An open letter to the Nicaraguan microfinance industry

Managua, Nicaragua
August 6th, 2008

Throughout the years, we have collected a diverse and representative number of testimonies describing the benefits microfinance has brought to Nicaragua. That is why the undersigned organizations wish to express their joint concern about the events of the last weeks, in which a group of debtors united in the Movimiento de Comerciantes y Productores de Nueva Segovia (MCPS) have organized protests and initiated action against several MFI branches, culminating in the unfortunate event on Tuesday, July 22nd in the city of Ocotal, when a small group of unsatisfied borrowers attempted to set fire to a branch of an MFI.

The microfinance industry worldwide has developed in a remarkable way over the last two decades as an alternative source of credit for urban and rural micro and small entrepreneurs that have historically been excluded from traditional financial systems.

In Nicaragua, microfinance has achieved an important position with regard to outreach into the most vulnerable sectors. For more than 15 years, hundreds of thousands of Nicaraguans in the cities and rural areas have had access to credit and other services with the primary objective of improving their quality of life and that of their families. At this time, more than 350,000 Nicaraguans receive more than USD $350 million in credit from the different institutions involved in microfinance, covering the entire country without any discrimination based on religion, race, gender or political affiliation. [...]

Thus, we can affirm that:

Violence is not the answer to solve this type of conflict. It only generates uncertainty and difficulties within • the population with the greatest need for access to credit from MFIs. The global model of microfinance considers self-sustainability as one of the essential principles. Hence, • interest rates should reflect the financial and administrative costs incurred in extension of credit. Each country has its own cost structure. The interest rates in Nicaragua compare favorably with the rest of the region. Additional violent action will only result in upward pressure on financial costs already affected by the perception of increased country risk. It may redirect scarce resources to other countries with perceived greater stability, or lead to the eventual exclusion of credit to thousands of Nicaraguans. [...] We trust that the honesty and work ethic of Nicaraguans will help in finding a fair and adequate solution for all parties, and we reiterate our support to all the organizations that receive our help and funding and especially to the hundreds of thousands of Nicaraguans that have found in microfinance an anchor in their search for a better life.

Best regards,

Frank Bakx
Netherlands Platform for Microfinance

Pat Eennett
Katalysis Bootstrap Fund

Alberto Solano
Global Partnerships

Raúl Sánchez
Red Katalysis

Erik Heinen
Oikocredit

Carlos Arenas
WCCN

Astrid Bant
Oxfam Novib

Other organizations that express their support:

Alex Silva
Omtirk, Inc.

Jim Kaddaras
Developing World Markets