Success Story: Oikocredit

Introduction – Calvert Impact Capital's history with Oikocredit

Calvert Impact Capital made our first loan to Oikocredit, a social impact investor and worldwide cooperative, in 1999. Oikocredit provides loans, equity investments and capacity building to organizations active in financial inclusion, agriculture, and renewable energy across countries in Africa, Asia, and Latin America. The $580,000 loan in 1999 was the first of many loans we made to Oikocredit and was among the first dozen international loans we had made since our founding in 1995. After over 20 years of lending, Oikocredit repaid our latest $6 million loan at the end of 2020.

Oikocredit was established in 1975 as an ethical investment channel, promoting social justice by providing credit to support organizations aiming to improve the quality of life of low-income people. While often considered a microfinance investment vehicle (MIV), Oikocredit is similar to Calvert Impact Capital as it is a social impact investor playing a key role in connecting private capital with MFIs around the world and with a focus on raising capital from retail investors. In addition to providing financial services, Oikocredit offers its partners capacity building programs to help them develop new knowledge, skills, technology, and access to markets with a focus on:

1. Promoting ethical, responsible access to finance in a digitizing world

2. Helping financial institutions support Small and Medium Enterprises (SMEs) to create sustainable jobs

3. Supporting sustainable agriculture for smallholder farmers

4. Improving household access to clean energy

5. Embedding and advancing social performance management

Based in the Netherlands, Oikocredit is financed privately through thousands of individuals, support organizations, and impact investors such as Calvert Impact Capital. Oikocredit is owned by its members, which include faith-based organizations, affiliates known as support associations that raise funds from individuals, and Oikocredit partners. Members and investors privately finance Oikocredit. Oikocredit is able to take the appropriate risk required to lend to smaller microfinance institutions than other MIVs. While Oikocredit aims to generate fair financial returns, its priority is social impact. Historically the return has been 2% to investors and was lowered to 1% and then to 0% more recently in light of the economic effects of the COVID-19 pandemic.

From a humble beginning with its first loan disbursement of $100,000 in Ecuador and $200,000 in India in 1978, Oikocredit has progressively grown to manage a portfolio of approximately $1 billion supporting 544 partners in 62 countries at the end of March 2021 – all while maintaining its mission and deep impact around the world.

How did our loan have an impact with Oikocredit in the US?

Calvert Impact Capital began working with Oikocredit in the US in the late 90's, when the US support office had only a single employee who spoke at churches about the value of impact investing and urged those in the pews to invest for good. Our Community Investment Note®, which launched in 1995 and gained brokerage account access in 2005, served as the only way at the time for individual investors to support Oikocredit's diverse portfolio. Interest in Oikocredit grew quickly and, in 2004, the Oikocredit US affiliate launched its own investment note program in the US with Calvert Impact Capital's administrative support.

Throughout the decades, our loan provided two benefits to Oikocredit's operations:

1. Calvert Impact Capital staff supported Oikocredit's launch of its own note product in the US, in addition to providing capital through our Community Investment Note®.

2. Our capital is lent in US dollars, while the majority of Oikocredit's capital is raised in Euros. Thus, Oikocredit did not need to hedge our capital when on-lending to its partners in USD, helping to mitigate currency risk.

While our loan was only a small portion of Oikocredit's overall capital base – €1.1 billion in member capital at the end of March 2021 – it gradually increased over 20 years, growing as both our and Oikocredit's portfolios grew and scaled. Our lending relationship demonstrates the value of providing reliable growth capital to financial intermediaries operating within global communities; it also continues to validate the efficacy of our portfolio strategy, which is to help our borrowers build, grow, and sustain their operations and impact. We have been proud to support Oikocredit's operations in the US and Oikocredit in its overall mission and impact over these past 20 years.

How did Oikocredit impact the communities it serves and the MFI market overall?

Oikocredit creates deep impact by financing 544 partners at an average outstanding balance of €1.6 million per partner at the end of March 2021. Half of its capital is invested in Latin American and the Caribbean, with the remainder spread across Africa and Asia. It also has regional and in-country offices all throughout the world, allowing it to monitor impact more closely than some MIVs and mitigating against impact risk.

Social performance management is a priority for Oikocredit; it monitors certain social and environmental performance indicators to ensure its partners reach its target groups and provide services that work towards a positive change in people's lives. In 2019, Oikocredit's partners served 38.2 million people, 86% of which were women and 63% lived in rural areas that are often not served by typical financial services. In the same year, its partners reached 557,000 farmers, as well as provided 52,000 households with access to clean energy, helping to avoid 149,000 metric tons of CO2 – equivalent to taking 32,405 cars off the road for one year.

Oikocredit's commitment to prioritizing social impact while safeguarding the environment and generating fair returns for investors has been a critical reason for our lending relationship these past two decades. Even though we no longer lend to Oikocredit at this time, we continue to support the cooperative through our relationship with the Oikocredit US team and look forward to exploring future opportunities to support Oikocredit's impact in communities all around the world.