Oikocredit is a social impact investor with more than four decades of experience in promoting sustainable development through investments. We spoke to Equity Analyst Mila Georgieva about Oikocredit’s model and inclusive insurance strategy.
MiN: What is Oikocredit’s main focus?
Mila: We have a €970 million investment portfolio with 700 partners across Asia, Africa and Latin America*. We provide loans, equity investments and capacity building for organisations working to sustainably improve the living standards of low-income populations. We’re active in the financial inclusion, agriculture and renewable energy sectors. By financial inclusion sector, we mean financial institutions and companies that provide financial services to underserved populations, for instance microfinance institutions (MFIs), (M)SME lenders and fintechs. Increasingly, we’re targeting investment into microinsurance, or inclusive insurance companies.
MiN: What is the business model?
Mila: Our headquarters are in the Netherlands, but we have a total of 25 offices worldwide.
As a cooperative we have over 500 members, each one with a vote at our Annual General Meeting. Our members are like-minded institutions, support associations (SAs). churches, and others.
SAs are independent organisations that operate under the Oikocredit brand to support our work. Most support associations accept investments from individuals, which are then re-invested in Oikocredit.
The funds invested in Oikocredit are in turn invested in organisations that target social impact in alignment with our mission. Oikocredit’s investments are mainly term loans, credit lines, or patient equity capital in growth stage companies.
Oikocredit also provides capacity building support to its partners, enabling access to new technology, knowledge and skills that can support them in their growth and development.
MiN: Where does inclusive insurance fit in?
Mila: We are relatively new to inclusive insurance, but it is part of our inclusive finance strategy to support organisations which facilitate insurance products for low-income populations. Already, a number of our partners offer credit life or other insurance products alongside micro-loans – so in that sense we are already supporting microinsurance.
We’ve also made two recent equity investments in microinsurance. Tajy is an insurance cooperative offering micro accident insurance and agricultural index insurance to small-scale farmers in Paraguay. And in West Africa, we have invested in a company called Inclusive Guarantee (formerly known as PlaNet Guarantee), supporting them to design and commercialise health, agriculture index, accident and life products in Burkina Faso, Mali, Senegal and Côte d’Ivoire.
MiN: What did you learn from last year’s International Microinsurance Conference (IMC)?
Mila: Bringing different people from different backgrounds together makes for a very interesting and informative event. I learnt about a lot of initiatives to promote inclusive insurance that happen not only on a private sector level, but on a public-private partnership basis. In my view this is very important for the promotion of inclusive insurance. I was able to gather a lot of insights about different distribution models for microinsurance products: how to reach the end client and what worked and did not work there.
I discovered lots of market innovations, innovative products, and new ways of adapting inclusive insurance to the needs of the client.
MiN: Although Oikocredit is a long-standing Network member, you are new to the MiN - what are you looking forward to?
Mila: I’m very excited to learn more from members and the inclusive insurance industry in general as it will help drive our investment decisions, particularly equity for which I am responsible. I’m particularly keen to participate in the Expert Forums as they cover new trends and market developments in depth - that’s very important when deciding on investments.
Oikocredit has a big network of different social impact actors, and so does the MiN. Bringing the two networks closer will be a win-win, especially now that we are more actively investing in microinsurance as a distinct segment. We can refer MiN members to our portfolio companies, and there may be opportunities for us to support the MiN ecosystem with funding. Together we can help drive the market forward.
MiN: What are the main challenges and opportunities in the inclusive insurance market?
Mila: There is a real need for affordable, accessible microinsurance products in all developing countries, and that means a great opportunity both for market development and for social impact-minded institutions and companies to build sustainable businesses. Low-income consumers need a variety of insurance products just like anyone else, but at the moment their needs are not being addressed. The challenge is reaching them with cost-effective, truly relevant products and delivery models.
Research into clients’ needs is essential. Inclusive insurance companies must constantly talk to clients, find out what risks they face in their lives and how they can be covered effectively. Once you know your client, you can deliver meaningful financial literacy and education programmes, and ensure they know how to use insurance products correctly.
MiN: What have you learned that you could share with other MiN members?
Mila: To be successful in the social impact sphere, you must know your clients thoroughly, know what products and services they demand and constantly adapt your products to those needs. You must be mindful about how clients’ money is spent – after all, we are talking about people on low incomes. You have a responsibility to ensure financial products are really needed and used. For example, microfinance companies must make sure their clients know what a loan involves, and the risks of being in debt. Protecting your client and teaching them how to use a product properly will help ensure your success.
*at 30 September 2018