Q4 2022 quarterly report: Continuing progress
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 fourth quarter of 2022.
The fourth quarter of 2022 concluded an eventful year for Oikocredit during which we made good progress in important respects. Approval by the members’ Extraordinary General Meeting in October of proposed changes to the Articles of Association was a landmark that will enable our cooperative to implement the new capital-raising model in the coming months. Another key event was the sale of our equity investment in Fusion as part of the microfinance institution’s initial public offering on India’s National Stock Exchange. This equity exit marked the culmination of more than a decade of our support for Fusion’s growth to become a large and successful provider of financial services to more than 2.9 million mainly rural low-income women.
The quarter’s positive net result of €13.7 million brought the year’s total consolidated result to a positive € 8.5 million.
The external economic context remained challenging, with high inflation, rising interest rates and foreign exchange volatility. In Africa especially, governments struggled with hard currency debt repayments. Climate-induced loss and damage remained a growing global concern.
Key quarterly figures
The development financing portfolio reduced by 4.0% in Q4, from € 1,049.3 million in Q3 to € 1,007.2 million, but still closed the year up 1.1% from € 995.9 million in 2021. Credit and equity disbursements during the quarter were slightly less than forecast, with partners understandably cautious in the current macroeconomic climate about taking on new debt.
Portfolio quality continued to improve, with PAR 90 (the percentage of loans with repayments at least 90 days overdue) falling from 5.0% in Q3, and from 5.5% at end-2021, to 3.8%, well below our 6% target threshold. We had 519 partners at year-end, compared with 513 in Q3 and 517 at end-2021.
Total member capital was € 1,110.7 million in Q4, down from € 1,120.9 million in Q3 and from € 1,129.0 million at end-2021. The fall was lower than expected as we revised our capital raising model. Once again we thank our members and investors for their loyalty. Net asset value (NAV) per share rose from € 211.66 to € 213.95 (and from € 213.58 over the full year), while liquidity increased to 23.9% (Q3: 15.7%; 2021: 21.7%).
Operating costs rose during the quarter to 3.0% of total assets (from 2.6% in Q3 and 2.3% at end-2021), mainly as anticipated, as we further developed the new capital-raising model and implemented other change initiatives, including our 2022-2026 community-focused strategy. Rising hedging costs and the effects of inflation have also affected our expenditure levels.
In Q4, working with 19 inclusive finance partners in 12 countries across Africa (6 partners), Asia (5 partners) and Latin America & the Caribbean (8 partners), we completed the second, expanded round of our innovative online client self-perception survey. Close to 16,500 clients participated using interactive software to share perceptions of what is happening in their lives, including changes they experience through greater access to affordable financial services. The survey, for which we held five face-to-face workshops with partners in Brazil, Ecuador and Peru, has stimulated interest among our development finance and impact investing peers and portfolio partners. Keeping clients, their perception of change, and their needs and challenges at the centre of Oikocredit’s partners’ work is critical to creating impact.
Tellingly, 46% of clients have reported extreme weather affecting their income. We have published our report on the 2022 client survey.
Capacity building is a key part of our social performance that we are strengthening to enhance its alignment with our four-year strategy. Our new Innovation Hub is operational in support of strategy implementation and our partners and projects.
Q4 saw Oikocredit enter into several equity investments and credit agreements. For example, we invested in the equity of fast-growing Ivoirian fintech Djamo, which offers affordable financial services to unbanked people in francophone West Africa. And we approved a loan to MyCredit in Kenya, a non-bank financial institution that supports small and medium enterprises with affordable loans.
The cooperative’s recently established Executive Committee has continued to guide implementation of the new community-focused strategy, detailing out the exact deliverables under the strategy to enable us to monitor progress and ensure we reach our objectives. The committee keeps a careful watch on market developments and makes plans for different scenarios.
We have committed to cooperate with the Dutch National Contact Point on a complaint filed during the quarter by three NGOs regarding our compliance with the OECD Guidelines for Multinational Enterprises in relation to the microfinance sector in Cambodia.
Also during the quarter, Dave Smit joined the Managing Board and Executive Committee as Director of Impact Investments, while one of our Supervisory Board members, Vice-Chair Gaëlle Bonnieux, resigned.
The coming year will be pivotal for the implementation of Oikocredit’s new capital-raising model, which allows any eligible organisations and individuals to invest directly in the cooperative via participations.
We will remain vigilant about macroeconomic risks and continue to carefully monitor and control our costs. Our high liquidity places us in a good position to respond to emerging challenges and opportunities.
We will increasingly engage with our partners about climate change effects, such as extreme and erratic weather events, and how we can work together to foster resilience at community level, including through regenerative agriculture.
With inequalities continuing to rise, our cooperative’s role of supporting partners and people in need remains crucial. Together with our four-year strategy and new inflow model, we will further progress other change projects, including further digitalisation of internal processes, to make our services to partners and investors as effective as possible.
More information is available at Oikocredit Facts & Figures Q4-2022.
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