Oikos Credit at BUMACO Ltd

OIKOCREDIT

Oikocredit gives groups of people a chance to start, upgrade or expand their business enterprises in the belief that people are capable of improving their own lives when given the chance- when given credit.
Credit for a better life:-
Oikocredit is an international development co-operative created for people who have joined hands to improve their lives but who need credit to actually make that step forward. Oikocredit gives loans, guarantees and investments to groups of people who need credit to create jobs and income. By doing this, Oikocredit gives poor people the chance to create a better life for themselves and their families.

Where does the money come from?
Everywhere in the world, people and institutions are prepared to share their resources with the disadvantaged people. Oikocredit believes that credit is a more dignified and more sustainable form of support to and sharing with people than grants alone. More than 20,000 churches, institutions and individuals in Europe, North America, Asia, Africa and Latin America, invest through Oikocredit in form of share capital to enable people in financially disadvantaged situations explore and engage in business. Not necessarily very rich people, but more often people who believe that it is their obligation to share whatever they can afford with people who are struggling every day to feed and educate their children.

They do not grant their money to Oikocredit, but they invest in it, and they do this in hard currency: euros or USA dollars. This means that, in the long run, they expect to receive their money back. Therefore, Oikocredit has the important task to maintain the hard currency value of its share capital. As a consequence, Oikocredit primarily lends in hard currency. It also means that Oikocredit cannot give -soft- loans that will not be retrieved if a project fails. Oikocredit can only exist if loans and interests are repaid faithfully and on time.

Oikocredit makes finance available to groups of people active in:
- The manufacturing of durable goods;
- Credit and savings operations
- Tourism
- Micro credit
- Agricultural and livestock production, processing or marketing

Oikocredit observes the following criteria in considering projects for assistance:
-The enterprise supported must benefit the monetarily poor and disadvantaged people;
-Benefits must be widely spread and not result in the enrichment of a few organizers or investors;
-The enterprise must contribute to the social and economic advancement of the larger community in which it is located;
- Special attention is paid to the ecological impact and the protection of animals and species;
- The cooperative structure is favoured where applicable because people can participate directly in the operation and management of the business;
- Preference is given to enterprises in which women are direct beneficiaries and in which they participate in decision-making, in structures and procedures related to the concept, organization, implementation, control and evaluation;
- The enterprise must be economically viable, with appropriate management and technical leadership, and become self-sustaining within reasonable period of time, thus allowing Oikocredit's capital participation, loan or guarantee to be phased out:
- There must be a clear need for foreign investment which can be provided within terms that can secure the necessary government approvals and that are beneficial to the project partners.

What are the conditions?
- Oikocredit products range from euro/dollars 50,000 - 2 million for loans issued in hard currency and repaid in hard currency. Otherwise Tsh. 50,000,000 to Tsh. 300,000,000 for loans issued and repaid in local currency.
- The repayment period ranges from 3 to 10 years with a possible grace period of 6 months to two years on capital only;
- For direct loans in euro, the interest rate is 9% per year (10% on the US dollar); on reducing balance
- In some cases a direct loan in local currency is considered, to be charged with a variable interest rate linked to local market rates and devaluation risks;
- For specific cases, Oikocredit extends a loan guarantee scheme. This means that Oikocredit provides a letter of guarantee for a hard currency deposit with a local bank that will provide a loan to the client in question. The loan and interest rate are in such cases to be negotiated with the local bank;
- Sometimes an investment is the most suitable form of financial support to a project: an equity placement in the enterprise with provisions for minimum return and a share repurchase agreement after a fixed period of time;
- Oikocredit does seek some form of security, and it must be re-enforced by personal guarantees;
- The entire approval and disbursement period of a loan takes 1 to 2 years.

If you are interested in credit from Oikocredit, and you are indeed eligible for an Oikocredit loan, please send a letter with an initial summary description of your organization, loan amount and the business for which you are seeking financing, to the Country Representative Office in Tanzania (for addresses see below). The Country Representative will contact you and advise you of the procedure to be followed for the formulation of a project proposal (Company Business Plan).

If you think your project may qualify for an Oikocredit loan, a more thorough evaluation process will start, which will include at least one visit of the project and the evaluation of a professional feasibility study provided by the applicant. Historical financial information will be required (balance sheet, cash-flow and profit and loss), as well as projected financial statements for the duration of the loan period that show the viability of the project and its capacity to repay the Oikocredit loan and meet other financial obligations.

If the outcome is positive and the applicant meets all Oikocredit requirements the Country Representative will summarize the project proposal and send it to Oikocredit International Office for approval by the International Board of Directors. This process, from the first contact until the final decision, takes 6 to 12 months.
Once a loan application is approved, the legal requirements concerning loan agreement, registration of securities and government and/or Central Bank approvals need to be fulfilled before the loan can be disbursed. Depending on the complexity of the requirements and the registration period, this may take anywhere between 3 months and a year. Oikocredit will take utmost care to ensure confidentiality of information of all the loan applications. However, this is not guaranteed with development projects (Oikocredit is a development Institution).