Los Angeles Microfinance Network

This article is referred to me by my Toasmaster member, Meyer! It’s posted on the magazine “Corporate Counsel”

Pro Bono Program Assists Microfinance Projects Around the World

Sherry Karabin

Corporate Counsel

July 28, 2009

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CAPITAL GAINS

While working at one of the biggest financial institutions in the world, Kimberly Summe was thinking small. Last year, as a lawyer at Lehman Brothers Inc., Summe developed an idea for a pro bono program that would assist microfinance projects around the globe. These organizations provide small loans, often under $100, to entrepreneurs in developing nations. Even as Lehman collapsed last fall, Summe managed to launch Paladin Connect, which now provides free legal help to more than a dozen microfinance groups operating from Bangladesh to Bosnia.

Microfinance organizations focus on individuals or groups — especially women — who want to start a business, but can’t get a loan from a bank because they have no credit history or few assets. “If you don’t have access to credit, you have to survive paycheck to paycheck, and it’s much harder to climb out of poverty,” said Summe. “Microfinance provides a solution to this problem by offering retail banking services to the poor.”

Summe set up Paladin Connect with the help of law firms that she got to know while serving as general counsel of the New York-based International Swaps and Derivatives Association Inc. from 2001 to 2007. “I worked with counsel in over 80 countries on a variety of matters,” she said. “I thought, I’ve got this network of talented people who do some of the most complicated commercial work from a legal perspective, and there are microfinance institutions in need of legal help. So why not set up a matchmaking service?”

It wasn’t until she joined Lehman as a managing director, however, that Summe was able to put Paladin Connect together. She faced a unique challenge when Lehman filed for bankruptcy last September and was acquired by Barclays Capital Inc. “There was a lot of uncertainty as to how things would work out after Lehman’s insolvency,” Summe said. “I figured I could engage in nervous chitchat at the water cooler, or shut my door and focus on this project.”

Summe chose the latter, and got Paladin Connect running by December. (She stayed on with Barclays until March, when she became general counsel of Partner Fund Management L.P., a San Francisco-based asset manager.) Summe continues to operate the nonprofit by herself.

Although microfinance institutions make much smaller loans than commercial and investment banks, Summe said they have many of the same legal needs. The difference is that they don’t have the money to hire top lawyers. Summe explained, “I wanted to amplify the number of people being reached by these institutions by connecting them to legal services.”

So far, more than a dozen law firms have signed on to work with Paladin Connect. No in-house lawyers are providing pro bono help through the project, though. “Law firm attorneys are uniquely suited for pro bono service because their billable hours approach contemplates a portion of their [nonbillable] time as being counted toward their required annual billings,” explained Summe, who hasn’t done any legal work for a microfinance institution herself. Plus, she adds, firms “offer resources and training” to encourage pro bono.

One of the institutions that Paladin Connect attorneys are helping is BRAC, the largest nongovernmental organization operating in the developing world. Two years ago, the group started an American affiliate, which recently enlisted lawyers from Weil Gotshal & Manges, a Paladin Connect participant. Weil attorneys are aiding BRAC USA’s fund-raising efforts by registering it with state authorities for charity solicitation.

“We’re a young organization in the United States,” said Alyssa Herman, vice president at BRAC USA. “It’s very valuable to have top-level legal support as we grow to help extend our reach. If we had to use our own funds, it would take away from program money.”

Mercy Corps has also drawn on help from Paladin Connect, much to the relief of general counsel Mary Chaffin. “I can’t do it all,” she said. A Portland, Ore.-based humanitarian relief and development agency, Mercy Corps has founded several microfinance institutions around the world. It’s currently transforming its affiliate in Bosnia-Herzegovina from a not-for-profit into a for-profit organization with help from London’s Allen & Overy, another Paladin Connect participant.

“It’s very interesting work because it’s a real mixture,” said Allen & Overy partner Christopher Bernard, who organized the firm’s microfinance working group. Bernard adds, “It’s a challenge trying to achieve some of the things Mercy Corps wants to do-such as giving incentives to employees of microfinance institutions in different jurisdictions by issuing them stock-while making sure the mission remains focused on microfinance.”

The emphasis in microfinance on women borrowers appeals to Summe because of her family’s history. While she had a middle-class upbringing in Oklahoma, both her mother and grandmother grew up poor. Her mother’s finances took a turn for the better only after she joined the U.S. Army and became one of its first female drill sergeants.

“I thank my mom for instilling discipline in me,” Summe said. She adds that her mother never let her forget about those who were not as fortunate. “There were so many things that she did, from taking food to families on the wrong side of the tracks — not just during the holidays but every week — to fostering children,” recalled Summe. “If I worked in the summer to save for clothes, she would have me set aside a portion of my earnings so I could buy clothes for a family in need.”

Years later, when Summe was an associate at Sullivan & Cromwell, she worked on her first pro bono project. She helped a Liberian man who had been tortured in his home country to win asylum in the United States for himself and his family. Her years at Sullivan also gave her time to learn about how microfinance institutions were helping poor people in similar situations to the one in which her grandmother and mother were raised.

“These organizations lend money to poor women. I thought about how incredibly powerful it was, because they were unleashing the creativity of these women to run their own businesses and help their families,” Summe explained. “I was reminded of my mom who wasn’t much different than these women in, say, Mexico. No bank cared about her because she was not a potential client.”

Summe hopes to expand Paladin Connect so that it can provide pro bono help to more organizations in the future. “I don’t think microfinance is going to move the entire world out of poverty,” she said. “But I do think it is a very strong contributing factor to the reduction of poverty.”

This article originally appeared in Corporate Counsel magazine, a Legal affiliate based in New York. •