This July, the 2008 Asia-Pacific Regional Microcredit Campaign Summit convened microfinance institutions (MFIs), NGOs, foundations, corporations, and government leaders from around the world to discuss the challenges, trends, and new opportunities arising in microfinance.

Unitus, along with several of our partner MFIs, joined Dr. Muhammad Yunus and more than 900 other delegates for several days of dialogue and discovery to outline the next chapter for the microfinance sector. In the midst of intense debate over recent privatization within the sector, much of the conference centered around finding common ground for new areas of focus and collaboration.

An important area of interest for Unitus is increased financial transparency for MFIs and the clients they serve. During the opening plenary, Dr. Yunus and Chuck Waterfield of Microfin announced the launch of MFTransparency, an initiative that aims to bring truth-in-lending standards to microfinance by publishing standardized annual interest rates on its website. Unitus and nearly 45 other microfinance-related organizations endorsed the initiative as a critical next step in ensuring ethical lending practices.

Catherine Shaw, Director of Consulting at Unitus, moderated a panel that included Samit Ghosh, founder and CEO of Ujjivan—a Unitus partner MFI—and Scott Gaul, Product Development Manager of Microfinance Information Exchange, Inc. (MIX), a public information platform for microfinance practitioners and investors. Their session, "Finding the Sweet Spot: How MFIs Balance Growth and Mission," offered new insights for balancing and measuring social and financial goals.

Unitus also announced at the conference the launch of Unitus Capital. As a new for-profit strategic affiliate of Unitus, the financial advisory firm was established to meet the investment needs of social entrepreneurs serving the bottom of the economic pyramid. You can read more about the launch here.

> Learn more about MFTransparency

> Read the Unitus Capital press release

In June 2008, Unitus attended the Annual International Social Performance Task Force meeting in Paris, France. Created in March 2005, the Social Performance Task Force (SPTF) has been charged with clearly defining social performance and addressing questions about measuring and managing social performance in the microfinance sector. More than 200 organizations around the world participate in the SPTF meetings and activities—MFIs, investors, network organizations, and academic institutions. Unitus is now an official member of the SPTF and is working on the "Social Indicators" and "Social Investor" sub-committees.

The initiative represents a unique and important opportunity for developing a better understanding of microfinance's effects on poverty and underserved populations, with the ultimate goal of improving products and services to better serve the poor. It is considered the industry's first successful attempt to create consensus and a worldwide framework around social indicator measurements and the usage of tools and metrics to assess progress out of poverty.

At the meeting in Paris, the SPTF identified 30 social performance indicators that are intended to set a standard for basic social reporting by microfinance practitioners. By the end of 2008, these social indicators will be published to the Microfinance Information Exchange (MIX). Microfinance practitioners will be strongly encouraged to report on these 30 social performance indicators as part of their regular reporting cycles (read more about the indicators in progress here.)

Unitus also plays an active role in the Social Performance Management (SPM) Roadmap Initiative, a project spearheaded by the Imp-Act Consortium. SPM enables MFIs to better assess client needs and use this information to refine products and services to better meet those needs. Backed by the Ford Foundation, MicroNed, CONCERN, and IFAD, the Imp-Act Consortium strives to provide tactical guidance to microfinance institutions who are working to implement SPM. The Roadmap is a "how-to" guide tailored for microfinance practitioners and is scheduled for release in December 2008.

> Read about the Social Performance Task Force and Social Performance Indicators

>Learn more about the Imp-Act Consortium and the SPM Roadmap

Unitus and The Police wrapped up a six-month charitable partnership on August 7 with a smashing concert at New York's Madison Square Garden, marking an end to The Police's record-breaking reunion tour. Unitus has been incredibly grateful for the opportunity to get our message to hundreds of thousands of Police fans across North America and Europe. The band's generous ticket donations also gave Unitus the chance to raise money through online auctions and events across the country, introducing us to a great new group of supporters and providing a fun opportunity for old friends.

Perhaps the most unexpected perk to the partnership was when Sting heard our own Jessica Ketola sing and invited her onstage during the Seattle area concert last month. Luckily for us, despite impressing the band, her colleagues, and nearly 20,000 fans, Jessica is still hard at work at the Unitus Equity Fund.

The following article is adapted from the August 2008 issue of Unitus's partner newsletter, "The Accelerator." The article is specifically focused on helping MFIs prepare for and respond to the drastic increase in food prices occurring throughout the developing world.

As economies adjust to the global rise in food prices, the growing crisis is expected to have a disastrous impact on poor communities. This year alone, rice prices have soared 114 percent since January. World Bank President Robert Zoellick recently said that soaring food prices threaten to push 100 million more people in low-income areas deeper into poverty, undoing many of the dramatic improvements made over the past decade.

