible mechanism to be able to hedge our loans so that the risk of depreciation is not absorbed by the poor borrowers this is supposed to be helping," said Gary Mulhair, chief investment officer at Global Partnerships.

Soon there may be a new solution to the risk of such currency fluctuations in the microfinance industry. Global Partnerships is helping to back a new company called MFX Solutions.

CHRIS MEGARGEE/GLOBAL PARTNERSHIPS

Silveria Champi Choque took a loan to help with a family business raising livestock in Peru. The lender, an NGO called Arariwa, received funding from Seattle-based Global Partnerships.

Its debut today is the result of a three-year effort involving more than 30 microfinance organizations from around the world, led by Global Partnerships, Calmeadow Foundation, ACCION International, Calvert Foundation and MicroRate.

MFX was created to apply modern hedging instruments to microfinance lending, analyzing and quantifying currency risk and mitigating that risk by trading among a basket of currencies. MFX also offers free Web-based risk management tools tailored to microfinance needs.

The initial backers are U.S. and European microfinance funds, networks, and foundations that have pooled their resources to set up MFX. In its first round of financing, MFX has secured $13 million from 17 investors, with Omidyar Network providing the biggest chunk: $9.3 million.

Other investors include Seattle-based Unitus, Triodos-Doen and Hivos-Triodos Fund of the Netherlands, Incofin CVSO of Belgium, ADA (Luxembourg), Grameen Foundation, Blue Orchard (Switzerland), Mecene/Africap, Microcredit Enterprises, Grassroots Capital, and Developing World Markets.

The Ford Foundation, The Currency Exchange Fund (TCX), The Dutch Development Bank FMO and USAID all contributed grant funding for MFX.

"Hedging goes on every day between very strong banks and companies," said Mulhair. Global Partnerships has tried to do such currency swaps with a bank, but "we're not big enough for banks to take us seriously."

With MFX, Global Partnerships may have to pay a higher cost up front to invest in places such as Honduras, he said, but ultimately it will have "less risky transactions, the cost will not be born by the micro-borrower, and we can do business with (microfinance organizations) we could not do business with before."

Unitus, a Seattle non-profit supporting microfinance around the world, is entering a new phase as it expands into northern India and Africa, and its social enterprise investment arm builds a second equity fund of at least $70 million, almost triple the size of its first fund.

From its new location on the fifth floor of a Queen Anne building, Unitus President Ed Bland talked about the group's progress to help small microfinance organizations grow by providing capital and business consulting. Unitus has about 40 employees and 24 microfinance partners, 14 of them in India.

ADAM HUGGINS FOR UNITUS

Flora, an entrepreneur in Dar es Salaam, Tanzania, used a microloan to expand a business renting chairs and tents for local events.

Among them, SKS Microfinance in India is the fastest growing microfinance organization in the world, reaching more than 4 million clients today from the 12,000 it had when it first received support from Unitus in 2003. I wrote about SKS here when its founder Vikram Akula was in town.

SKS, which has relied on private equity so far, is likely to go public within the next 18 months. "It will make a big splash," Bland said, but not in the same way as the last major microfinance IPO, Compartamos of Mexico. SKS charges interest rates of 26 percent, compared to the 84 percent interest charged by Compartamos, he said. The IPO helped fuel a debate about the role of microfinance.

A public stock offering would be one way for investors in Unitus Equity Fund to get back their initial capital investment. Another way would be for a microfinance partner to be acquired by a bank in a private buyout. That could help the bank push its services to more low-income clients, who have proven to be reliable borrowers with higher than 90 percent repayment rates. Two-thirds of the Unitus Equity Fund's investments are in microfinance organizations that Unitus supports on the non-profit side.

The first fund's investors were socially minded individuals willing to take a risk for a modest return over 10 years. The $24 million fund was managed with a "charitable override," Bland said. That meant that its social purpose was the most important aim, and making money was second.

Now Unitus' for-profit arm has been renamed Elevar to avoid confusion with the non-profit. Elevar is raising the second fund with a different strategy: broadening its investors to include institutions that weren't part of the first fund at all. To draw investors such as pension funds, Elevar changed its mission to remove the charitable override, Bland said.

It still has a social mission, but that can't be above profit, he said.

