Q4 2024 quarterly report: Positives and challenges

Implementing our 2022-2026 strategy

A key element of Oikocredit’s 2022-2026 strategic plan is investing to support lower-income communities in building resilience in the face of major risks and threats such as climate change impacts. In Q4 2024 our community-focused portfolio, including investments in partnerships and projects in education, water and sanitation, housing and community infrastructure, grew to EUR 84.4 million (from EUR 72 million in Q3).

Key strategic multi-year community-focused partnerships include those with Aqua for All and Water.org (water and sanitation) and with Opportunity International (affordable non-state schooling). By December 2024 our partnership with Opportunity International had supported 22 financial institutions since it launched in October 2021. Early estimates indicate that over 600,000 children will benefit from the investments and corresponding improvements in school facilities and access to school.

We have completed our fourth annual Client Self-Perception Survey, with 46 partners participating. The survey has expanded into French-speaking Africa and the renewable energy sector, inviting online responses in 10 languages and 4 dialects from more than 48,000 clients in 18 countries. The findings show that our partnerships help small entrepreneurs improve their livelihoods, although clients increasingly report extreme weather disrupting their incomes. Our investing in renewable electricity is proving effective in increasing access to energy among rural and previously underserved rural households.

The survey findings enable our partners and ourselves to better understand clients’ needs, opportunities and risks. Several partners have introduced new and tailored products and services as a result. You can read about the survey and access the full survey report here.

With our more cautious approach to taking on new partners, and more emphasis on supporting current partners, our number of investee partners decreased from 502 to 487 in the fourth quarter. This also contributed to higher partners’ average environmental, social and governance (ESG) scores measured by our scorecards (rising to 72.2%, well above target), and to increased impact, measured by the number of clients reached.

We have completed a mid-term review of our 2022-2026 strategy. This has confirmed the soundness of the strategy’s fundamentals and highlighted modifications that can help us respond to market circumstances unanticipated when we first defined the strategy (lacklustre economic growth and heightened tensions and uncertainty worldwide; increasing climate change impacts on partners, clients and communities; growing regulatory and reporting burdens; and rising interest rates, returns and risk levels).

Financial performance and portfolio development

Oikocredit’s development financing portfolio resumed controlled growth during Q4, with outstanding credit and equity rising from EUR 1,029.8 million to EUR 1,105.3 million. This was largely the result of growth in Africa and India and favourable foreign exchange rate changes.

The year-end net result was a EUR 8.1 million loss, down from EUR 1.4 million positive year-to-date at the end of Q3. This negative result, unforeseen earlier in the year, resulted largely from the exceptional political and economic instability in Bolivia, one of our main development financing country markets, where the cost of US dollars became prohibitive in the second half of the year. In Peru, three partners also faced difficulties. These developments resulted in the need for significant loan loss provisions. Moreover, two equity investments, in India and in Mexico, incurred increased impairments shortly before year-end.

Total operating income was EUR 85.1 million at the end of the quarter and the year, above budget. Oikocredit’s net interest margin increased, reflecting increasing credit and market risks, and resulting in record revenues. The ratio of operating costs to total assets rose slightly from 3.8% to 4.0%. Liquidity reduced to 14.8% but remained well above our contingency threshold.

Net asset value per participation decreased from EUR 213.15 in Q3 to EUR 211.74, largely due to the quarter’s decline in income after taxation.

Portfolio quality deteriorated. The PAR 90 portfolio at risk percentage (outstanding loans with payments more than 90 days overdue) rose from 7.5% to 8.3% (target threshold: 6%), with notable rises over the year in both our agriculture and financial inclusion lending. Increased portfolio monitoring, including more in-person partner visits, were put into effect.

Member and investor capital fell from EUR 975.4 million to EUR 967.0 million. Redemptions continued for several reasons: chiefly, the loss of members resulting from our ‘know your customer’ remediation; competition from higher bank and savings interest rates; and investor caution arising from current economic uncertainty.

Organisational developments

As previously announced, Gwen van Berne, Director of Finance & Risk, left Oikocredit at the end of 2024 to pursue a new career opportunity. Gwen’s responsibilities were distributed on an interim basis among Executive Committee members. Dave Smit, Director of Impact Investments, has also decided to leave Oikocredit, with his departure set for 1 April 2025. Hans Perk, currently Director of Specialised Finance & Community Building, will succeed Dave on an interim basis, with support from Ging Ledesma, who recently retired from her post of Director of Strategy & Sustainable Impact. Hans and Ging stepping up from within Oikocredit are a sign of organisational strength.

Both Gwen and Dave have made important contributions to the cooperative.

We have established our first regional partner service centre, in Latin America and the Caribbean, and this has enhanced our monitoring of partner performance. A soft launch of a similar centre in Africa will take place in Q1 2025.

Future outlook

In 2025 Oikocredit’s will celebrate 50 years of ground-breaking impact investing. At the same time, as our mid-term strategy review showed us, we need to adjust to address multidimensional challenges in a fast-changing world. While staying faithful to our mission, we will focus more on financial sustainability by lowering costs and risk, increasing productivity, investing in technology and systems to support our strategy, reaching out to new investor groups and younger investors, and becoming more deliberate in our portfolio development – including strengthening the gender, climate and environmental dimensions of our investing.

In early 2025 we launched our new website, introducing our new branding to the public. We will start to implement new capabilities to support our capital raising. A new digital investor pathway will enable us to streamline services for new, more digitally oriented investors. We will monitor portfolio quality more closely, based not only on the PAR 90 ratio but also applying a PAR 30 metric (loan payments more than 30 days overdue) and initiating earlier portfolio risk mitigation strategies.

And with the support associations we look forward to launching our first Global Learning for Transformation and Advocacy campaign with the theme ‘Invest in Climate Action’.

Mirjam ‘t Lam, Oikocredit’s Managing Director, comments: “With our mid-term strategy review completed, organisational improvements, a new visual identity and leadership structure strengthening underway, we are well placed to make more impact. As a cooperative, Oikocredit embodies a very powerful organisational form. If we all connect effectively, this celebration year can one that marks a great start for the next five decades.”

More information about Q4 2024 is available here.