A letter from WCCN’s Executive Director

I just returned from the Global Microfinance Investment Congress in New York City, an annual gathering of people from around the world working on microfinance from every possible angle -- from grassroots initiatives to major financial institutions involved in the microfinance sector. The meeting reflected the current status of microfinance worldwide.

Two issues caught my attention at this year’s meeting. One was the growing interest on the social impact of microfinance, through social impact studies and through the development of social performance metrics to better track impacts on borrowers’ lives over time. I felt proud that WCCN has addressed this topic for more than a decade.

Also noteworthy was the general consensus about countries in which microfinance faces the most difficult times: Bosnia, Morocco and Nicaragua. In previous newsletters, we have reported on challenges in the microfinance sector in Nicaragua. However, we must also note positive changes underway to overcome the crisis and change the shape of Nicaragua’s microfinance sector.

Prestanic’s work exemplifies the right kinds of measures being implemented. A WCCN 19-year partner, Prestanic focused mainly on lending in rural areas, originally to a mix of individual borrowers and some credit unions and worker-owned enterprises. As many of the credit unions grew and graduated from their lending and as the worker-owned enterprises were privatized or collapsed, Prestanic gradually ended up lending to individual borrowers, mostly small- and medium-sized cattle ranchers. The cattle sector boom starting in 2004 helped Prestanic grow significantly. However, the 2008 dramatic drop in meat prices internationally resulted in crisis for this dynamic sector of the Nicaraguan economy and also impacted Prestanic’s borrowers.

As a result of the crisis, Prestanic revisited its mission and made a 180-degree change. Instead of waiting for better times, Prestanic focused on creating communal banks in remote Nicaraguan towns with thousands of people still underserved by banks or microfinance institutions. Prestanic’s pilot project is in the municipality of Teustepe, and with Bolivian experts’ technical support, it has organized 1,000-plus borrowers in communal banks. The experiment has been extremely successful so far, with delinquency in this portfolio almost zero. In January, WCCN’s delegation visited one of those communal banks, described by Jeanne Duffy in this newsletter’s borrower profile. My main take-home from that visit to communal banks in Teustepe was that -- despite some of our Nicaraguan partners’ difficulties -- we must keep supporting institutions such as Prestanic that are taking the right measures to overcome the crisis and doing the right thing to continue reaching the poorest of the poor. No one has claimed that supporting the economic enterprises of the poor was easy or risk free, especially during tough economic times.

In this edition of Grassroots Connections, we reflect on our microfinance work by reviewing the three funds that have existed in WCCN over the past 19 years. We also include a piece in memory of Archbishop Romero from El Salvador as we commemorate the 30th anniversary of his assassination. Jeanne Duffy reports on our April 2010 annual meeting, when we hosted three visitors from our partners in Central America. Finally, we show the latest data on our portfolio.

Sincerely,

Carlos Arenas

WCCN Executive Director