The fund will make almost no investments in Unitus' partner microfinance organizations, but rather invest in "innovation at the bottom of the pyramid," Bland said. That includes things like technology, insurance for the poor, private education and anti-malaria bed nets.

The second fund has a target of $70 million to $100 million, focusing on a new category of investing in services for the 4 billion people at the lowest socioeconomic rung.

Unitus opened an office in Nairobi earlier this year, along with the Africa Microfinance Growth Centre, an 18-month program in leadership development for microfinance CEOs. As it moves into Africa, Unitus has partnerships with MFIs in Kenya and Tanzania and hopes to expand to groups serving Uganda, Rwanda and Ethiopia in the future.

Some of the challenges are different, Bland said. Capital is much harder to come by than in India, where the government has identified microfinance as a priority sector and banks have an incentive to support it. In Africa costs are higher, and MFIs must hedge against currency fluctuations as they borrow in dollars and lend in Kenyan shillings, for example.

But Unitus' mission is to put its resources into promising regions where microfinance is struggling. Places that are "harder but not so hard you're stuck there for 30 years banging your head against the wall," Bland said.

A Kenyan Internet entrepreneur is planning to make her first loan -- to an American she's never met. She's doing it through the online micro lending Web site Kiva.org, which grew famous serving the developing world and is now expanding to include the working poor in the U.S.

Recognizing that poverty is everywhere, Kiva is starting to offer loans to U.S. borrowers today, a plan that has been in the works for some time. It's testing the waters to see how the service is used and whether it will help Americans in the midst of a credit crunch find ways to fund small businesses such as beauty salons, nurseries and bakeries.

CEO Matt Flannery mentioned the idea when he talked with me about the evolution of Kiva in a recent interview here. More than 500,000 people have used Kiva to make a total of $76 million in small loans to entrepreneurs featured on the site.

THOMAS AUCIELLO/SPECIAL TO THE SEATTLE TIMES

Silvia and Todor Believe received a Kiva loan to expand their firewood delivery business in Bulgaria.

In the U.S. market, the non-profit is working through two partners: ACCION USA and the Opportunity Fund in the Bay Area.

Locally Washington CASH also offers small business loans to local borrowers. While a small amount of capital is often what entrepreneurs in the developing world need,
getting a business off the ground in the U.S. has its own challenges. Keeping it running successfully can be even harder, so Washington CASH combines loans with training, such as creating a business plan, budgeting and marketing.

Kiva's U.S. micro loans come at an interesting time, with the global economy shifting precariously and unpredictably, and government rescue plans aimed at huge banks and corporations. Through its person-to-person economic stimulus plan. Kiva is giving individuals a new way to decide where and how to put their money to work helping others.

As Seattle's new Express Credit Union makes its official debut this week, it turns the tables and tailors banking specifically to the needs of low-income people.

Its new model combines a credit union with policies and products designed to encourage savings, and a non-profit arm that can fund financial education. Accounts can be opened through local community service organizations, where people are already going for help.

Will that solve the problem for the estimated 20 percent of King County adults who lack a bank account? Recent legislation tackles some of the excess, but there is also debate about the merits of payday lenders. Meanwhile, Express predicts it will take about four years to become financially sustainable and not need to rely on grants.

COURTNEY BLETHEN/SEATTLE TIMES

Nathan Hawkins, a representative for Express Credit Union, helps members at the YWCA Opportunity Place downtown.

With Express rolling out its services to the public and hosting a "grand reopening" on Saturday, there are many questions about how it works, who qualifies and why it's taking on the payday lending industry.

While it aims to help people who have been rejected by banks in the past, not everyone will be accepted for all services. Clinton Jacob called me to say he was annoyed at having been turned down for a checking account at Express after the credit union looked up his history using the Chex system. Jacob owed $500 to a previous bank from a series of overdraft fees, charges which he considered unfair and did not intend to pay back.

Chief Executive Brenda Kurz said Express can't help every case.

"Every situation is very unique," she said. "We're willing to take that extra step and evaluate rather than turn people way."

In some cases, people can open a savings account and establish a six-month track record before being considered for other services like checking accounts and loans.

Express loans are not designed as payday loans, but as an alternative short-term loans with monthly payments, she said. Express offers repayment terms, and the loan is reported to credit reporting agencies so it can improve a credit score if paid back on time. Borrowers get a rebate of one-third of the loan fee once it's paid off, and no checking account is needed to qualify.

