Nicaragua

Case Studies WOCCU’s Savings Mobilization Programs in Latin America The Role of Credit Unions in Nicaraguan Financial Markets: Improving the Financial Access of Small Savers and Borrowers Nicaragua: Putting the Framework into Place

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Country Facts

General Approach to Regulating

Based on the Comparative Database on Microfinance Regulation by the IRIS Center of the University of Maryland

	Banks	NBFIs	Cooperatives	Non-Profit MFIs
Definition or description of institution	Financial intermediaries with resources obtained from public deposit-taking or any other securities. (See GL Art. 2)	Non-banking institutions that provide brokerage and financial intermediation services with resources obtained from public deposit taking. (See GL Art. 126)	Engage in financial activities; receive savings deposits, provide loans and discounts to its members through low interest payments. (See Coop Law Art. 9)	Not-for profit foundations or associations whose principal function is to extend small loans to both urban and rural natural and legal persons that engage in manufacturing, production, retail and service activities. Nondeposit- taking. (See Special Law Art. 1)
Guidelines & restrictions on financial services	Permitted: on-site, savings or term deposits; provide credits in domestic and foreign currency; accept letters of credit; provide leasing; issue credit and debit cards and traveler’s checks; provide guarantees; currency exchange; participate in the secondary mortgage industry; engage in the negotiation of derivatives, negotiable instruments and international business operations. (See GL Arts. 40&47) Prohibited: insurance. For a more complete listing of prohibited functions, not necessarily services.	Permitted: Provide credits in domestic and foreign currency. Prohibited: Cannot provide any other service except credits.	Permitted: Receive savings deposits, provide loans and discounts to its members through low interest payments. Prohibited: Cannot engage in the above services with nonmembers.	Permitted: In both domestic and foreign currency: provide credits; accept and discount letters of exchange; provide guarantees that constitute payment obligations; engage in investment in conformity with its objectives; and administer funds from other nonprofit MFIs or financial development entities whether foreign or national that engage in programs for cooperation. Can also provide loans and accept donations. /P> Prohibited: Cannot accept deposits of any kind.

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Case Studies

WOCCU’s Savings Mobilization Programs in Latin America (88 KB, PDF)
"Adapting to the Challenges of Changing Financial Paradigms WOCCU’s Savings Mobilization Programs in Latin America", 2003
By Janette Klaehn

This paper presents the case study of the savings methodology employed by the World Council of Credit Unions, Inc. (WOCCU) in its Latin America programs in Bolivia, Ecuador, Guatemala, Mexico and Nicaragua.

In Latin America, WOCCU has implemented credit union strengthening programs in Bolivia, Ecuador, El Salvador, Guatemala, Honduras, Mexico and Nicaragua. WOCCU experience repeatedly demonstrates that credit unions which combine financial discipline with demand driven products and aggressive outreach can both satisfy local demand for savings services and generate stable, long-term financing to meet member demand for credit services.

The Role of Credit Unions in Nicaraguan Financial Markets: Improving the Financial Access of Small Savers and Borrowers, 1998, (196 KB, PDF)
By Dina Mesbah

In August 1996, the USAID/Nicaragua Rural Credit Unions Program implemented by the World Council of Credit Unions (WOCCU) in Nicaragua initiated a program of voluntary stabilization and innovative service development to re-establish the capability of participating credit unions to mobilize local savings for reinvestment in productive loans to small farmers and small businesses.

The principal strategy of the program is to help the Nicaraguan credit union movement move away from a traditional reliance on share accounts, dependence on external financing, and associated problems with loan delinquencies. Instead the proposed new credit union model is characterized by: the mobilization of local savings by offering competitive interest rates on standard withdrawable deposit accounts; stricter enforcement of loan repayment schedules; loan application evaluation policies which place greater emphasis on capacity to repay; and financial management disciplines which include capital accumulation, loan loss provisioning liquidity management and delinquency control.

Strengthening operations in a small institution: Moderna Credit Union

Over the course of four years, the twenty-five year old Moderna credit union in Nicaragua professionalized and grew its savings operations. This one-page case describes the key steps taken Moderna’s management in consultation with technical assistance providers from the World Council of Credit Unions.

This case study can be found in Savings Operations for the Poor: An Operational Guide, edited by Madeline Hirschland, forthcoming from Kumarian Press (1294 Blue Hills Avenue, Bloomfield, CT 06002).

Nicaragua: Putting the Framework into Place
Summarized from: "Striking the Balance in Microfinance, A Practical Guide to Mobilizing Savings", 2002, pages 185-210
Edited by Brian Branch and Janette Klaehn
Case study written by Jose Benito Miranda Diaz

In 1996, WOCCU began a program in Nicaragua called the Rural Credit Unions Program (RCUP), financed by the USAID. When RCUP began, Nicaragua was in the post-war period, battling the economic difficulties caused by the armed conflict and by earlier government policies. Savings capacity was very low in 1996. In previous years, the repeated pattern of major devaluations and the hyperinflation resulted in real losses for those who held savings in the country. Consequently, many people had developed a serious mistrust of savings institutions.

This case study describes the process undertaken by RCUP and three of the credit unions to develop the framework for savings mobilization. The three credit unions are Avances Credit Union, Iaguei Credit Union, and Moderna Credit Union.

Full study is available in hard copy. See more at http://www.pactpublications.org/item.asp?prod_cd=WOC001

See also:

CGAP CLEAR