Oikocredit has appointed Mirjam ‘t Lam as its new managing director. Her task: steer the Dutch cooperative and social impact investor through the post-Covid recovery.
In short
- Oikocredit is a social impact investor in financial inclusion, agriculture and renewable energy in Africa, Asia and Latin America with €1.26bn in total assests and €876mn in development financing outstanding.
- Investor’s third quarter results show a rise in the portfolio at risk as the pandemic has hit clients hard, and that recovery is likely to be a gradual process.
- However vast majority of partners has now sufficiently recovered to resume scheduled repayments and Oikocredit signals increased demand for credit.
‘t Lam will take charge of Oikocredit on December 1, having served as interim managing director since August. She replaced Thos Gieskes, whose departure was announced in March, since when a number of other key personnel have also announced they would be moving on.
They include Petra Lens, director of people and change, and Bart van Eyk, director of investments. Joseph Patterson, chair of Oikocredit’s supervisory board, also resigned in October, following his involvement in a public protest in Jamaica, which breached Jamaican law, leading to his arrest for a day.
‘t Lam was previously Oikocredit’s director of finance and risk, having joined the organisation in November 2020, so her appointment as MD provides a degree of continuity. Prior to that she worked as chief financial risk officer at African investment company Arise, which she helped to establish.
Founded in 1975, Oikocredit is structured as a cooperative that promotes financial inclusion through partnerships with microfinance institutions, and with banks that support small and medium-sized enterprises. It has around 527 partners, mainly in Latin America, Africa and Asia. The cooperative also funds organisations active in agriculture and renewable energy.
Mirjam ‘t Lam will be discussing where she sees Oikocredit, and the impact investment sector in general, heading in an interview with the Impact Investor newsletter to be published later this month.
Mixed financial picture
These personnel changes come at a difficult time for any microfinance investor, given the need to maintain loan portfolio quality at a time when the incomes of vulnerable borrowers in the developing world are still subject to the effects of the Covid-19 pandemic.
However, Oikocredit was able to report some improvement in business conditions in its third-quarter 2021 report, released on November 16.
“In lending, increased demand for credit indicates that Oikocredit’s partners are learning to live with and plan for the implications of the pandemic. Very few partners still require our support under special Covid-19 measures,” Oikocredit said.
Its development financing portfolio registered net growth of 4.8% compared to the previous quarter to €875.8mn – which represented a rise of €30.7mn in the year to date.
Loan approvals had returned to pre-pandemic levels in the third quarter, and disbursements were in line with expectations, it added.
“With the vast majority of partners now sufficiently recovered to resume scheduled repayments, only 12 partners remained on ‘payment holiday’ in Q3, representing €18.6mn – down from € 64.9mn – of the total credit portfolio,” Oikocredit said.
Despite the positive signs, a rise in the portfolio at risk was a reminder that the pandemic has hit clients hard, and that recovery is likely to be a gradual process.
The PAR 90 percentage of loans – those with repayments at least 90 days overdue, usually considered bad loans – increased to 6.1% in Q3 from 5.9% in Q2, as some larger partners fell into arrears. The impact of Covid-19 also contributed to increased loan write-offs.
Capacity-building measures
The easing of Covid restrictions in many of the markets in which the organisation operates has also enabled it to return to providing onsite and in-person capacity building for partners, rather than relying on online support.
As part of its capacity-building support for partners Oikocredit has been working with coffee partners in Latin America on price risk management strategies, the production of financial literacy videos in Cambodia and supporting smallholders to plant tea seedlings in Rwanda.
A new loan guarantee agreement has been signed with the African Guarantee Fund for Small and Medium-sized Enterprises (AGF), which allows Oikocredit to increase lending to higher risk African partners.
Education initiative
The organisation has also strengthened its involvement in the education sector through a three-year collaboration with non-profit Opportunity International, announced in November, to increase education access and quality in low-income countries.
The two organisations will invest up to $100mn in financial institutions that are benefiting from Opportunity International’s EduFinance programme, which is estimated to reach some 1.6 million children.
The programme provides school improvement loans, washrooms, dormitories, teachers, and transportation, as well as supporting school leaders with financial products and providing loans for school fees and tuition. The initial target countries are Ghana, Kenya, Nigeria, Senegal, and Uganda.
Cautious outlook
Oikocredit said it remained positive about its prospects, but remained “cautious and vigilant” on the economic outlook for its markets.
“Unequal and extremely limited access to Covid-19 vaccines in low-income countries is an important concern for us and could result in major new waves of coronavirus. In addition, if governments in high-income countries reintroduce social mobility restrictions, a new global economic slowdown is possible,” it said.
Oikocredit further said it would assess the potential for rising interest rates and their possible impact on its term investments and that maintaining portfolio quality would be prioritised.
