Nicaraguan Microfinance in Crisis

> Posted by Sergio Guzmán

Credit: El Nuevo Diario, http://impreso.elnuevodiario.com.ni/2009/09/ 08/nacionales/109207

The microfinance industry in Nicaragua is under siege by a politically motivated group of borrowers who call themselves the No Payment Movement (Moviemiento No Pago).  The Movimiento No Pago includes from 3,000 to 5,000 producers, merchants and microentrepreneurs who are led by the former mayor of Jalapa Omar Vílchez. The movement commenced in Jalapa in the summer of 2008, with the takeover of an MFI and a riot incited by a protest speech.

Recently, the leaders of the movement have demanded that the Congress approve a Moratorium Law to give debtors a 10 year amortization period with interest rates that do not exceed 8 percent APR as a condition to stop harassment of the microfinance industry. The leaders of the Movimiento No Pago from the North and Caribbean regions of Nicaragua have threatened to burn the buildings of MFIs, take hostage MFI personnel and escalate their violence if their demands for a moratorium law are not met.

Credit: El Observador Económico www.elobservadoreconomico.com/ articulo/933

There has been important opposition to this moratorium law from many sectors. Several newspaper editorials and articles speak against the moratorium bill, which has not yet moved toward legislative action. The law was sent back to the economic committee of the National Assembly and Awaits review. 

According to one journalist, “Before erasing two decades of investment and progress with a vote, the National Assembly should investigate how microfinance operates and the reasons for its high costs as well as its social and economic impact as well as its clients’ satisfaction. A law that rewards clientele without willingness to pay and punishes honest and punctual clients, will incentivize a non-payment culture at a loss for all of the social stakeholders involved, including the banking system.”

Guest Post: A Report from the FWA Event “Macro to Micro”

> Posted by Kimberly Williams Weinrick and Meghan Gallagher

While the New York spring rain outside was slowing down, inside at the May 7 evening dicussion “Macro to Micro: Performance of Investments in Microfinance in the Current Financial Crisis” there were energetic and insightful attendees from many different backgrounds, professions, and perspectives, adding to the buzz in the room resonating with dynamic conversations.

The evening included a lively and broad-ranging panel that examined the story of how a sector whose chief purpose is to supply small loans to those without collateral or access to traditional financial services is at once maturing and reshaping itself during this time of turmoil. And the panel did not disappoint.

Beginning with an after-work networking reception in Midtown Manhattan, the microfinance program enjoyed a big crowd. Once the panel was introduced, it was clear that the exceptional participants would bring illumination and understanding to this evolving landscape. These panelists were: Roland Dominicé, Executive Director, Symbiotics; Ann Miles, Managing Director, BlueOrchard Finance, S.A.; Camilla Nestor, Director, Grameen Foundation; Susanna K. Tisa, Managing Director, FINCA International; and Mitchell Strauss, Special Advisor SME Finance & Director of Credit Policy, Overseas Private Investment Corporation (OPIC).

The insightful discussions focused on how microfinance institutions

Microfinance – Being a Part of the Solution

> Posted by Elisabeth Rhyne

I’m blogging today from the annual meeting of the ACCION Network taking place in Buenos Aires, hosted by Columbia Microcredito of Banco Columbia.  We spent a very interesting morning talking about the effect of the financial crisis on microfinance institutions and their clients in Latin America.  We’ve heard from Michel Burbano of Banco Solidario in Ecuador, Carlos Viteri of Financiera Apoyo Integral in El Salvador and Kurt Koenigsgfest of BancoSol in Bolivia.  Some of the points that really hit me this morning are:

• The severity of the crisis differs by country.  It is hitting El Salvador much harder than Bolivia because El Salvador is more integrated into the US economy.  What for MFIs in Bolivia is so far a somewhat challenging time is for MFIs in El Salvador a very serious situation.
• The crisis is still unfolding, but these MFIs have had time to think about how to respond and are already implementing their responses. Their most important message is: stick to your knitting.  Do what you do best.  The biggest concern is the rise of delinquency as clients’ businesses suffer.  The MFIs are responding in many ways.  The most important is focusing on their credit methodology, especially assessing client  ability and willingness to repay. 
• Some adjustments are necessary, including changing staff incentives.  When general delinquency rises