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Fostering sustainable projects and businesses

by Sabine Balk

In brief

BROXX rents out off-grid solar systems to poor Kenyan households. Oikocredit is a shareholder.

BROXX rents out off-grid solar systems to poor Kenyan households. Oikocredit is a shareholder.

Social justice and environmental protection are en vogue in Europe. As a finance institution, Oikocredit is benefitting from this trend. It is a pioneering international cooperative that has been funding sustainable projects and businesses in developing countries and emerging markets since 1975.

The mission of Oikocredit is to drive development with socially responsible investments. In particular, the cooperative helps to provide microcredits to persons and small businesses with small incomes and the intention to invest in farms or expand operations. Germans and people form other European countries who want to ensure that their savings serve worthy causes can join Oikocredit.

In 2016, Oikocredit invested more than € 1 billion in sustainable businesses. This was the record so far and 16 % more than in 2015, reports Hann Verheijen, credit director with Oikocredit International. He expects this year’s figure to be another 10 % higher. The money will be put to good use, Verheijen promises.

Last year, Oikocredit’s main focus was what is called “financial inclusion”. More than € 814 million were invested in this field. Oikocredit is supporting microfinance institutions, banks as well as small and mid-sized enterprises by refinancing loans or becoming a temporary shareholder, thus boosting a partner’s growth potential. Once a company is firmly established, Oikocredit sells its shares.

Oikocredit invested almost € 160 million in agricultural projects last year, and 40 million in renewable energy. Verheijen admits that the clean-energy portfolio is relatively small, but he expects it to increase especially fast: “We are in favour of social justice and environmental protection – and to date, some 1.2 billion people around the world still do not have access to electric power. Most of them belong to rural low-income families.” By 2020, renewables are set to account for up to 20 % of Oikocredit’s investement portfolio, he says. Verheijen considers the provision of affordable, clean energy to be a core issue of development.

Oikocredit is interested in large-scale schemes as well as small off-grid solutions. One of the large projects Oikocredit supports is a photovoltaic power station in Honduras. For this purpose, Oikocredit has contributed $ 11 million to a $ 120 million funding scheme coordinated by International Finance Corporation (IFC) in support of Compañía Hondureña de Energía Solar. The IFC is a World Bank subsidiary. 

Kenya is one of many countries where Oikocredit is supporting small-scale renewable applications. BROXX is a company that rents out off-grid solar systems to customers who can pay their monthly fees by mobile phone. After three years, they own the appliances. Oikocredit has bought BROXX shares, allowing it to expand operations faster. According to Oikocredit, some 7,000 Kenyan customers have benefitted from its shareholding so far.

According to Verheijen, the need is greatest in sub-Saharan Africa, so Oikocredit will focus on this region in the future. The cooperative’s African portfolio has doubled in the past three years, but it still only amounted to about € 190 million last year. Verheijen says that microcredit has a longer tradition in Latin America, for example, so African investments are more challenging. On the other hand, he sees greater opportunities for making a difference with small sums in Africa than in other world regions.  

In 2016, Oikocredit provided loans, training, information and equity-holdings to 801 partner companies in 70 countries. Verheijen stresses that these operations were possible thanks to the people who invested their savings in his cooperative. Last year, there were 54,000 of them, eight percent more than in 2015. Half of them were from Germany. The idea of Oikocredit was born at a 1968 meeting of the World Council of Churches. Seven years later, Oikocredit was established in the Netherlands and then expanded internationally.




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