What’s the best kept secret in social impact investing?
It may well be Oikocredit. Oikocredit is an international financial cooperative which manages a social investment fund. The fund invests almost exclusively in microfinance, including microfinance institutions, village banks, farmers’ cooperatives and fair trade initiatives. (Reserve capital is generally invested in financial instruments issued by carefully screened organizations such as development banks or governments in the developing world.)
Volunteers
The investment fund is managed professionally. All disbursement of capital is subject to robust risk management processes and professional oversight. However, the cooperative has relied almost exclusively on volunteers to raise investment capital from individuals and organizations across Europe and North America. This has kept costs down. It has also made it more difficult for Oikocredit to build its brand among social impact investors. Moreover, although the organization’s cooperative structure empowers all members, it may at times make it more difficult to respond quickly to emerging marketing trends. Thus, if you have never heard about Oikocredit, you’re not alone.
Track record
Founded in 1975, Oikocredit International is based in the Netherlands and has offices in 36 countries. The cooperative invests in almost 70 countries and works with almost 900 development partners around the world. In 2010, Oikocredit reached a milestone. Worldwide, the organization surpassed the CAD$1.4 billion in accumulated loans and investment capital provided to disadvantaged people since its inception in 1975.
Clients
In 2011, Oikocredit reached 26 million clients by extending loans to microfinance institutions and other partners. Over 80% of these clients are women and over 50% live in the countryside. Countries with highest capital outstanding are India, Bolivia, Paraguay, Cambodia and Peru. Oikocredit is rooted in the World Council of Churches and its first investors were churches and para-church organizations. The fund has never denied an otherwise eligible person or organization for a loan or investment opportunity due to religious adherence.
Investing in (smart!) people
Individuals and organizations invest in Oikocredit because they seek to maximize social returns. For example, Oikocredit investors provide working capital to Upland Marketing Foundation Inc., a social enterprise in the Philippines that helps small-scale Pilipino farmers meet the growing demand for organic products in the country’s capital Manila and other major cities. As a fair trade marketing firm and distributor, UMFI works with about 60 community-based enterprises operating in 17 provinces by packaging, merchandising, and advertising their products. Oikocredit financing enables UMFI to expand activities and develop new merchandise which diversifies its product lines.
Why a loan rather than a donation?
Donations will remain important to provide health care, education, and emergency relief during humanitarian disasters. However, when communities wish to achieve economic growth and build productivity, giving credit (a loan), equity or loan guarantees is often more effective than giving a donation. Here is one important reason why: When giving credit, there are no givers or receivers. Rather, business partners agree to make a deal and become mutually accountable. All partners involved have vested interests in making the deal work out well.
Investment approach
Oikocredit invests in a geographically diversified portfolio. A member’s capital is invested into Oikocredit as a worldwide entity, never in a specific project or individual entrepreneur. This spreads risk for all investors and project partners. The fund screens development project partners to assess their commitment to environmental, social and governance best practices for their industry. This includes adherence to client protection principles to ensure microfinance products are contextually appropriate.
Finally, development project partners, including microfinance institutions, can obtain capacity building grants to strengthen their ability to build supply chains, obtain fair trade designations, and improve client-focused financial infrastructures.
More info
Visit www.oikocredit.org for more information about investing in Oikocredit and how the cooperative measures impact of investors’ money. Canadians can also check out our facebook page atwww.facebook.com/oikocreditcanadacentral.
Nandy Heule is Director of Investor Relations for Oikocredit Canada Central in Toronto. Nheule@oikocredit.org