To illustrate how Express loans stack up to payday loans in cost, I asked for a detailed breakdown, which can be found here in a comparison chart.doc

Checking and savings accounts are free and can be opened with $5 or $10, along with free ATM use at a network of 300 locations.

Another program, Bank on Seattle, started last year as an effort to extend the services of commercial banks and credit unions to more "unbanked" low-income residents. Express is a member of that initiative.

The non-profit agencies offering Express services are YWCA, Catholic Community Services, the Refugee Women's Alliance, Solid Ground, Hopelink, Multi-Service Center of South King County, New Futures and Neighborhood House.

The agencies are getting grants from the new organization's non-profit arm to handle services like the financial education (which Hopelink is designing) and efforts to reach diverse immigrant communities through the Refugee Women's Alliance, whose staff members speak more than two dozen languages.

I've written a lot about microfinance, which proved to be one of the initial inspirations for Tricia McKay, executive director of the Medina Foundation, who came up with the idea and did years of research to develop a plan. The system of small loans to poor entrepreneurs also turned conventional thinking about banking on its head.

"I became convinced microfinance can and will change the world," she said. "Why is it we have payday lenders on every corner of low income neighborhoods and nothing like this for people in our own backyard?"

For now, Express is focused on King County, but anyone who lives or works in Washington can apply for membership. If the concept proves successful, McKay hopes it can spread and become a model for other communities.

Seattle Pacific University is putting on the first ever Pacific Northwest Microfinance Conference tonight and tomorrow, a testament to the growing interest in the topic. Seattle has at least three dozen organizations working in microfinance, and no doubt students are already dreaming up others.

SPENCER PLATT/GETTY IMAGES

Microfinance pioneer Muhammad Yunus, founder of the Grameen Bank in Bangladesh, is now loaning to hundreds of borrowers in the U.S.

More than 400 people are expected at the sold-out event. Speakers include Matt Flannery, co-founder and CEO of Kiva.org, Skip Li, founder of Agros International, and Atul Tandon, World Vision senior vice president.

Tandon, who left a career in global banking to join non-profit World Vision, said the current economic crisis has made it more urgent to find, train and equip local entrepreneurs in poor countries.

"Microfinance is a time-tested tool," he said, "to generate self-employment and provide local jobs for those who are losing the little they have gained over the last twenty years of global prosperity, and stand to drop back into the black hole of the abject poverty."

Defying the global recession and Wall Street meltdown, microfinance has continued to grow. But as commercial banks and private investors move in, more questions are being raised about how effectively it reduces poverty, and whether more efforts should go into other areas, such as savings and larger-scale employment.

Microfinance is expanding in the U.S. through programs like Washington CASH, which provides training and "peer microloans" to low-income entrepreneurs in the Seattle area. Mercy Corps Northwest recently formed a partnership with Washington CASH to make more micro-loans available in Washington state.

GRAMEEN FOUNDATION

Grameen Foundation executive vice president Peter Bladin.

Peter Bladin, who will also speak at tomorrow's conference, is taking on a new role at the Grameen Foundation as executive vice president for programs and regions, part of a new strategy to expand the reach of microfinance and technology in international development. Bladin, a Microsoft veteran and founding director of the Grameen Technology Center, will lead global operations for microfinance and technology and remain in Seattle.

The field is attracting more interest from job seekers. The World Affairs Council is sponsoring a "Careers in Microfinance" panel Tuesday at 7:30 p.m. at the Seattle Public Library. Details are here.

I had a good conversation with Kiva co-founder Matt Flannery, who told me the microlending Web site will offer loans to people in the United States later this year and is working to fix the imbalance of borrowers and lenders. He also reflected on his own motivations and hope for the future. He grew up in Gig Harbor and still has family and friends here, in addition to several non-profit partners. Thanks to Susan, Kintan, Lynann and others for contributing questions.

Q: What brings you to Seattle?

A: Primarily to speak to SeaMo [Seattle Microfinance], an organization my long time friend Ryan [Calkins] is running. I've known Ryan since we were 15. I'm meeting several other [microfinance] practitioners: World Vision, Unitus, Grameen Technology Center. We just want to expand synergies with those three organizations.

With Grameen we have a lot to learn from them. They're developing great software...we'd love to encourage our partners to use it. It's free and it's advanced to manage their loan portfolio, and our Web site can connect to that.

