Oikocredit and FMO fund celebrates one year

Oikocredit and FMO fund celebrates one year

Guillermo Salcedo

Guillermo Salcedo

24 July | 2013

One year ago, Oikocredit, along with Dutch development bank FMO, established the LIC Loan Fund. The fund was established to reach out and create more business opportunities for micro and small entrepreneurs in some of the poorest countries worldwide. Both organizations put € 5 million towards the fund, taking total capital to € 10 million. We recently spoke with Guillermo Salcedo, deputy director loans and investments at Oikocredit International, about how the fund is faring and where he sees it heading in the future.

Firstly, why did Oikocredit choose FMO to establish the fund?

“FMO is a very well-known, leading international development bank, also based in the Netherlands, which we knew well. FMO’s vast experience in emerging markets, commitment to sustainable economic development and expertise in a variety of sectors including finance, renewable energy and agribusiness made it an ideal partner for Oikocredit, from which we can learn.  We identified potential synergies between our organizations. Both focused on long–term development with a special interest in growing our outreach and impact in Africa.”

How important was the financing from FMO for the fund?

“It was very important. From 2005 onwards, the demand for microfinance investments grew significantly, to the extent that Oikocredit’s portfolio growth began to outgrow the inflow of funds from investors. This led to the realisation that if we were to be prepared to respond to high demand in future, we needed to develop and gain experience with other mechanisms to leverage our funding capacity. A good option for this was to enter into partnerships with other like-minded development finance institutions willing to co-invest in our partners.”

Since it began one year ago, what has the fund achieved?

“At 30 June 2013, the fund had € 5.3 million capital outstanding, so in one year we invested half of the committed € 10 million. The LIC Loan Fund now has 11 partners, with nine in Africa, one in Cambodia and one in Tajikistan. We expect to see even greater diversification in the course of the next 12 months as eligible small to medium enterprise partners are funded and more countries covered.”

Where do you see the fund heading in the future?

“Through the cooperation with FMO, Oikocredit sees an opportunity to gain experience and exposure as a reliable fund manager and partner of a large reputable development financier such as FMO. The experience may open doors for much greater collaboration in the future, not only with FMO but also other development finance institutions as potential investors.

The investment period of the fund was envisioned for five years, initially with just the two organizations as participants. We are confident the funds will be fully invested within the first two years and expect to see increasing opportunities to grow the fund.”

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