Q1 2021 quarterly report: Steady recovery
Four times a year Oikocredit publishes key facts and figures on the previous quarter. Here we provide our investors and others with additional background context on developments during the first quarter of 2021.
Oikocredit ended 2020 on a cautiously optimistic note following the challenges arising from the Covid-19 pandemic. Q1 2021 has proved better than we expected, with a net result of € 11.9 million. Net asset value (NAV) per share rose from € 210.50 to € 213.11, close to the pre-pandemic level at the start of 2020. Our net result and subsequently NAV were positively influenced by a one-off release of provisions amounting to € 9.5 million.
We have made initial encouraging progress in building back our loans and investments portfolio and supporting new partners in Africa, Asia and Latin America. The total development financing portfolio grew by 1.3% during the quarter from € 845.1 million to € 856.3 million, although is still below the portfolio size at the start of 2020 (€ 1,064.6 million). Portfolio at risk, represented by the PAR 90 percentage of loans with repayments at least 90 days overdue (excluding partners’ payment holidays), improved from 5.8% in Q4 2020 to 5.6%.
Oikocredit’s highly committed members and investors have provided a further inflow of € 13.2 million in new capital, bringing total member capital to € 1,117.3 million compared with € 1,104.1 million at end-2020. We much appreciate this increase in funds entrusted to us. Once again our members and investors’ loyalty shines through.
Our liquidity position is healthy at 31%, enabling us to accommodate the growth of the development financing portfolio as well as supporting the issuance and redemption of shares.
Factors affecting the results
Growth of the portfolio started slowly early in the year, with many local economies stagnant or recovering only marginally, limited demand for credit and strong competition among lenders. Later in Q1 we saw an upsurge in demand for loans among partners, led by demand in India, which enabled Oikocredit to deliver on its ambition to grow the portfolio. We also saw the number of partners in the ‘payment holiday’ category reducing from 69 at the end of Q4 to 37, signalling improvement of portfolio quality.
We updated our provisioning method for country risk, which we have aligned with best practice in the financial sector and with the Generally Accepted Accounting Principles in the Netherlands (Dutch GAAP). This has enabled us to revise down our loan loss provision, releasing a one-off € 9.5 million, which is a direct contribution to our result for the quarter. We are reviewing our accounting principles relating to the valuation of our equity investments. We anticipate that the outcome of this exercise could favourably impact the results in Q4.
The Q1 results also benefited somewhat from the strengthening of the US dollar, which increased the value of our portfolio in dollars and dollar-linked local currencies in Latin America and the Caribbean. We saw a small positive result on our foreign exchange for the quarter. Our term investments (bonds) portfolio lost a little in value as a result of higher interest rates in the United States.
Oikocredit’s partners and staff
We continue to offer attentive support to our partners, 90% of whom are now making repayments on schedule. Even in heavily pandemic-affected countries such as Brazil and India, most partners are coping relatively well to date, but we are aware that this could change. We continue to apply a conscious and engaged approach to monitoring and assisting partners, which we believe contributes to the quality of our portfolio.
We are concerned about global inequality in the distribution of anti-coronavirus vaccines. This is an issue that affects many partners and their clients. Humanity will continue to be at risk as long as some countries are largely excluded from the preventive benefits of vaccination.
Most of our staff are still working from home, as they have done since country lockdowns began in 2020. Managing competing home and work responsibilities has been demanding for many, and we remain committed to supporting the personal well-being of our staff.
Two members of the Managing Board, Managing Director Thos Gieskes and Director of People & Change Petra Lens, have announced that they will be leaving Oikocredit in 2021. Both have made enormous contributions to the organisation for which we are very grateful, and they will be much missed. Succession planning has begun for both positions.
We have rolled out two new initiatives. The first is an online interactive partner portal, which will help strengthen our partner monitoring, improve information sharing and speed up communications. All our partners have access to the portal, and 98% of partners have now uploaded quarterly monitoring information into it.
The second new initiative is a client perception survey for partners to undertake. Five partners are piloting the survey, which aims to gather clients’ perspectives on how credit helps them improve their lives. We plan to have 30 more partners undertake the survey with their clients later this year.
The quarterly results give us confidence that Oikocredit’s portfolio will continue to regain lost ground in 2021, and we expect income to grow as we rebuild. But we remain cautious. There is still much economic uncertainty in our focus countries. Oikocredit will maintain strong cost controls and stay alert to new risks, whether resulting from Covid-19 or other unforeseen developments.
Our Annual General Meeting (AGM) will take place in June, with cooperative members joining online, when we will present members with a progress report on the new purpose-driven four-year strategy. It has been necessary to slow the process a little because of pressure on resources from the pandemic. We now aim to have the new strategy ready by year-end.
We will continue to review our inflow model as regulation evolves. Care, continuity and opportunity will be our watchwords as local economies and the development financing sector gradually open up again.
|Oikocredit in Q1-2021 (PDF)||526.0 kB||application/pdf|