What makes Oikocredit unique and different from banks, MFIs and charities

In today’s global financial landscape, not all institutions play by the same rules or offer the same services and products to the same people. While commercial banks continue to dominate in managing capital and credit, millions of people remain excluded from their reach. To fill this gap, a growing number of organisations are delivering inclusive, community-focused financial services. Among them are microfinance institutions (MFIs) and charitable groups.

With 50 years of experience, Oikocredit stands out as a pioneer in social investing. It works alongside banks, MFIs, charities and other community-focused organisations to amplify impact, while remaining distinct from each of them. Though it shares some of the same financial tools as banks, its goals, methods and impact are profoundly different.

A brief history of banking and microfinance

Modern banking traces its roots back to the merchants of Renaissance Italy, who developed systems for lending and exchanging money. By the 17th century, central banks like the Bank of England were established to manage national currencies and public debt. Today, banks operate under complex regulatory frameworks and serve businesses and individuals with a wide range of financial products. 

Microfinance, by contrast, emerged from community-based lending traditions. One early and inspiring example is found in 18th-century Ireland, where author Jonathan Swift—famous for Gulliver’s Travels—used his personal fortune to provide small, interest-free or low-interest loans to low-income artisans. Borrowers repaid weekly and required two guarantors, anticipating many features of modern microcredit.

What banks do… and what they don’t

Traditional banks are commercial entities designed to generate profit. They offer a wide range of financial products, including current and savings accounts, personal and business loans, mortgages and investment services. They play a central role in maintaining economic stability and liquidity. Banks are regulated by financial authorities, are often large and multinational, and operate with sophisticated infrastructure and risk management systems. 

However, banks typically serve a specific segment of the population, namely individuals and businesses who can provide credit histories, stable income and collateral. Their operations are underpinned by a risk-reward calculation. In many cases, low-income clients, small-scale farmers, informal entrepreneurs and rural households simply do not fit the model. 

As a result, large sections of the population, particularly in low-income countries, remain excluded from the formal banking system. According to the World Bank, around 1.4 billion adults globally still lack access to a bank account. For these individuals, the traditional banking sector is often physically inaccessible, financially unaffordable or administratively out of reach.

The rise of microfinance institutions (MFIs)

Microfinance institutions emerged to bridge this gap. Their purpose is to provide small-scale financial services, most notably microloans, to people who are excluded from the formal financial system. MFIs often lend to informal workers, smallholder farmers and microentrepreneurs, especially women. In many cases, these clients lack fixed income or property, but still need credit to start or grow a business or invest in their children’s education. 

What distinguishes MFIs from banks is not just the size of their loans, but the nature of their relationships with clients. MFIs tend to work closely within communities, offer support and training, and often use innovative lending models like group lending, where peer accountability replaces traditional collateral. 

What MFIs generally share is a social mission: to promote financial inclusion and help people improve their living conditions through access to capital. Oikocredit has a long-standing relationship with MFIs. As of 2024, over 70% of Oikocredit’s development financing is dedicated to financial inclusion, primarily through MFIs, but also by supporting SMEs. Our 2024 Impact Report explores this in more detail. 

Beyond aid: how impact investing differs from donations and NGO work

Unlike traditional fundraising or charitable aid, impact investing builds long-term, self-sustaining ecosystems. It does not see communities as passive recipients of help, but as active agents of growth, innovation and resilience. It combines financial tools with a clear social purpose and insists that capital must flow with responsibility and respect.

Philanthropy and investment each have an important role to play. In many cases, they can even work together, through mechanisms like blended finance, to unlock solutions that neither could achieve alone. But the goal of impact investing is not to replace donations. It is to grow the space where capital listens, where finance works with people, not on them.

Oikocredit seeks to empower communities through sustainable finance, working through trusted local partners and measuring success through social outcomes. 

Each of these actors plays a role in the broader financial and development ecosystem. But for those seeking to address inequality, reduce poverty and promote inclusive development, institutions like Oikocredit provide an alternative, one that puts people before profit and long-term impact before short-term gains.

Where Oikocredit fits in

Oikocredit is neither a bank, a microfinance institution, nor a charity.  It is a social impact investor, a cooperative with a unique approach that combines elements of finance, development and partnership. 

Founded 50 years ago, Oikocredit channels investments from individuals and institutions into social enterprises, cooperatives, banks, SMEs and MFIs that serve communities with limited access to resources. This means deepening our focus on transformation: not only providing finance, but also working closely with our partners to build long-term resilience. 