As we grow from 6 million to 60 million, it's getting quite complicated. A single organization in Peru might be managing 2,000 borrower profiles on our site. They have to upload those one at a time from a location where the Internet doesn't works so good, and as a woman pays them back $10 a month, enter that information in Peruvian currency. Then relay to somone in Seattle and that person gets paid back in dollars. When you have currency fluctuations in between, it gets pretty complicated.

Q: How has the economic crisis impacted Kiva?

A: Currencies are more volatile than ever. Funding is drying up for partners all over the world. [In the past] there was almost too much debt capital compared to the capacity of lending organizations to absorb it. Because of the credit crunch, most of that has dried up or in the process of drying up. Kiva is growing. We're becoming more important in that landscape. We're depending on people in Seattle with $25 to make up the difference.

Lending organizations helping women in Ghana, you break even charging 20 percent interest, and in order to lend that out you need to get funding. They get funding from wholesale debt and lend it to the women. A few years ago debt capital like that was abundant. If you run a commercial you could get funding from Deutsche Bank, Citibank, USAID, Unitus and local banks. Just as banks in the U.S. are tightening criteria, so are these international lenders. Kiva is contrary to that trend because the money we raise comes from completely different sources. Lenders are borrowing money from Wall Street, the same places that are drying up. Kiva is borrowing $20 from my mom. My mom is not drying up yet. The average lender is contributing $60. We have diversified our sources to half a million people. That's more diversified than if you are Lehman Brothers. The situation is driving more MFIs to Kiva, and more lenders, too, oddly enough.

CAROL PUCCI/SEATTLE TIMES

Radka Borisova Portocalova runs a walnut-cracking business in the Roma ghetto in Bulgaria. She and her husband hope to use the money from their Kiva loan as working capital to increase the volume of nuts they buy.

Q: Does microfinance offer any lessons or solutions to the larger problems in banking?

A: The emphasis on knowing the borrowers is the biggest lesson you can learn. Know the community in which you work. You get to know the people you work with and that results in a high repayment rate.

Q: Kiva has run into the problem of having more lenders than borrowers. Is that still the case?

A: It just changes. Today more borrowers than lenders, yesterday there were more lenders than borrowers. It's just dynamic call and response on the Web site. The equilibrium shifts back and forth often.

Q: Is it a problem of infrastructure within microfinance to find enough borrowers to which you can direct those lenders?

A: I wouldn't go so far to stay that. We have 100 partners, and we work with them closely. It has much more to do with Kiva. We've been chronically short [of borrowers] more than not. Especially since December more often than not loans have been zero. That's because we've been selling out. Lenders - about 150,000 are selling the site out most days. That's a failure on Kiva's part to predict the strength of our lender base to grow exponentially and supply the site accordingly. We should have been signing up more and more [microfinance institutions] and enrolling them last October or last August to prepare for this event.

We looked at our statistics last year, and in February we thought that we would have the same seasonal patterns. This year it's not true at all. Last August we were trying to improve relationships with existing partners rather than expanding. We didn't predict that in 6 months the site will be blowing up. Finding partners takes time. You have to go to Mozambique to get to know a small non- profit, to do an audit, to get to know the funders, and do all sorts of financial analysis. We'll probably be in the opposite situation later this year.

Q: What are you doing to address that?

A: We raise money from our lenders, who donate little amounts to us optionally. That's the main way we are able to pay the rent, and occasionally donations from foundations [such as eBay founder] Jeff Skoll's foundation and the Kellogg and Rockefeller Foundations. Right now we're trying to raise another big round of money from foundations, so we can stop operating incrementally, and correcting, correcting, correcting... because we're understaffed.

While we're growing, the world just looks quite unstable. We have a few months of good data...but it's inconclusive. Part of our income comes from foundations. I am seeing a noticeable tightening on the part of foundations. I view foundations as much more volatile than the Internet public at large. That makes up 30 percent of our budget, and the outlook for that is much more dire.

Q: Is Kiva expanding to offer loans to people in the U.S.?

A: Yes, I expect it to happen probably later this year. Obviously there's poverty everywhere including the U.S. As we've grown up, we've begun to think of our Web site not only as a developing world Web site but a place to lend to people in poverty. When we started we thought it's an interesting idea for this one village in Uganda ... Time and time again we were just forced to think bigger. We just were responding to thousands of people who wanted to do something.

