Why Oikocredit focuses on the ‘social dividend’ more than the financial dividend

For the past 50 years, Oikocredit has been dedicated to driving social impact through ethical investments, proving that financial resources can be a force for good. Unlike conventional financial institutions that prioritise maximising returns for shareholders, Oikocredit focuses on creating lasting social impact by supporting projects that empower communities, enhance financial inclusion and contribute to sustainable development. The cooperative’s approach ensures that its investments generate meaningful change, particularly for low-income populations in Africa, Asia and Latin America.

A commitment rooted in purpose

Oikocredit was founded on the principle that financial capital should serve communities rather than focus purely on financial gain. Since its early days, the cooperative has been committed to investing in underserved populations, with a strong focus on financial inclusion, agriculture and, more recently, renewable energy. The organisation has always recognised that the true value of an investment is not just in its financial returns but in its ability to improve lives.

Unlike traditional investment funds, where maximising profit is the main objective, Oikocredit operates with a different mindset. The cooperative’s investors do not seek maximum financial returns but rather measurable social outcomes. The willingness of its investors to accept lower financial dividends enables Oikocredit to reinvest more capital into impactful projects with a clear community-focused approach that drives long-term sustainable change.

Balancing social and financial returns

Oikocredit’s investment strategy is unique in that it seeks to balance financial sustainability with social impact. The organisation not only ensures responsible financial management, but it also prioritises investments that create tangible benefits for communities.   

For instance, agricultural financing presents significant challenges due to fluctuating market conditions, climate risks and financial instability in many regions. However, agriculture is one of the most socially impactful sectors because it directly supports smallholder farmers, enhances food security and fosters economic development in rural areas.

Agriculture is the world’s largest employer and accounts for up to 25% of gross domestic product (GDP) in some developing countries. Three-quarters of the world’s poorest people live in rural areas, and for two-thirds of them farming is the main source of food, employment and income. Research shows that growth in the agriculture sector is two to four times more effective in raising incomes among the poorest 40% of people compared to growth in non-agricultural sectors.    

Despite the financial risks, Oikocredit continues to invest in agriculture, demonstrating its commitment to prioritising social impact over immediate financial gains. The cooperative offsets the financial risks associated with these investments by maintaining a diverse portfolio that includes more financially stable sectors.

Measuring social impact

To ensure that its investments align with its mission, Oikocredit employs a rigorous social impact assessment process. A dedicated social impact research team evaluates the effectiveness of its projects, not just in terms of financial performance but also through measurable social indicators.  

The organisation gathers and analyses data across various metrics, including the number of people reached, the percentage of women benefiting from its projects and the specific outcomes achieved. Oikocredit’s ESG scorecard goes beyond financial performance, assessing partners on environmental, social and governance factors to ensure lasting community impact. Learn more about this process in this article.

Oikocredit’s 2024 Impact Report highlights that 87% of the people reached through its financial inclusion initiatives are women. This demonstrates a clear commitment to gender equality and women’s empowerment by ensuring that financial resources reach those who need them the most. Additionally, Oikocredit’s renewable energy portfolio offsets 422,564 tonnes of CO2 emissions annually, further underscoring its commitment to environmental sustainability.

Why social dividends matter more than financial dividends

While many investors seek high financial returns, Oikocredit’s investors recognise that the cooperative’s true mission is to drive positive change. Historically, Oikocredit has offered modest financial dividends, with returns never exceeding 2% and, in some cases, opting not to distribute dividends at all.

Detailed dividend figures are available in Oikocredit’s Annual Report. This decision is strategic—it allows the cooperative to reinvest more capital into impactful projects rather than prioritising payouts to investors.   

In 2020, Oikocredit decided to set its dividend at 0% due to the economic uncertainty caused by the Covid-19 pandemic. Instead of distributing profits to its investors, the organisation added EUR 11 million to its general reserves, ensuring it could continue to support partners and protect the capital of its members. This flexibility allowed Oikocredit to respond to the urgent needs of its partners, particularly those hardest hit by the crisis.

The cooperative’s ability to prioritise social dividends over financial ones has been crucial to its success. Unlike profit-driven institutions that focus on short-term gains, Oikocredit takes a long-term approach, ensuring that its investments generate sustainable benefits for communities over time.

The role of investors in Oikocredit’s success 

Oikocredit’s model relies on a community of dedicated investors who share its values. These investors are not looking for maximum financial returns; instead, they seek to make a meaningful impact through their investments. This commitment allows Oikocredit to maintain its unique approach, investing in projects that prioritise social wellbeing while still maintaining financial stability.   

Unlike traditional investors, Oikocredit’s investors understand that their capital is being used to drive positive change. This enables the cooperative to take on projects that might not be considered financially viable by conventional standards but that offer immense social benefits. Whether it’s financing small businesses, supporting education initiatives or investing in renewable energy, Oikocredit ensures that every euro invested contributes to a greater purpose.

Investing in local economies   

One of the key ways Oikocredit ensures its investments create lasting impact is by offering partners the option to receive support in their local currency. The cooperative offers financing in local currencies to mitigate exchange rate risks, enabling partners to focus on growing their businesses and serving their communities without the burden of currency fluctuations. By offering loans in local currencies instead of euros, Oikocredit absorbs the currency risk rather than passing it on to its partners. 

This approach protects small businesses and social enterprises from financial instability, enabling them to thrive in their local markets. It’s a strategy that emphasises long-term impact over short-term financial returns, further reinforcing Oikocredit’s commitment to social dividends. In some cases, like the current situation in Bolivia, the risks can be high. 

A future built on social impact   

As Oikocredit looks to the future, its commitment to social impact remains unwavering, especially this year as we celebrate 50 years of creating sustainable social change. The cooperative is continuously evolving to address emerging global challenges while staying true to its mission.  

Looking ahead, Oikocredit will continue to expand its impact by deepening its focus on agriculture, renewable energy and financial inclusion, all while maintaining a strong, community-centred approach. By prioritising social dividends over financial ones, the cooperative ensures that its investments drive lasting change for millions of people worldwide.

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 or sign up for our newsletter. 

By investing in Oikocredit, you can help create opportunities for people with low incomes in over 30 countries. That’s investing in people and generating real social impact. Because money has the power to transform the world.