Interview: Oikocredit’s latest Impact Report

What’s different this year? And why the new name ‘Impact Report’?

The Impact Report combines two publications — the Social and Environmental Performance Report and Oikocredit At A Glance — into a single, more accessible report.

The Impact Report also has new features, like mapping our impact results to the United Nation’s Sustainable Development Goals (SDGs) framework.

Why the new title? Oikocredit has always been modest in not wanting to overuse the word ‘impact’, as we cannot claim the impact is solely because of our support. 

But impact is a widely used term, and we felt we were not giving enough credit to the work of our partners by avoiding it. That’s after all where the real credit for the impact must be given.

Is there a difference between Oikocredit’s impact reporting and that of other impact investors?

The most common approach to impact reporting is to focus on the outreach numbers and the profile of the investments made. While these numbers are useful, we think it’s equally important to report on the conduct of our partners.

We want to answer questions like: how do our partners do business? Do they monitor and report on the achievement of their social goals? Are they providing products and services in a responsible way?
For example, in reporting on the results of our financial inclusion portfolio, we’re not just saying our partners reached 38 million people. We’re also able to say that 73% of the 466 partners we’re working with in this sector endorse the Client Protection Principles. 

Access to finance is important, but equally important is that access is responsible, and focused on client needs and capacities. 

It’s also worth highlighting that while the impact reports of peers can rely on self-reported data, Oikocredit’s data collection process involves data checks by our colleagues in the field. The local presence of Oikocredit in many countries is a big advantage in this regard.

What impact achievements can Oikocredit be most proud of?

Oikocredit remains one of the most important sources of support for financial inclusion. I say ‘support’ because we provide not only financial but also capacity building support. 

We can be proud of the fact that we continue to challenge and support partners to be client focused, to have the welfare and benefit of end-clients top-of-mind in their operations. 

We can take pride in our continuing efforts in Africa. While the portfolio may appear small at 18% of our total development finance outstanding, it’s still higher than the investments made by most of our peers. 

We can take pride in our tenacity to support agriculture, a challenging sector made even more challenging by the increasing impact of climate change. 

As a cooperative society, we can be proud of our continuing support to cooperatives. It’s interesting that many of our cooperative partners are found in the agriculture sector. Coffee and cocoa cooperatives are by far the most numerous in our portfolio. 

Cooperatives are rooted in communities, provide an opportunity for individual members to have a stronger voice in governance, and distribute the value of their economic activity more equitably among their customers.

Is reaching rural clients and women still a high priority for social impact?

While there has been change, such as migration from rural areas to cities, and cities are sprawling into rural areas, Oikocredit’s fundamental assessment remains the same. In the countries where Oikocredit works, poverty remains high in rural areas. There’s still a lack of basic services in these areas, with limited opportunities for enterprise and education. 

We want to address poverty, and many rural areas continue to be left behind by global growth and prosperity. Smallholder farmers struggle to put food on their tables even as their production puts food on the tables around the world. Smallholder farmers are also among the first to suffer the impact of global climate change.

Oikocredit also has special concern for women. In the countries where we work there are multiple barriers to women’s empowerment. These barriers can be legal or cultural. 

Yet studies show, particularly with microfinance, that when women benefit from economic activity, they spread the benefits to members of their family. 

So for example, when a women is successful in generating additional income, that additional income is typically translated into better nutrition, clothing and housing improvements for her family.

Did the report highlight any areas where Oikocredit can improve?

The number of partners dropped from 747 in the previous year to 684. We’re also still working to get a solid insight into the impact of the small to medium enterprises (SMEs) that are supported through our partners. 

Growing our portfolio in agriculture remains a challenge and we need to do better in accessing resources for capacity building support to partners. There’s also a big opportunity for us to do more in terms of facilitating the exchange of experiences and knowledge among our partners.

The report says Oikocredit’s average loan size is € 1.7 million. Would Oikocredit like this to be higher or lower?

The first thing to say is that there is nothing to connect small loans to more social impact, or indeed higher loan amounts to less impact. What matters is that when a potential partner approaches Oikocredit for a loan, we do not want to reject them simply because it is a small loan. 

After all, Oikocredit’s reason for being is to provide financial resources to those who are unable to get this from mainstream sources. 

Typically, small and start-up enterprises are considered too expensive or risky by many banks. We’ve always said that Oikocredit is here to support the growth of viable enterprises. That has been a conscious choice that means our members and investors expect us to take on more risk, and that also means the cost (because of transaction size) is not necessarily always a key driver for our work. 

And we shouldn’t forget that our partners today on their fifth or sixth Oikocredit loan will have started off with small loans, and now they have bigger loans as the enterprise has grown.

73% of Oikocredit partners endorse the Client Protection Principles (CPPs). Would it be unrealistic to expect this to be 100%?

There will be partners who may not endorse the CPPs but comply with a comparable set of standards. For example, in India there is a set of standards set up by a network of microfinance institutions. 

We also have several partners who are regulated banks, which must be compliant with regulations set down by the country’s central bank and are comparable to the CPPs. 

We’re working to have all our financial inclusion partners to endorse the CPPs or comparable standards. Beyond endorsement, we support partners in their assessments and in drawing up action plans to address the gaps and weaknesses identified.

How will Oikocredit improve on these impact results?

Many of our partners have good intentions and are doing good work. However, there remains the question: what are the changes in the life of your clients that have been made possible because of your intervention? 

Across the board that is one common weakness: measuring, monitoring and reporting on change at the client level. Currently we’re not always able to tell the whole story in that regard. That is because the indicators we’re using are still limited and not all partners have the resources or the skills to work with such data.

I visited a fintech partner earlier this year showing progress in this direction. They were telling me how in the past they collected data such as size of business, productive assets and so on, but only at the time of the loan application. Now they ask these questions over time and see what has changed because of the services they provide to their clients.

What are your hopes for Oikocredit’s reporting going forward?

I hope we can provide more information on change at the client level. Even if this is only for a limited number of our partners to start with. There are a few partners who have indicated their willingness to work with us on this.

In the next Impact Report I hope we can highlight how Oikocredit is becoming a ‘linking pin’, facilitating the sharing of information and not only the sharing of resources. 

We already share resources from investors to partners. But we can also share knowledge between our technical assistance providers and our partners, as well as between the partners themselves. 

We will continue to capitalise on the many strengths of Oikocredit: our local presence, the experience of our partner network, and the commitment of our members and investors. Through these strengths we can build networks, partnerships and communities, all working with a common agenda: improving people’s lives and working towards a more just society.