March 01, 2000 NICA Fund Gives Credit to Nicaraguan Communities A year after their first loan, the Nicaraguan Credit Alternatives Fund has loaned $1.65 million to help rebuild the economy of the Central American nation from the ground up. SocialFunds.com -- María Cinecia Gutierrez, a resident of Tipitapa, Nicaragua, was robbed several years ago, leaving her nothing. Like many destitute Nicaraguans, citizens of the second poorest country in the Western Hemisphere, her options were few. She might have chosen to go back to housekeeping, but instead, she joined a solidarity group comprised of 14 women entrepreneurs like herself. Together, María's group received a small loan from CHISPA, an alternative credit organization now supported by the Nicaraguan Credit Alternatives (NICA) Fund. The NICA Fund was founded by the Wisconsin Coordinating Council on Nicaragua (WCCN) in 1998 to offer loans to Nicaraguans excluded from other sources of credit. Nicaragua, the Central American nation renowned for it's revolutionary Sandanista government in the 1980s, has been all but overlooked by the international community in '90s. Meanwhile 80 percent of the population lives in poverty, half of them in extreme poverty, and the structural adjustment programs imposed by international lending institutions like the IMF and the World Bank have exaggerated the disparity between the haves and have nots. "In Nicaragua, as in many other countries around the world, the international lending institutions have had a devastating affect on the majority of the population," said Julie Andersen, Executive Director of WCCN. "The structural adjustment programs have forced Nicaragua to redirect its economic priorities to ensure the payment of the foreign debt and to increase the opportunities for foreign investment," added Andersen. "This, in turn, has robbed the government of the capacity to comply with the elementary responsibility to provide for the general welfare of its society." The requirements of international lending institutions have reduced access to credit for small farmers and businesses, and increased interest rates. They have also increased the sales tax to 15 percent, one of the highest in the region, eliminated tariffs that protected the market for local industries and agriculture, and reduced government spending on health, education, and other social services. The NICA Fund has lent $1.65 million to six different Nicaraguan alternative credit programs, providing credit to small businesses and rural producers, since it's first loan was made in February 1999. These loans work to counteract the negative social impact of debt to international lending institutions, and so far have a 100 percent repayment rate. "The primary focus of the NICA Fund is to lend funds in a professional manner to microcredit organizations in Nicaragua that meet our social impact goals," said Anderson. The Fund's lending policies prioritize low-income communities, locally controlled development, nondiscrimination, accountability, and environmental protection. "The general manager of CHISPA (the credit organization that granted a loan to María Gutierrez's group) pointed out that many international agencies much bigger than WCCN come to Nicaragua, and other countries, and just throw money at microcredit programs. Many times this results in poorly managed programs that can have a negative impact on the entire microcredit field in the country." With the NICA Fund, WCCN built on its earlier success with the Nicaraguan Community Development Loan Fund (NCDLF), launched in 1991, linking investors with the lending program of the National Council of Protestant Churches in Nicaragua. Although the NCDLF successfully loaned nearly $6 million to struggling businesspeople and farmers, the NICA Fund represents a wider variety of borrowers and diversifies risks through several local credit programs. The approximately $2.5 million in the NICA Fund come from more than 200 investors throughout North America, mostly individuals or family groups who have a previous connection to Nicaragua and empathize with the social and economic upheaval there. Several foundations, church parishes, religious orders, sister city groups, and informal groups are also investors. The NICA Fund has an interest rate of between 0 percent and 6 percent, depending on the amount invested, with a $2,000 minimum for a term of 2 to 5 years. It provides a unique venue for social investors to make a direct positive impact on a deserving community, and a ray of hope for Nicaragua's devastated economy. At this point, the beleaguered nation needs all the hope it can get. "Hurricane Mitch, which hit Nicaragua in October of 1998, was much more devastating to the land, people, and economy because all of these factors were left in a weakened condition," said Andersen. "The policies of international lending institutions have resulted in increasing environmental degradation, by pushing poor people to marginal lands, stripping mountainsides of vegetation, and making entire regions more vulnerable to natural disasters." María Gutierrez, meanwhile, has gone from destitution to dignity. She has rebuilt her clothing retail business, and is able to support her family, including her teenage son who helps at his mom's shop before and after school. María has also been able to teach business skills to two of her daughters who now have small businesses of their own. The NICA Fund provides for many more like María, who are pleased to have the opportunity to run their own business or farm, creating employment, feeding their families, and retaining their dignity. © SRI World Group, Inc. All Rights Reserved. Order reprints | Send it to a friend | Print it | Save it Top