Q1 2023 quarterly report: A positive start to the year
Eliane Faye, client of Oikocredit's partner CAURIE MicroFinance
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 2023.
Implementing our community-focused strategy
Oikocredit’s new strategy aims to strengthen community resilience and advance responsible investing by focusing on three main pillars: building a holistic approach to supporting communities; nurturing a global impact-making movement; and facilitating a more direct connection between partners, communities, members and investors.
Our annual online client self-perception surveys are important for social impact in ensuring that our partners, and we ourselves, are as responsive as possible to end-clients’ views and concerns. Completed in Q1 and now published, our report on the 2022 client survey reflects the involvement of 19 financial services partner organisations (compared with 5 in 2021) and almost 16,500 clients participating. We asked survey participants in our focus regions of Africa, Asia and Latin America & the Caribbean about their household situation, the development of their businesses and their future outlook. Close to 90% of clients said Oikocredit's partners have a positive influence on their wellbeing.
In terms of community-focused projects, we were pleased to report how our financial inclusion partner Banco da Familia in Brazil has developed retail loans to fund housing renovation, new affordable housing, and water, sanitation and hygiene (WASH) projects. Other community-focused project developments during the quarter have included the approval of € 2.5 million in new loans dedicated to education finance with partners in Kenya and Nigeria, and we continue to build a pipeline of new WASH projects in Africa and Asia.
To connect partners, communities, members and investors, we have held the first of our new Oikocredit Live online events, combining discussion of the client survey with insights into the work of our microfinance partner Finca Perú. And as part of our nurturing of a global impact-making movement, the launch of our new capital-raising model involves an enhanced focus for Oikocredit support associations: promoting our mission in their regions; nurturing local communities of investors and informing them about our work and that of our partners; promoting education on sustainable development; and serving as the voice of members.
Oikocredit’s Executive Committee has approved our new capacity building strategic plan for greater consistency with the new community-focused strategy. We aim to expand our capacity building for agriculture partners to include new themes of rural community climate adaptation and the development of young leaders.
Protecting the size and quality of our credit and equity portfolio was a key objective in Q1. Portfolio growth to € 1,010.6 million, up by 0.3% from € 1,007.2 million at end-2022, was modest but expected in view of continuing market volatility and uncertainty, high costs of borrowing and our current and potential partners’ resulting caution. Loan portfolio quality remained good, and the quarter’s overall financial result was a positive € 3.1 million. Our Indian subsidiary, Maanaveeya, performed solidly, with 20% loan portfolio growth during the quarter.
PAR 90 (the percentage of loans with repayments at least 90 days overdue) rose to 4.4% from 3.8% at end-2022 but remains well below our 6% target threshold. We had 501 partners at the end of the quarter compared with 519 the previous quarter, and we wrote off € 6.9 million in loans to 11 partners.
As anticipated, with our capital-raising model in transition, total member capital reduced by € 13.1 million from € 1,110.7 million to € 1,097.6 million. Once again, we appreciate our members and investors’ loyalty to our mission. Liquidity remained healthy at 22.5%, compared with 23.9% the previous quarter. From 1 March we were delighted to resume capital inflow in Germany via our new investment product, participations, and also to begin offering participations to Oikocredit cooperative members.
We have changed the basis of our calculation of net asset value (NAV) per participation: see the explanation here. Based on the new calculation, NAV decreased from € 213.95 to € 212.36, but it remains above our target threshold of € 210.
Although hedging premiums stayed high, we continued to keep operating costs under control. These rose marginally during Q1 from 3.0% to 3.2% of total assets.
Financial sector turmoil affecting some European and North American banks had no noticeable impact on Oikocredit’s performance. Despite growing awareness of climate change effects on business, communities and countries, so far we see few if any direct financial consequences for our partners. With our agriculture partners, however, there is increasing discussion of regenerative agriculture and climate resilience and adaptation.
We expect further market uncertainty and rising interest rates in the second quarter to continue to suppress the appetite for credit. Oikocredit nevertheless has a strong pipeline of current and potential partners keen to extend their work with us, including organisations well placed to implement community-focused projects.
With the transition to our new capital-raising model still ongoing, we expect redemption requests to continue, potentially leading to a further reduction in total member capital, and some additional costs. Participations, our new investment product, will become available to more investor groups in phases and eventually completely replace both shares in Oikocredit and other investment products issued by the support associations and the Oikocredit International Share Foundation (OISF).
We will continue to develop our new inflow strategy as we implement the capital-raising model.
The cooperative’s Annual General Meeting will take place, together with a members’ meeting, on 9 June, and preparations are well under way.
Non-member investors interested in viewing a recording of our 1 June Q1 members’ webinar on the financial results can email Investor Support at firstname.lastname@example.org to request a link to the video.
Further work harmonising our systems with EU regulatory requirements means that we will continue to contact investors whose documentation we need to update.
The outlook for the remainder of the year remains, above all, positive.
More information about Q1 2023 is available at Oikocredit Facts & Figures Q1-2023
|Oikocredit in Q1-2023 (PDF)||3.0 MB||application/pdf|
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