Credit, where credit is due

The Rev. Ueli Burkhalter recently visited the backyard of Yamileth “Millett” Solano in Costa Rica-he wanted to see for himself how her small business, made possible through a $350 Oikocredit loan, was faring.

He and Solano couldn’t have been more pleased with the result, said Burkhalter, a priest from the Reformed Church of Switzerland and a volunteer of Oikocredit, a worldwide co-operative based in the Netherlands that has partnerships with microfinance institutions that offer financial services to the poor.

With the loan that she obtained from Oikocredit project partner, Fundacion Mujer, Solano bought 90 chickens. Now she sells eggs laid by the hens. She calculated that by the end of the year, her business will have a net profit of $200. “She said, ‘That’s great, because it helps the family,’ ” said Burkhalter. When the chickens can no longer lay eggs, they can be slaughtered, Solano told Burkhalter. Her family will have food, plus they can sell some of the meat for extra money.

“She [Solano] had hundreds of ideas about what she wants to do next,” said Burkhalter, who spoke at a “Lunch and Learn” session organized Sept. 30 by the Primate’s World Relief and Development Fund (PWRDF), in Toronto. PWRDF, the relief and development arm of the Anglican Church of Canada, has been an investor with Oikocredit since 1997. PWRDF finance manager, Jill Martin, served as president of the Oikocredit board of directors in 2006.

 

The seed for Oikocredit was planted at the 1968 General Assembly of the World Council of Churches (WCC), when members called for just investment. WCC is a fellowship of more than 340 Protestant, Anglican, Orthodox and other churches in 100 countries. Oikocredit was launched in 1975 as a vehicle for churches to invest in loaning money to the poor, who are generally unable to obtain credit from banks and other financial institutions. Today, it has more than $1 billion in accumulated loans and investment capital, 48,000 investors and 859 project partners worldwide, said Burkhalter. About 28 million people profit directly and indirectly from the loans, he added.

 

Burkhalter, who recently spent his sabbatical visiting Oikocredit partners in Central America, said that meeting loan recipients has convinced him all the more about the life-changing value of groups like Oikocredit.

 

In Costa Rica, where Oikocredit invests $21.8 million in capital spread out to 28 project partners, Burkhalter met with various groups, including a group of women who obtained credit as a collective.

 

The group has given itself a promising name-“With a wish to grow”-and Burkhalter said it was “fascinating” to hear them speak about how some of their dreams had come true because of the loan. A recipient of a $500 loan spoke about her love for making desserts and how that has translated into a baked goods business; another shared the story of a thriving milk business.

 

Beyond the financial gains, the women spoke about how having their own business has spurred personal growth. Before becoming entrepreneurs, they stayed home and felt isolated. “Now, there’s solidarity and our self-esteem has grown,” they told Burkhalter. There’s a particular sense of pride that the money comes from them, Burkhalter added, and not their husbands.

 

Ninety-eight per cent of Fundacion Mujer’s clients are women, and the loans are precisely geared toward supporting and empowering them, said Burkhalter. Worldwide, 85 per cent of Oikocredit’s loans go to women, mostly in rural areas.

 

The world of microfinancing has grown by leaps and bounds, but Burkhalter pointed to Oikocredit’s “social performance management tools” as key to its enduring value. Project partners are evaluated through a set of criteria that includes environmental impact, social impacts, governance (it prefers partners with a co-operative structure), capacity-building or technical assistance, and progress out of poverty index. Capacity-building means being able to help groups in areas such as financial literacy or running an enterprise; progress out of poverty index measures whether significant changes have resulted as a result of the capital infusion.

 

Oikocredit was able to weather the controversies that have beset some micro-lending groups, because it has adopted “client protection principles,” said Burkhalter. The micro-credit industry has been under considerable scrutiny following the growing number of suicides by farmers in India and Bangladesh who were unable to pay their loans.

 

Burkhalter said Oikocredit adapts its products to meet the client’s need-for instance, if a coffee planter were to get a loan, interest rates wouldn’t kick in until the first harvest, which typically happens after three years.

 

Oikocredit also practises transparency and respect for clients, said Burkhalter. “I’m a university graduate and I’ve seen application forms (for micro-credit loans) which even I couldn’t understand. We try to make it as simple and precise as possible,” he said.

 

“…There are financial institutions that have bodyguards to get their interest rates. We don’t do that,” he said, adding that clients also have a mechanism for filing complaints.

 

“The [Oikocredit] fund has an impeccable reputation,” said Nandy Heule, director for investor relations at Oikocredit Canada Central. Oikocredit is volunteer-driven, but its funds are managed by fund management professionals, who adhere to the institution’s socially responsible investment ethos. She noted that Oikocredit bonds still posted earnings of 1.75 per cent, even as other funds tanked at the height of the global economic meltdown in 2008.

 

Some of Oikocredit’s 48,000 investors are based in Canada; one can invest starting at $250 by contacting Oikocredit representatives through its website.

 

Right now, Oikocredit bonds are not available in portfolios offered by financial advisers in Canada because of regulatory reasons, said Eugene Ellmen, national director for Oikocredit Canada. But if all goes well with ongoing negotiations between Oikocredit and financial institutions, he said, things may change by 2014. “One project I’m working on is to interest a conventional financial product-a mutual fund-[to have] Oikocredit shares as the underlying investment…,” which people can use as RSSP or Tax-Free Savings account money to invest, said Ellmen.