Oikocredit

A. The main facts about the activities of the company.

Oikocredit is an international co-operative and one of the world’s leading social impact investors. 2.7 billion people lack access to basic financial services. Without credit or savings many people cannot get financial and other support to start businesses or improve their standards of living. Oikocredit particularly help people in remote, rural areas and women to create income-generating businesses.
One way we do this is by providing loans, equity and other investments to local social and microfinance partners. In turn, they provide people on low incomes with loans as small as $200, which are affordably paid back over a number of years. Once people finish repaying their loans, the microfinance partner pays back Oikocredit.
Oikocredit finances renewable energy ventures and companies who contribute positively to the agriculture value chain. This includes farmer organisations and agri-processing companies working with smallholder farmers.

B. The Ethical challenges this company is addressing.

As a bank, their business goals are to keep alive, diversify the risk and get profits. Then, talking about the ethical challenges we find the difference from others.
Their model of business is based as they call it “ triple bottom line” .It means that you can feel good about where your money goes, knowing it is having a positive social, environmental and finance impact on the world.
They are able to help people that need it and furthermore try to prevent this situations before could happen by offering alternative financial situations. Then, this could help create jobs, reduce footprints and mitigate the impacts of climate change. Moreover, this type of investments have to be positive for the planet like with renewable energies .
Their social and environmental performance are just as important as their financial performance.

C. What makes you believe this company is really ethical and why you trust it?

The first reason why we thought Oikocredit was an ethical company was its activity itself. As mentioned before, it was a tool of social transformation in areas where people would find difficult to get access to credits. At the same time, the projects they invest are from cooperatives, fair trade companies, agricultural and from green energy.

All organizations Oikocredit works with share the same values of providing poor people the resources to start their own business, and improve their lives. Our company selects them after a process detailed on their website, with and ethical criteria, and keeps tracking their performance and tutoring them.

One thing we also considered was the way these credits were provided. Oikocredit puts together all investments to a unique fund, to make sure all the areas are taken care without distinction and that there is an equilibrium between riskier and safer projects. In addition, they base all their investment decisions on analysis that include social ratings of MFI’s and measure the poverty levels using a well developed Progress Index (from the Grameen Foundation).

At the same time, Oikocredit provides local people with financial information and courses for them to learn the best way to invest the money.

And finally, one of the most important reason why we think it is an ethical business is their transparency about all their processes, annual financial reports, all the projects they have worked with and an annual Study of social impact.

D.The possible challenges facing the company in the future and how you think this company may improve.

The main challenge from Oikocredit is ensuring the ethical behaviour all over the process of the microcredit. It have been criticized that Oikocredit doesn’t give directly the money to the people and projects they have approved. There are a lot of intermediary agents such as local institutions which are who do the final transactions. This could imply opportunistic behaviour applying higher interest rates or not doing a properly evaluation of the people or the project involved. At the end, this implies a misuse of the credit and the impossibility of returns in the future, falling to the bankruptcy or in constant debts, what is common in the old banking system.

From the other side, the best way to ensure a deeply impact in the social development of a country and avoid the moral hazard involved, is educating. All the Oikocredit staff are learning constantly about ethics and the values represented by the ethical bank. However, this knowledge should also be spreaded to the intermediaries of the company and the project managers in which it has been invested. This would imply a consolidation and a long term development of the investment.