Q: Can you envision applying the Kiva model of dispersing financial capital to dispersing human capital, such as mentoring entrepreneurs in developing countries?

A: Yes, I think the flow of information is just as important as the flow of money. That's a really good idea. It's been hard for us to pull it off in the early days. The borrowers typically aren't computer literate or even literate. People who are borrowing don't read and certainly don't use the computer. That's a barrier. In running their business, they know what to do. If you've been selling vegetables in Cambodia for 15 years, you're pretty good at it and you know your market. It's really just [a question of] funding. That's by and large the problem we're trying to solve. It's challenging if you're a Microsoft employee in Seattle speaking to someone selling vegetables in Cambodia.

Q: Do you think global poverty can be eliminated in the next 35 years?

A: Oh, absolutely... wide scale poverty that is. There's always some segment of people that will be poor because of their situation. But we live in a world where a huge percentage of the glob is in poverty. It's completely out of whack. I think we'll look back at this era in shock that we let this thing get this far out of hand. I think this is a temporary anomaly in a world where there's disparity in wealth. It's this weird moment in time, in history, that will correct itself because it's unsustainable.

Q: What motivates you to do this work?

A: I grew up in a Christian family... my mother was a volunteer for World Vision, my sister worked for World Vision. I definitely had international development on my mind. I realized I was an entrepreneur and that was what I was best suited for. I tried to start several companies and failed and failed. It wasn't until I went to Africa with [co-founder and wife] Jessica. I loved talking with people in Kenya about their plans and dreams. That was a different vibe than I had when I was sponsoring children and had an idea of Africa as a desolate place. I found it vibrant and fun. I just wanted to convey that sense of hope and have people convey that to each other. That set me on fire. I thought wow, if people knew the country and started helping a business in Africa that would be so exciting. I told my family I'm going to start thousands of businesses in Africa. People are entrepreneurial. People have a lot in common if you can just break down the barriers between them. Neighbors are not just here, they are in Cambodia and Nicaragua. You are so connected to them spiritually and financially, but it just hasn't been evident.

Q: What do you mean by that?

A: In any major faith tradition there is a proponent of the idea that people are very connected. Whatever religion you're in you'll find there's a universality of people and our actions affect us all.

Financially what you have is a good metaphor for spiritual connection. Someone making a foolish decision in Louisiana, a loan defaulting, a bank no longer able to lend money to international lending organizations, then institutions collapsing in Cambodia because they can no longer raise money, and a seamstress weaving silk in Cambodia can no longer get a loan. It's connected now more tightly than ever.

Q: What else is in Kiva's future?

A: We're opening a development community for volunteer developers all over the world. Volunteer coders are writing apps, where you can browse loans on an iPhone and see transactions. With a second round of apps hopefully you can make a loan from Facebook, or put Kiva loans on your Web site... People could buy loans or where you access a 401k online, you might be able to put a Kiva loan there. We want to spread transactions across the Internet. One day, borrowers can actually get the money on their mobile phones. That's probably five years away. The regulatory and technology barriers are too great to do it today.

Ryan Calkins was driving home from work one day when he heard a familiar voice on the radio -- his old friend Matt Flannery talking about a new non-profit he started called Kiva. The two Northwest natives met as teenagers at a summer camp in Canada.

Calkins, now 32, loved the idea of a Web site that provided a simple way for people here to help people in developing countries by funding their businesses -- loaning them small amounts of money interest-free over the Internet, then tracking their progress.

KEITH STANSK

Calkins, left, visits a microfinance project in Colombia.

Calkins wanted to support Kiva and the burgeoning microfinance industry in Seattle, which has grown to at least 20 organizations, including Global Partnerships, Unitus, Washington CASH and others. In late 2007, he and a few friends created Seattle Microfinance or SeaMo as a kind of business chamber where people interested in the topic could meet and collaborate.

Seattle Microfinance, The group has 350 subscribers to its Web site and many others on its event invitation list. Most members are in their mid to late 20s, and Calkins described them as young professionals who work hard but realize how fortunate they are compared to the rest of the world.

"They have the sense they came by success because of opportunities they had," he said. "They won the birth lottery by being born in United States. They like the idea of giving back in a way that expands opportunities for others."

