Oikocredit in Africa: Decisions are a matter of good relationships
Yves Komaclo, regional director Oikocredit West Africa, and Judy Ngarachu, regional director Oikocredit East Africa.
As the crow flies, it is 4,599 kilometres between the offices of Judy Ngarachu in Nairobi, Kenya, and Yves Komaclo in Abidjan, Côte d’Ivoire. The two regional directors represent Oikocredit on the east-west axis of the continent, with five Oikocredit offices in West Africa and four in East Africa. We spoke with them about what unifies and differentiates their work in Oikocredit’s priority region.
“This is the time for Africa,” says Judy Ngarachu. This statement is the motto of the regional director in East Africa. It was also this realisation which, four years ago, led Oikocredit to make Africa its strategic focus, with the goal of doubling Africa’s share in the total development financing portfolio by 2020.
Highly visible in the region
Since 2012, Oikocredit’s workforce in Africa has grown from 43 to 46. This doesn’t sound much, given the continent’s large geographical size. However, this is more than other private investors. “Our local footprint and local staff increase the closeness to Oikocredit’s partners and gives the organization a better understanding of the markets in which we operate”, says Judy Ngarachu. “We opened our office in Abidjan in 1994,” says Yves Komaclo. “For microfinance organisations, agricultural cooperatives, banks for small and medium-sized enterprises, we are highly visible and very much present as a social partner for financing.”
Growth in mobile money
This is a major advantage. The market is changing, competition in the microfinance segment has intensified, and African countries are becoming increasingly attractive to investors. The general acceleration of economic development in African nations, the digitalisation of the continent and the competition are changing the pace of business and decision-making. Both regional directors are noticing the effects of this, albeit in differing ways.
Judy Ngarachu comments that “One of the main differences between our regions is the way in which digital financial services have developed, particularly the growth in mobile money in East Africa. Almost everyone has a mobile phone. We use it to pay our bills, make money transfers to other people, buy goods, and so on. Even people who don’t have much money can gain access to loans via their mobile.”
“We have to respond quicker”
A consequence of digitisation in Africa is that microfinance clients are now demanding quicker decisions. “They can have a loan on their mobile phone in less than 24 hours”, says Judy Ngarachu. “Often, they don’t have the time to go to a microfinance institution and then wait two months for a loan.” The microfinance institutions (MFIs) with which Oikocredit cooperates are also requiring the organization to respond faster to their loan requests.
But surely the cooperative believes it is important that decisions are only made after careful checks and observation of the future partner organisations? Absolutely, say Judy Ngarachu and Yves Komaclo in unison. But “We have to respond quicker”, and being careful doesn’t have to mean taking a long time. Checking processes are also speeded up by digitalisation and, comments Yves Komaclo, “Decisions are also a matter of good relationships.” Judy Ngarachu adds: “We know the MFIs that we want to work with pretty well and have a good understanding of their business having built relationships with them over time. As such, we are able to respond quickly when they need a loan.”
Yves Komaclo adds that “We have to be prepared and spot trends. There are times of the year when people have a greater need for money: The start of school, public holidays, harvest times for coffee, cocoa and so on. We’ve learned that over the last few years, so we think ahead a little bit more.”
Demand for loans
So if everything is developing at such a fast pace, is there still a need for Oikocredit loans? “Absolutely,” responds Yves Komaclo, “there is still strong demand for loans, particularly in the financial services sector, but also in the agricultural sector.” Judy Ngarachu comments further that “agriculture does, however, require a huge amount of knowledge. The way coffee is traded in Rwanda is different from how it is traded in Uganda and in Kenya. You need to know what’s being sold, understand the processes and the risks – it takes longer to develop.” As such, the Oikocredit offices in Africa have chosen to concentrate on a handful of agriculture sub-sectors such as maize, dairy farming, coffee, cocoa, rice and cashews.
In the microfinance segment, Judy Ngarachu adds, the demand is on both sides. “The MFI turns to us because it needs a loan and we turn to it because we know who we want to work with.” According to Yves Komaclo, financial inclusion is far from a reality everywhere in his region and growing microfinance institutions still need capital. Despite their very rapid development, this demand remains impossible or hard to come by for local providers.