Nicaragua’s Microfinance Crisis: Is It Winding Down?

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Sep 2011
Managua, Nicaragua, September, 08 2011 - It seems like it is too good to be true, but the “No Pago” Movement leaders have agreed to have their members individually negotiate with MFIs the restructuring of their loans.

This is a major concession from the movement that rallied and protested in front of MFI branches and even successfully lobbied the National Assembly to pass a Moratorium Law forcing MFIs to renegotiate loans. This created a major setback for MFIs in the country who saw their portfolio’s quality deteriorate and their investors flee during the height of the protest.

The “No Pagos” wanted collective bargaining rights in order to restructure their loans in the laxest possible way. Neither the MFIs nor the government gave in to their requests and now the movement’s 1,500 members (down from estimates of 5,000 – 13,000 at the height of the crisis) are approaching their financial service providers in a bilateral  effort to renegotiate their obligations.

Why did they give up? As Omar Vilches, leader of the movement, explained, the members did not want to jeopardize their future ability to obtain loans and were facing pushback from the MFIs who did not want collective bargaining.

It was estimated that the crisis created losses of up to US$20 million for the MFIs that restructured more than 32,000 loans.

Hopefully, the renegotiation of loans with individual borrowers will contribute to the unraveling of this two-year episode. This would be a good time for the sector in Nicaragua to look back at the causes of the crisis and implement solutions to avoid a repetition. A good place to start would be this 6-Point Action Agenda to Recalibrate Microfinance.



 

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