SeaMo's signature event, "Microfinance and Microbrews," packs Seattle bars with dozens of enthusiastic participants. The events feature a speaker from a local organization engaged in financial services for the poor. This month, SeaMo is hosting Flannery at Town Hall.

"Generally speaking I believe there's a Seattle ethos of this sort of we have an obligation to do good while were doing well," Calkins said.

But why does microfinance attract so much interest?

It appeals to people who aren't necessarily into the idea of charity, Calkins says. "A donation or loan that helps someone sustain themselves appeals to folks frustrated with the sort of handout philanthropy," he said. "Microfinance is the embodiment of the fishing metaphor [teaching to fish rather than giving out fish]."

Calkins said his own interest increased as he gained more experience as a small business owner. He is president of Statements Tile, a business his grandfather started and his dad continued. Calkins took over the Georgetown company when his dad retired last year.

He lived in Nicaragua and Columbia while working with the group Witness for Peace and returned to the region more recently with Global Partnerships.

It was striking while talking with with entrepreneurs in Nicaragua how much the conversations about business sounded like the ones he has in Seattle, he said.

"We had many of the same concerns -- I need line of credit to buy inventory," Calkins said. "How do you find good help? She may be sitting on $10,000 in inventory and I'm sitting on a few million, but business people speak the same language universally."

Seattle Foundation CEO Phyllis Campbell is stepping down at the end of the month to become chairman of JPMorgan Chase & Co.'s Pacific Northwest business. A formal announcement by the bank is pending.

Campbell is a lifelong resident of the Pacific Northwest, where she earned her bachelor's degree from WSU and MBA from UW.

Campbell, who has headed the Seattle's largest community foundation for the last six years, will become the bank's senior executive in Washington, Oregon and Idaho. JPMorgan Chase acquired Washington Mutual's banking operations last September.

"I am excited to join a world-class firm and to help build on the community legacy forged by Washington Mutual," Campbell said in a statement. "Returning to my banking roots and staying in the community I love is a wonderful combination for me."

She spent three decades in banking, including as CEO of U.S. Bank of Washington, handling private banking, commercial banking and retail banking -- all areas that JPMorgan Chase plans to expand in the Pacific Northwest.

"We could not have found a better person than Phyllis to lead our expansion of financial services in this important region," said JPMorgan Chase CEO Jamie Dimon said in a statement. "Phyllis's hard work, integrity and success in banking and philanthropy define true leadership in the community."

The Seattle Foundation more than doubled its total charitable assets during her tenure, focusing on education and economic opportunity. It had assets of $676 million at the end of 2007. Campbell's annual salary at the foundation was $211,200.

JPMorgan Chase plans to convert all 316 WaMu bank branches in Washington, Oregon and Idaho to its own brand by June.

It has also pledged to continue WaMu's local philanthropy, committing $2.65 million in grants to Washington non-profits in 2009, which matched WaMu's local corporate giving in 2008. The bank gave a $10 million grant to the Seattle Art Museum.

Good timing for Campbell and the bank, but her departure poses a challenge for the Seattle Foundation to find someone who can steer the umbrella organization that so many non-profits depend on through rough economic times.

The Seattle Foundation released a statement today from board chairman Bill Lewis.

"Certainly we will miss Phyllis' steady hand at the helm, but are thrilled for her..." he said. "She is a one-of-a-kind leader who leaves strength and success in her wake."

Lewis said that "while the foundation's assets have been affected by the economic downturn, our solid footing has enabled us to do more, not less, to help our community."

As more borrowers lose their homes amid falling housing prices and a mortgage meltdown, a Kenyan institution that started with loans to 50 beggars in a Nairobi slum makes for an interesting counterpoint.

A microfinance organization called Jamii Bora ("good families" in the local language), is building a whole new town. It's offering sub-prime mortgages, but potential buyers must have successfully repaid three self-employment loans to qualify for one.

"What that basically means is that the mortgages are only provided to those who have proven that they are capable of repaying loans," said Robyn Shepherd, communications officer of RESULTS, a grassroots advocacy organization. "Rather than assuming that these people cannot pay because they are poor, or granting a mortgage that cannot be paid and allows the family to slide into debt, Jamii Bora allows clients to prove themselves."

Jamii Bora is in the spotlight today as supporters of microcredit announce a major milestone in surpassing a 10-year goal of reaching the very poorest people with tiny loans to help them do business.