How can MFIs prepare for the food crisis? Unitus recommends that MFIs be proactive in assessing their clients’ exposure to the growing crisis and in planning their response, beginning with the following steps:

1) Watch PAR closely. MFIs should watch PAR closely over the next months to ensure defaults are not increasing as clients devote a larger percentage of their household income to food consumption.

2) Survey clients. MFIs can use a range of survey tactics to assess and plan for the magnitude of impact. Options include implementing a full market research study using quantitative or qualitative tools, or simply devoting time during center meetings to discuss how rising prices affect clients. Surveys should aim to determine the impact on clients’ businesses and consumption patterns, discover trade-offs clients are making, and identify opportunities where MFIs can help to meet client needs. In lieu of surveying clients, MFIs might choose to survey branch managers or loan officers to learn about what they are seeing in the field.

3) Be proactive. MFIs should actively seek out clients likely to be suffering from the crisis and develop a plan to help them meet their basic needs.

How can MFIs help respond? There are a number of short-term and long-term levers that MFIs can use as mitigants if they find their clients are suffering from rising food prices. Please note that because these mitigants may increase operational costs—in some instances significantly—Unitus recommends a rigorous strategic planning process and cost-benefit analysis before implementation.

Short-term:

1) Help clients plan for the crisis. Through diversifying their businesses, securing larger inventories, or buying ahead, clients may be able to protect their businesses during the crisis. MFIs should encourage clients to take these measures and provide training and support when possible.

2) Create discussion forums. Providing a forum for clients to share their experiences during center meetings could help borrowers find opportunities to assist one another and brainstorm solutions.

Long term:

1) Ramp up business training, client support, and other services. MFIs that offer business training and support have seen fewer defaults than MFIs that just focus on microcredit products. As an example, Fonkoze has an ultra-poor program that targets clients with no productive assets. Interestingly, these clients have fared better during the food crisis than clients with just a microfinance loan. Anne Hastings, CEO, attributes this to the business enterprise training and regular problem-solving visits with caseworkers that have helped clients to plan for the future and take steps to mitigate the crisis.

2) Seek operational improvements to decrease costs. By identifying key areas for improved operational efficiency, MFIs can reduce operating costs. This will help to mitigate the effects of declining revenues and stabilize operational self-sufficiency.

3) Consider partnerships with other organizations. Partnering with food aid agencies, health care providers, and other social service organizations could allow MFIs to refer clients to additional services that may be necessary during this crisis.

4) Consider impact on employees. Some MFIs may need to consider raising salaries or providing other benefits to assist struggling employees. Some Unitus partners have taken measures such as increasing rice stipends provided to employees.

5) Offer flexible products. If possible, MFIs could permit flexibility in their products for clients suffering from the crisis. By restructuring loans and extending loan terms, MFIs can help borrowers keep their current businesses afloat. This measure should only be taken if there is demonstrable repayment capability to avoid the risk of further increases in loan defaults.

6) Consider offering consumption loans. Many MFIs have seen increased demand for consumption loans as clients have fewer resources to devote to business investment. MFIs considering offering consumption loans as a solution to the food crisis should proceed carefully. Some MFIs have seen significant increases in defaults after offering consumption loans. Others have seen costs rise dramatically as they have had to increase training for loan offers and adapt accounting systems. MFIs should ensure there is demonstrable repayment capability and be confident in the ability of their systems to manage the increased burden of consumption loans before considering this as a solution.

7) Avoid increasing interest rates and debt forgiveness. Raising interest rates could force defaults up even further and exacerbate the crisis for both MFIs and their clients. Debt restructuring is preferable to debt forgiveness, which is not a sustainable solution to a long-term crisis. MFIs should avoid both of these measures.

Congratulations to Unitus Capital for a successful launch during the 2008 Asia-Pacific Regional Microcredit Summit Campaign conference. Unitus Capital represents the transformation of what was once the Capital Markets team at Unitus, and is now an independent commercial company based in Bangalore, India.

Unitus Capital is proud to be one of the first financial advisory firms designed to meet the investment needs of social entrepreneurs serving the bottom of the economic pyramid. As an independent entity, Unitus Capital will serve as a conduit between capital market investors and social entrepreneurs focused on creating social and financial value for investors, MFIs, social enterprises, and the communities they serve.

On July 8, Unitus partner Ujjivan crossed the 100,000-client threshold, a major accomplishment. Headed by CEO Samit Ghosh, the organization reached the milestone in just 982 days.

Ujjivan launched the first of its pilot programs in November 2005 in Bangalore, India, and currently operates 68 branches centered around Bangalore, Kolkata, and New Delhi. A Unitus partner since 2006, Ujjivan plans to reach 2 million clients across India in 6 years.