Q1 2022 quarterly report: International events influence results
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 2022.
Financial markets undermine sound performance
Q1 2022’s outcomes were mixed for Oikocredit, mainly because of issues beyond our control. War broke out in Ukraine just when much of the global economy was recovering from the effects of Covid-19. Despite our cooperative’s sound management of portfolio development, liquidity, cost controls and other areas, we incurred a net loss in the quarter of € 6.3 million. This was a direct consequence of the devaluation of our term investments (bonds) portfolio by € 9.3 million and, to a lesser extent, the need for an additional € 3.3 million in loan loss provisions.
As financial uncertainty increased with the Ukraine conflict and markets reacted, interest rates, already rising, climbed more rapidly, as did commodity prices. International share prices fell amid considerable market speculation. These developments, which included a massive sell-off in the bond markets, triggered a very negative quarter for fixed income investors. Hence the major fall we saw in the value of our term investments.
Steady progress in core areas
We made good progress in our core activity of providing development financing. Total outstanding credit and equity grew by 1.9% from € 995.9 million at end-2021 to € 1,015.2 million. Building Oikocredit’s development financing portfolio beyond € 1 billion is a strong achievement and consolidates our post-Covid-19 recovery in line with expectations. Member capital remained stable at € 1,129.8 million (Q4 2021: € 1,129.0 million). Net asset value (NAV) per share declined to € 212.24 (Q4 2021: € 213.58) as a result of the net loss, while net liquidity continued to reduce, falling to 17.4% (Q4 2021: 21.5%), although still well within our minimum target level.
With market uncertainty again on the rise, the portfolio at risk PAR 90 ratio (the percentage of loans with repayments at least 90 days overdue) grew from 5.5% to 6.3%, above our 6% target threshold. The increase was caused mainly by complications arising in West Africa regarding the transfer of repayments to our account in the Netherlands. By the end of the quarter no partners remained under temporary pandemic-related ‘payment holiday’ measures, and partners making repayments on time stayed stable at 90%. The total number of partners reduced from 517 to 508.
Operating costs continued to be under control, with personnel, travel, and general and administrative expenses all under budget.
Social performance and capacity building
As Oikocredit continues to work towards full implementation of its new 2022-2026 strategy’s community-focused approach, we have updated our Theory of Change and our ESG (environmental, social and governance) partner selection policy. Also in Q1 we have identified potential partners to participate in our 2022 client self-perception survey, started our Price Risk Management Programme in Rwanda, and launched projects to stimulate and support enterprise Kenya and Uganda, among other activities.
Several senior posts were still unfilled or not permanently filled at the end of Q1. At Managing Board level, following Bart van Eyk’s departure from his post as Director of Investments in February 2022, we are currently recruiting for the new post of Director of Impact Investments. Our new permanent Director of Finance & Risk is due to start with us during Q2. New candidates to join the Supervisory Board have been nominated and will be appointed at the Annual General Meeting on 9 June.
We have taken further steps towards implementing our new 2022-2026 strategy and new capital-raising model. The new strategy is being finalised and will be presented at the 9 June AGM.
Increasing inflation, rising interest rates, market volatility and general economic uncertainty seem very likely to continue for some time to come. We will intensify our monitoring of partners’ performance and wellbeing and of our own balance sheet, liquidity, costs and term investments portfolio. We will keep under close review how the challenging businesses environment affects our partners and their end-clients. As global food prices rise, there is a strong possibility of more households and communities falling into poverty. One potential positive outcome could be that Oikocredit’s farmer cooperative partners may benefit from price rises for their produce.
More information is available in the Oikocredit Facts&Figures Q1-2022.
|Oikocredit in Q1-2022 (PDF)||698.2 kB||application/pdf|
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