More than 100 million of the poorest families in the world had received a loan of $50 or less by the end of 2007, compared with less than 8 million in 1997, according to the Microcredit Summit Campaign. The non-profit project recently received a $700,000 grant from the Bill & Melinda Gates Foundation to measure its progress.

The more important question is what the millions of borrowers do with the money. In many cases they are poor women who get loans to buy a cow or purchase items to expand a small food shop, working their way up to a larger operation and eventually sending their children to school.

Since the concept of microcredit was first pioneered by Mohammad Yunus in Bangladesh, it has expanded all over the world and spawned a whole industry of microfinance institutions that exist to lend money to the poor.

Banks and other commercial firms smell money, realizing that the poorest people have a good track record of paying their loans off on time in spite of high interest rates. The amount of microloans has grown from an estimated $1 billion to $15 billion in 2007.

But people in the field are seeing the loans in a new way: not merely as a financial tool, rather also as a network to reach the poor with many kinds of basic support -- health care, clean energy and in this case, housing.

In Kenya, the new town has 2,000 houses and 3,000 business spaces. Each new two-bedroom house with its own kitchen, living room and bathroom has the same monthly mortgage as a one-room shack in the slums.

Previous schemes to provide housing for the poor have failed "largely because they did not involve the people in the planning and implementation of the program," says Ingrid Munro, a Swedish housing researcher who founded Jamii Bora in 1999.

Those projects were designed by experts, with land and expensive infrastructure that was already out of the reach of poor people by the time the plots were available.

So Munro, who has become a role model for many in loaning to the poor, reengineered the system from the ground up.

"They have to be able to afford the loan repayments on a monthly basis," she says in explaining the program on her Web site. "Otherwise they will be forced to sell to those who are better off ..."

Sounds like the all-too-familiar story of foreclosures.

Now the microcredit campaign has set a new goal of reaching 175 million of the poorest families by 2015. The goal includes making sure that 100 million of them move above living on $1 a day.

Grim financial news has made raising capital almost anywhere a challenge. But a relatively new kind of investment with a social payoff is expanding this year -- vaccine bonds.

The bonds offer retail investors a fixed rate of return along with the opportunity to use their money to help immunize children in poor countries.

The bonds are offered by the International Finance Facility for Immunisation Co., (IFFIm) a UK-based charity and subsidiary of the GAVI Alliance, a global partnership to expand vaccines that was one of the Bill & Melinda Gates Foundation's first major health initiatives.

Since introducing the bonds first to institutional investors in 2006, GAVI has raised about $1 billion. The organization seeks to raise an additional $500 million this year, beginning next month when the bonds go on sale to retail investors in Japan. Based on their success so far, they may be offered in other markets in the future, says Gargee Ghosh, senior program officer for development finance at the Gates Foundation.

JACQUELINE M. KOCH

Researchers are closing in on a successful vaccine against malaria in Mozambique, .

They're backed by long-term government aid commitments over one or two decades from donors such as the United Kingdom, France, Norway, Spain and other countries. Based on those pledges, the IFFIm board issues bonds as needed. The donor countries make annual payments toward their commitments, covering the interest on the bonds.

"What this essentially does is create predictable on-call funding for vaccines," says Ghosh.

The previous bond, issued in March 2008 to Japanese institutional investors, pays 9.9 percent a year with a two-year maturity. This year's bond, arranged by Daiwa Securities SMBC, pays 6.6 percent interest over three years.

Their triple-A rating makes the bonds solid enough to appeal to the gun-shy, Ghosh says.

"IFFIm has really tapped a market we thought but weren't sure existed," she said. "People talk so much about social investing. This is such a great example. It's a completely viable financial structure. People don't need to care about kids in Africa at all for this to make sense in a portfolio. But if they do, they can track the impact of their funds."

(The University of Washington's Institute for Health Metrics and Evaluation recently questioned some countries' reporting methods, which may influence the way GAVI measures progress.)

GAVI uses the funds for big upfront investments such as buying trucks and stockpiling polio vaccines. In the future it may call upon bonds to help finance a malaria vaccine.

The innovative financing is creating a new kind of asset class, one that could work for other kinds of investments supporting humanitarian projects. It could also attract socially motivated investors in the U.S.

"We've just scratched the surface of understanding the social investment market," she said. "The U.S. is a deep market we just haven't really tapped."