Q You began your career at the Royal Bank of Canada before moving into the international banking sphere in Europe, Asia and the Middle East. Why did you decide to make the leap into the socially minded world of microfinancing and join Oikocredit’s team in 2013?
A I didn’t want to go back to banking. I’d left the Middle East in the fall of 2011, was working for myself and enjoying it, but I missed being around people. A friend had said, “Banks are miserable places filled with miserable people,” which I think was increasingly the case at the time. When I looked at what Oikocredit did, I thought, “Well, that’s different enough. It’s using the skills I’ve acquired, there’s a big change-management job to do and it could be interesting.”
Oikocredit has grown so much since then. If you look at the balance sheet today, it has doubled in size in the last five years. We have to, whether we like it or not, act as a professional financial services organization and not as a family business.
Q When Oikocredit was founded 40 years ago, the organization came out of the World Council of Churches. What role have churches played in the development of the co-operative?
A The intention when the World Council of Churches set up Oikocredit was to channel some of the churches’ surplus funding into helping poor people directly. But the churches have a fiduciary responsibility to their parishioners, and for a church whose responsibility is often to maximize its return, a two percent return [on investment], as we offer, doesn’t pay the bishop’s pension.
What we quickly got was the churches saying, based on their constitution, that they couldn’t put much money into this. They would put a little in but encourage parishioners to do it directly. That’s why today we have 53,000 shareholders. But that’s also why it’s much more of a secular organization than you’d think based on the origins.
Most of Oikocredit’s 600 members are church-related — including The United Church of Canada. Twenty-nine of them are what we call support associations, or shareholder groups. Behind those 29 sit most of the 53,000 investors. The typical investor is 65 years old and a retired nurse or teacher, with about $11,000 invested.
Q Oikocredit may be a secular organization, but it supports the less fortunate by providing loans to low-income individuals, typically in developing countries, allowing them to work their own way out of poverty. In that sense, it’s inherently a Christian model.
A It is, very much so. And we’re very mindful of our Christian roots and very honoured and respecting of our link with the World Council of Churches. But we do see that the relevance of the World Council of Churches in terms of our day-to-day activity is pretty small. In terms of keeping us focused on our mission and our vision and our values, it’s quite big.
Q Microfinance has seen a lot of growth since 2006, when Muhammad Yunus won the Nobel Peace Prize for his pioneering work with Bangladesh’s Grameen Bank. At the same time, microfinance has been criticized for putting profit ahead of poverty reduction. How do you respond to that?
A Overall, if you look at the last 10 years, you see the growing pains of a new business as it developed. Microfinance has had a few bumps along the road: there have been people going into it with different intentions; it’s been seen as a way of making easy money; it hasn’t always been managed ideally.
I recognize that, particularly where microfinance is not well understood, it can lead to issues. If you assume that by giving someone a microloan, they’re suddenly going to be middle class and no longer working class, that’s very different.
Microfinance is not a panacea. And it’s not appropriate for the poorest of the poor — they need plain aid. But you get one level above that, and it’s the “teach a man to fish” argument. You see the benefits; you see the people growing.
I think one of the original problems with microfinance was it assumed everyone was an entrepreneur. It assumed that you help a woman buy a sewing machine, and a year later, she has 50 people working for her. But it doesn’t always work like that.
Q How have governments responded to the rise of microfinance projects?
A More and more governments in developing countries have taken on themselves the ambition to progress financial inclusion further. Look at India: When [Narendra] Modi became prime minister [in 2014], the government announced it wanted to create 200 million new bank accounts in two years. That’s a lot if you put it into a Canadian perspective — it’s a little different in India.
But what we’re seeing is that the bigger microfinance institutions (MFIs) are more and more often becoming banks and taking over from people like us. Which is fine, because we can only provide credit. They can provide credit, savings, insurance, transaction services — so they start to include people in the financial system.
Q What are some of the successes Oikocredit has seen?
A It depends on how you define “success.” I think one definition is that MFIs keep growing and keep coming back to us for more funding. Another definition is that they keep growing and stop coming to us because they no longer need us.
I would cite CARD Bank, Inc., in the Philippines as one of our most successful microfinance partners. CARD has expanded from just being an MFI to having its own medical company and its own education company with a university charter. It has branches in Dubai and Singapore to facilitate remittances coming back to the Philippines. That’s one example of an MFI that has really grown but stayed close to its roots.
Q What’s next for Oikocredit and the microfinance sector?
A Today, we’re looking at, in many countries, a relatively mature financial-inclusion business. There are more and more MFIs becoming banks or being acquired by banks, and therefore more and more people having financial services available to them that they didn’t have before. So you look at what the technological solutions are to take it to the next stage.
We know that microfinance as a lending business for us is going to continue to decline. We will be replaced by banks, so we’ll move more into equity investment, into lending directly to agricultural partners. We’re looking at all the ways we can contribute.
This interview has been condensed and edited.