Q2 2024 quarterly report: Positives and challenges

Implementing our 2022-2026 strategy  

Oikocredit’s community-focused development financing, central to our 2022-2026 strategy, continued to grow in Q2, reaching EUR 76 million, well ahead of target for the year. Growth in our community-focused investing included a new round of our water, sanitation and hygiene partnership with Sidian Bank and Aqua for All in Kenya, and an equity investment in Altum Credo in India to strengthen finance for affordable housing. We address resilience at community level through investments in education, housing, water and sanitation, infrastructure and climate action.  

Oikocredit has continued to work with financial inclusion partners in Africa, Asia, and Latin America and the Caribbean on our fourth annual Client Self-Perception Survey. Partners have to date reached close to 9,000 clients with this year’s survey questionnaire, ahead of planning. We are confident of again achieving many client responses to further inform our partners’ work. 

Our capacity building activities currently include work in Cambodia to strengthen client protection across the financial inclusion sector by promoting client voice, choice, respect and control, including among Indigenous communities. We are also working with two savings and credit cooperatives in Indonesia to improve their social performance management and client protection, and with a further three Indonesian cooperatives on risk management. In partnership with the leading cooperative Jardín Azuayo in Ecuador, we have provided training to support other cooperatives in the financial space by sharing Jardín Azuayo’s governance experience and expertise. 

In Q2 member and investor capital reduced by 0.82% to EUR 981.0 million, showing a slight improvement compared to the 1.39% fall in Q1. Redemptions in Germany, the Netherlands and Austria and low subscriptions were the main factors.  

Together with our support associations we remain active in our main inflow markets to secure sufficient member and investor capital to support the growth of our development financing. We participated in 20 events across Germany during the quarter, organised a road show in five cities in Austria, held five events in Spain, and began new marketing campaigns in France, Germany, Austria and Switzerland.  

In facilitating connections and nurturing our global investor movement, in Q2 we held our fifth Oikocredit Live webinar for members, investors and others. The focus was ‘The Future of Cocoa – Is Sustainable Chocolate Possible?’ with speakers from Dominican Republic cocoa cooperatives’ union Conacado and Dutch bean-to-bar chocolate producer Chocolatemakers.  

May 2024 saw our first Oikocredit Journey, to Peru. We took 18 investors from six countries on 10 days of travel in and around Lima and the northern coffee region. We visited six partner organisations, tasted countless cups of coffee, held many engaging conversations, and heard inspiring stories from partners and clients. Once back in their home countries, several journey participants organised local follow-up events. 

Minor adjustments to our Participation Terms have come into effect, mainly affecting the dividend payment process.  

Financial performance and portfolio development 

The net result for the first half of the year was overall a positive EUR 3.2 million, reversing Q1’s net loss of EUR 2.6 million.Operating income for the year to date was EUR 41.3 million. Operational costs as a proportion of total assets rose from 3.5% to 3.7%. While operating income is developing in line with expectations the additions to loss provisions were more than anticipated. The liquidity ratio stood at 11.6%, which is within our contingency range.   

Net asset value per participation fell very marginally to EUR 214.38 (from EUR 214.39 in Q1), mainly because of a reduction in the general reserve following the annual dividend payment. 

Oikocredit’s total outstanding credit and equity (development financing) decreased slightly in the second quarter, from EUR 1,136.1 million to EUR 1,099.1 million, remaining ahead of target.  

Portfolio quality has remained a concern. Measured by the PAR 90 ratio of outstanding loans with payments more than 90 days overdue, portfolio at risk rose from 6.3% to 6.6% (above the 6% target threshold). Fewer credit portfolio partners were able to repay on time, some of them hampered by a scarcity of US dollars. In addition, rising interest rates and hedging costs evidenced a higher perception of risk in the countries where we are active. 

Organisational developments 

On 1 June, Ging Ledesma transitioned from her role as Director of Strategy & Sustainable Impact to become Strategic Adviser for Impact & Social Performance. In this new role, Ging is concentrating on several pivotal projects including the development of a social due diligence training course and supporting Oikocredit’s forthcoming 50th anniversary celebrations. Kawien Ziedses des Plantes, Sustainable Impact Manager, has assumed the role of Director of Strategy & Sustainable Impact on an interim basis. 

Oikocredit held its 48th Annual General Meeting on 7 June in San José, Costa Rica. Members and others participated both in person and via web-based conferencing and electronic voting. Among the AGM’s decisions was endorsement of the 0.5% annual dividend payment, several Supervisory Board and Members’ Council appointments and reappointments, extension of Supervisory Board member terms from three to four years, and adoption of an alternative voting system to allocate more votes to the support associations reflecting the number of investors per association. 

Oikocredit is strategically realigning its operations in Southeast Asia. We want to move closer to our partners in Cambodia and Indonesia by recruiting staff in these countries. As part of these changes, we will close the office in the Philippines, where we have had no investments for some years due to changes in market conditions. We have committed to provide comprehensive support to staff members in the Philippines during the transition. 

Following three non-governmental organisations’ submission to the Dutch OECD National Contact Point for Responsible Business Conduct alleging non-compliance with the OECD Guidelines for Multinational Enterprises, we participated in further dialogue with the NGOs about Oikocredit's financing of microfinance organisations in Cambodia. Discussion topics included challenges in the microfinance sector and the need to address them to improve the living conditions of low-income people in Cambodia. 

Future outlook 

External factors as well as internal developments will continue to influence our performance. Global political instability and changes in regulations, as well as climate-related events, affect our partners and their ability to repay. We continue with intensified monitoring to understand the situation of our partners and end-clients and find suitable solutions. Despite these efforts we anticipate that costs of risk (loan loss provisioning and impairments), combined with high operating costs, will put pressure on our financial results. With the measures taken we anticipate adequately balancing our impact, risk and return.  

Besides optimising our organisational set-up in Asia, we will look further into our organisational design, mindful to continue with creating impact and servicing investors and partners effectively. 

Oikocredit’s overall performance in Q2 provides positives when it comes to impact creation and furthering resilience as per our community-focused strategy. The positive financial result gives us some cushion in times of change, uncertainty and volatility.   

More information about Q2 2024 is available here.