Q4 2023 quarterly report: Portfolio growth and other key achievements

Implementing our 2022-2026 strategy 

In continuing to implement Oikocredit’s 2022-2026 strategy, we were pleased to see steady growth in our community-focused development financing portfolio in the fourth quarter of 2023. This portfolio of resilience-building projects focused on water and sanitation, education, housing and community infrastructure rose from € 43.0 million in Q3 to € 57.3 million. We have been especially pleased with the development of our partnerships with Opportunity International (education) and Aqua for All (water and sanitation). Our total development financing portfolio grew to €1,084.7million.  

We also seek to support communities by providing capacity building for partner and prospective partner organisations, for example through work on climate adaptation, agricultural price risk management training,and financial literacy programmes developed for end-clients. By the end of the quarter, our capacity building had benefited 85 organisations during the year, more than we had projected.  

Q4 saw completion of our third annual digital Client Self-Perception Survey in which we collaborate with financial inclusion partners to gather clients’ perceptions of recent changes in their lives. This year’s survey involved 34 partners and more than 40,000 clients – significantly more than the previous year. Partners increasingly use survey findings to serve their clients better with products and services.  

In addition, the strategy involves facilitating connections. In Q4 we held our first international study tour since the Covid-19 pandemic. This involved 15 Oikocredit volunteers and support association staff spending a week in India to learn more about our work through meetings with colleagues at our Indian subsidiary, Maanaveeya, and several partners. 

Our third Oikocredit Live webinar for members, investors and others took place. This brought together three microfinance experts to talk about the Evolution and Impact of Microfinance and our commitment to fostering empowerment and sustainability. 

Total member and investor capital reduced to € 1,000.8 million, as anticipated. There was a combination of reasons for this, including the introduction of participations as the new investment product and the strengthening of our ‘know your customer’ and anti-money-laundering measures.Our Belgian support association approved the transition to our new capital-raising model, to take effect in Belgium from 1 January 2024.  

Organisationally, during the quarter we set up a new unit for Global Learning for Transformation & Advocacy. With the support associations, the unit will coordinate Oikocredit’s joint long-term initiative to raise awareness and encourage action in higher-income countries relating to our mission and vision of a better and fairer world. The Executive Committee’s approval of a new diversity, equity and inclusion policy was another notable development. We took account of input from our staff, issue specialists and other sources in developing the policy. 

Portfolio development and financial performance 

Oikocredit’s net income in the fourth quarter was a negative €3.0 million, down from €4.6 million positive in Q3, bringing the year’s total consolidated result to € 1.6 million positive. We experienced solid portfolio growth in Q4, with outstanding credit and equity rising by € 47.5 million from € 1,037.2 million to € 1,084.7 million.Partner numbers increased from 526 to 540. 

Several factors caused the quarter’s loss. One was the increased loan loss provisions we made on the credit portfolio due to increasing macroeconomic and geopolitical instability worldwide. Continuing war in Ukraine, the outbreak of war in Gaza, and unrest in several regions where we operate, such as West Africa (e.g.Niger) and Latin America (e.g. Ecuador and Peru), compounded already challenging circumstances for lower-income countries’ economies that required us to increase provisioning for partners operating in countries facing difficulties.  

Another factor influencing our financial performance was the repatriation of funds from our XOF (West African CFA franc) bank account in Côte d'Ivoire into our eurobank account in the Netherlands. After a restrictive delay of three years, repatriation became possible during the quarter at the cost of a significant one-off bank charge.  

Accounting changes Oikocredit implemented in Q4 were a further reason for the loss. We adjusted our accounting method relating to our restricted exchange fluctuation reserve and loan loss provisioning on our development financing portfolio. This enabled us to increase transparency and consistency in our annual financial reporting and comply with Dutch GAAP. Our forth coming Annual Report on 2023 will describe the changes in more detail.  

Effective development financing portfolio management, including enhanced partner monitoring, combined with portfolio growth, enabled us to reduce the portfolio-at-risk ratio. PAR 90 (the percentage of outstanding loans with payments more than 90 days overdue) decreased to 5.8% from 6.8% in Q3.  

Operating income in Q4 rose to € 59.4million from € 52.4 million in Q3, driven mainly by the increase in interest income.Member and investor capital declined during the quarter, as redemptions continued, to € 1,000.8 million from € 1,012.0 million. Net asset value (NAV) per participation increased to € 214.3 from € 211.87 because of changes in the accounting methodology. Operational costs remained under control, rising marginally to 3.9% from 3.5%. Net liquidity (cash) decreased from 16.5%to 11.3% of our assets, remaining sufficient for portfolio growth and redemptions. In addition, we renewed our € 70 million bank credit line to maintain adequate buffers. 

We began to prepare for more active capital raising, due to commence in 2024, and continued to plan our first year of reporting in 2026 (on financial year 2025) under the European Union’s Corporate Sustainability Reporting Directive (CSRD). We developed a sustainability statement to provide a framework for future CSRD reporting. The statement, which we will include in full in our Annual Report on 2023, formalises our holistic commitment to financial, social and environmental performance in key areas of our work. 

Future outlook 

Oikocredit expects the external environment to remain unstable, resulting in limited portfolio growth in the coming quarter. As interest rates will remain at current levels, our income will be sufficient to cover our operating costs, provisions and impairments, leading to a positive net result. We will increase marketing efforts to raise new capital in our inflow markets. We are keen to prove the effectiveness and value of the past year’s major overhaul of our capital-raising model. Based on the anticipated financial performance and capital-raising activities, we anticipate that NAV will remain solidat around the € 214 level. 

We are ambitious in implementing our strategy to advance responsible investing and improve individual and community resilience, despite the many uncertainties that lie ahead. Our partners and end-clients in the lower-income communities of Africa, Asia, and Latin America and the Caribbean where we focus our efforts need our social impact investing today more than ever.  

More information about Q4 2023 is available at https://www.oikocredit.coop/en/about-us/facts-figures/facts-figures.