Alongside our investments in financial inclusion, sustainable agriculture, renewable energy and, increasingly, climate-smart solutions, we support partner organisations with tailored funding—through debt and equity—as well as practical capacity building. These three instruments form the core of our approach, with the ultimate goal of maximising social impact for low-income people and communities. 

One of the key differences between Oikocredit and commercial banks is its motivation. While banks are driven by shareholder returns, Oikocredit is guided by values such as solidarity, social justice and a commitment to responsible finance. All its investments are made with the intent to improve lives and reduce poverty, not just to generate financial return. 

Crucially, Oikocredit does not lend directly to individuals. Instead, it works through carefully selected partners, including MFIs, that are rooted in their local communities and aligned with Oikocredit’s social mission. These partner organisations are supported not just financially, but also through training, research and tools for impact measurement.

Why SMEs are central to Oikocredit’s impact strategy

Small and medium enterprises (SMEs) play a crucial role in Oikocredit’s approach to creating meaningful impact. For us, supporting SMEs is essential because they offer a clear and effective way to contribute to positive change. Their contribution to society is enormous: SMEs generate jobs, support local economies and provide essential services in areas such as education, housing and healthcare. Representing 90 per cent of businesses worldwide, up to 70 per cent of employment and 50 per cent of GDP worldwide, SMEs are key drivers of inclusive growth. Yet many still lack access to the finance they need to thrive. 

Oikocredit works with financial institutions that specialise in supporting SMEs, helping to close the funding gap and enabling these enterprises to grow, become more resilient and support their communities. This approach aligns closely with several Sustainable Development Goals, including those related to employment, gender equality and basic services. You can read more about this in this article.

Examples of local partnerships with MFIs, banks and NGOs driving social impact

Oikocredit maximises its reach and social impact by working through carefully selected local partners. These include microfinance institutions (MFIs), financial institutions that fund SMEs, NGOs and banks that are deeply embedded in their communities. Rather than offering direct loans to individuals, Oikocredit finances and supports these partners to deliver financial inclusion and development services where they are needed most. 

Here are three examples of such partnerships:

Fundación Espoir, Ecuador

Oikocredit has been partnering with Fundación Espoir since 2006. This Ecuadorian NGO provides financial services and basic healthcare to low-income women, many of whom run small businesses. With over 90% of its clients being women, Espoir uses group and individual loans to support microentrepreneurship while also offering health check-ups and education. Its integrated approach reflects Oikocredit’s belief that financial inclusion and wellbeing go hand in hand. 

Visión Banco, Paraguay

Oikocredit has been working with Visión Banco in Paraguay since 2005. It reaches 900,000 individuals and businesses across the country. Over the past 10 years, it has grown from only offering savings accounts and micro loans to providing specialised digital solutions to formalised SMEs. Around half of Visión Banco’s financing portfolio is allocated to small and medium enterprises. 

Banco Caribe, Dominican Republic

Since 2023, Oikocredit has been working with Banco Caribe to improve access to finance for small and medium-sized enterprises (SMEs). This partnership provides Banco Caribe with long-term funding to support local businesses and promote sustainable development. By extending credit to underserved entrepreneurs, especially in sectors that generate employment, the collaboration contributes to building a more inclusive economy.

These partnerships show how Oikocredit goes beyond traditional finance. By equipping MFIs, banks and NGOs with the capital, capacity building and support they need, we help build local resilience and foster sustainable, measurable social impact in people’s lives.

Oikocredit’s mission and vision

Oikocredit’s success over the past five decades is a testament to its commitment to social impact. By prioritising community development over financial returns, the cooperative has been able to support countless individuals and businesses, proving that finance can be a powerful tool for positive change.  

Through its focus on social impact, rigorous assessment processes and commitment to ethical investing, Oikocredit continues to demonstrate that financial success and social responsibility can go hand in hand. As it moves forward, the cooperative remains dedicated to investing in a better future, where financial capital is used not just to generate wealth but to uplift communities and create lasting social change.

Do you want to make a difference too?

If you are an individual or institution looking to make a difference by investing in Oikocredit to support people with low incomes improve their living situation, you can find more information about Oikocredit here, sign up for our newsletter here, or if you’re ready, make an investment here. 

Invest from just €200, with no upper limit and no hidden fees. Oikocredit focuses on creating social impact while preserving your capital and offering modest financial returns, aiming to pay up to 2% dividend annually. You can find full dividend details in our annual report. 

By investing in Oikocredit, you can help create opportunities for people with low incomes in over 50 countries. That’s investing in people and generating real social impact. Because money has the power to transform the world.  

Have questions or want to get in touch? Feel free to email us at [email protected] or call us on +31 33 422 40 40.