MICROCAPITAL STORY: USAID and Netherlands-based Oikocredit Partner to Guarantee $36.2 million for Microfinance Over 10 Years

Oikocredit, a Dutch cooperative investment fund, and the United States Agency for International Development (USAID) announced a partnership which will leverage USD 36.2 million in private financing to support microfinance. USAID will provide a 50 percent guarantee on loans made by Oikocredit for ten years, and this guarantee is intended to increase private-sector financing to microenterprises and small-scale farmers, according to a press release by USAID. USAID has guaranteed loans for Oikocredit in the past, beginning in 2003 but this is the largest guarantee to date. Oikocredit’s loans are channelled through a network of regional offices worldwide and managed by local professionals.

USAID was formed in 1961 as a part of the Foreign Assistance Act and is the principal United States agency to extend assistance to countries recovering from disaster, trying to escape poverty and engaging in democratic reforms. USAID is an independent federal government agency that receives overall foreign policy guidance from the secretary of state. In 2007 USAID had a foreign assistance budget of USD 24.7 billion and provided USD 193 million in funding for microenterprise development through 184 new and existing grants, cooperative agreements, and contracts in 61 countries.

Established in 1975 by nonprofit World Council of Churches, Oikocredit is a Dutch cooperative investment fund comprised of various types of investors including church groups, social support groups and individuals. Oikocredit’s debt-capital and equity investments focus on microfinance institutions but also include small businesses. As of December 2007, Oikocredit held 390 active investments spanning 37 countries on five continents. Oikocredit held USD 614.5 million in total assets as of December 2007, and had allocated USD 179.4 million toward future investments in microfinance institutions over the next twelve months. In its 33 years of operation, Oikocredit has experienced a default rate of less than ten percent on its loans. MicroCapital has reported several loans made by Oikocredit in 2008, including USD 2.8 million to Cambodian microfinance institutions (MFIs) Hatha Kaksekar Ltd (HKL) and AMRET, USD 6.2 million to Balkan commercial bank Opportunity Bank of Montenegro, USD 2.5 million to commercial bank Micro Finance Bank of Azerbaijan (MFBA) and USD 1.6 million to Polish microfinance institution Inicjatywa Mikro. Stories covering these transactions may be found in this listing of recent MicroCapital stories on Oikocredit.