The time for Africa
In recent years, Oikocredit has focussed on Africa, agriculture and inclusive finance as its strategic investment areas. Oikocredit currently has € 72.5 million invested in Africa across a range of sectors, with the plan for further expansion. So, why Africa and why now? We recently spoke with Oikocredit regional director for East Africa, Judy Ngarachu, and Oikocredit deputy regional manager for West Africa, Yves Komaclo, about Oikocredit’s investments in Africa.
Africa has grown significantly in recent years. Why is it important for Oikocredit to continue investing in Africa?
Judy: “This is the time for Africa. Growth of African economies in 2013 and beyond is estimated at 5.8%, exceeding Latin American and East Asian countries. This is on the back of a better macroeconomic environment and home-grown policies that ensure growth trickles down to the poor which increases political stability.
This stability means that businesses continue to grow and thrive. With a 20-year physical presence, activities in 18 sub-Saharan African countries and over 10 offices, Oikocredit is well positioned to focus on Africa in the coming years.”
How will Oikocredit continue to grow in Africa?
Yves: “We will leverage Oikocredit’s strengths by investing in agriculture which has longer-lasting development effects. Our aim is to have a coherent and continent-wide approach. We’ve provided training for all Oikocredit staff across Africa to improve our understanding of our markets, our partners, their clients and the risks involved.
We’re also identifying the capacity building needs of our partners together with their financial needs for further value chain development. Our partners are typically involved in segments of value chains, with the produce delivered to regional and international markets. ”
Judy: “We’ve selected agri-business sub-sectors to focus on in the coming three years, such as dairy, coffee, rice, cashew and cocoa for both local consumption and export. Overall, agriculture fits very well with Oikocredit’s mission of empowering lower income earners, because the rural poor are almost exclusively active in agriculture.
At the same time, microfinance will remain our core sector, as we’ve acquired a vast amount of experience, support a significant number of end clients and are seen as a leader in this sector in Africa, both as an investor and also in social performance management. ”
As a social investor, what are the key drivers for Oikocredit’s investment decisions in Africa?
Judy: “We look at the financial viability of the potential partner and also the social components. But over and above that, we look at the people behind the business, as they make the decisions about how to use the money. They’re also responsible for ensuring end beneficiaries are reached and the loans are repaid.
In Africa, business is about relationships, it’s about people. So we look at the character of the people. We look to see if the people behind the business are socially motivated. Do they have the heart of the poor? So we spend a lot of time building relationships. ”
Yves: “We think about who the end beneficiaries are, and how our funding will benefit them and improve their livelihoods. We also look at the relationships between the organization, their providers and their clients. It’s about ’following the funds‘, which basically means looking at where the money trickles down. That is how we know if we truly fulfil our mission.”