Interview with Oikocredit's country manager for Mexico
Carlos Rius, second from right
Carlos Rius, Oikocredit’s country manager for Mexico, was interviewed about Oikocredit’s activities in Mexico and how working with credit unions has become a focal point for the country’s investment strategy.
What is Oikocredit’s strategy in Mexico?
The development of Oikocredit’s strategy in Mexico has been unique and full of challenges. In 2011 Oikocredit’s strategy in Mexico changed, moving away from the microfinance sector (mainly because of the high interest rates) and towards the more mature sector of credit unions and finance for small and medium enterprises (SMEs).
The main challenge that we faced was to substitute all of our MFI portfolio (almost 60% in 2011) and enter a new sector where Oikocredit was relatively unknown. Having developed clear selection criteria, we decided to target specific geographic locations (the most disadvantaged of Mexico’s states) where we focus on SME finance though credit unions. This financial support has direct impact on the micro, small and medium enterprise (MSME) sector upon which so many of Mexico’s disadvantaged people build their livelihoods. By supporting credit unions, Oikocredit is helping to boost economic development among Mexico’s most deprived.
What is a credit union and how it is different to a microfinance institution (MFI)?
You've probably heard of MFIs and SME banks, but you might not be as familiar with credit unions. They are financial institutions, too, but they are owned by their members (who are also their clients) and not by a small group of individuals.
In Mexico, all credit unions are regulated institutions and only can provide financial services to formal MSMEs, which can be individuals or corporations. Credit unions focus on helping their members/clients to save and receive affordable financial services.
The credit union philosophy is members helping members. Many members of credit unions like knowing their savings will help other members to finance their businesses.
How does Oikocredit partner CONCRECES fit into your strategy in Mexico?
CONCRECES is one of the most solid credit unions in the country. CONCRECES’ main geographic scope is Oaxaca, the state with the fourth-highest poverty rate in Mexico (66.9% of the population in 2014), the slowest economic development and the least financial inclusion in Mexico. For us it’s important to support CONCRECES in order to improve the quality of life of low-income earners or communities through the generation of jobs in the specific geographic location – 75% of formal jobs are created by SMEs – and providing financial services to the local SMEs that support the livelihoods of so many people.
How important is the environment in Oikocredit’s activities in Mexico?
Oikocredit Mexico fosters environmental awareness among its partners (including financial institutions), encouraging them to achieve carbon neutrality. No matter how big or small the carbon footprint of our partner is, we raise the issue with them, so that they in turn raise it with their stakeholders, too. To this end, we’ve developed a special agreement with Pronatura (Mexico’s largest NGO concerning carbon neutrality) so they can offer special conditions to all of our partners that want to measure their carbon footprint and compensate it on an annual basis.
What is Oikocredit’s strategy in Mexico going forward?
Oikocredit Mexico’s strategy is to continue with the consolidation of our portfolio, operating with credit unions and financial institutions linked with base of the pyramid needs (education, health, water, etc.). Regarding the MFI sector, we are polishing our strategy to start supporting specific organizations with clear commitments to reduce interest rates in order to start challenging the current market paradigm.