Looking back, going forward

by Sue Lloyd
WCCN Board Member

For almost 17 of WCCN’S 24 years, we have been channeling capital from socially concerned investors through partner agencies for much-needed credit to small enterprises in Nicaragua.

Sue Lloyd on one of her many trips to Nicaragua. Sue has been involved with WCCN since its inception. WCCN file photo.

And, it will soon be 19 years since the Nicaraguan people voted the revolutionary Sandinista government out of power in the freest election to that date in Nicaragua’s history. The 1990 election marked the end of many solidarity groups’ direct support of the Nicaraguan people’s revolutionary struggle to build a new society featuring health care, education, and enough to eat for everyone.

During the 1980s, there had been a major focus on Nicaragua by US and European groups in solidarity with the “third world.” In 1979, the people’s successful overthrow of the Somoza dictatorship galvanized this movement in support of this people’s revolution. It was a movement which grew stronger in the struggle against the US-supported contra forces’ attempts to overthrow the new government. But in the end, US government interference and threats forced the voters to turn out the very government their struggle had built.

It looked like the revolution was finished, or at least seriously set back, but it was not the end of WCCN’s relationship with the people of Nicaragua. Wisconsin had been connected as a sister state to Nicaragua since the Alliance For Progress/Partners in the Americas programs in the early ‘60s, and there was a people-to-people revolution still to carry out. It was a busy time in which Sonia Taddy, WCCN’s new executive director, organized a Trade and Investment Delegation to look at possibilities for work around economic issues and development. It was in connection with that trip that CEPAD, the Nicaraguan Council of Churches, formally asked WCCN to be their “US conduit for loans providing credit for low-income farmers, cooperatives, women’s small businesses and local community development organizations.” After much discussion, we agreed.

Financial businesses and organizations, socially responsible banks and larger non-profits had turned CEPAD down. Was this project too risky, or was it just small stuff for these groups? We don’t know, but WCCN did know that this was in keeping with its program priority for economic development and poverty reduction.

While we did not have the expertise we knew we would need, we did have the will and the commitment to Nicaragua. CEPAD had the US connections which brought forth many of the initial investment dollars. The partnership was formalized in 1992, and the next 6 years were a time of learning and making connections for WCCN. These years also saw the initial and expanding development of the microfinance industry in Nicaragua.

By 1998, various non-profit microfinance institutions were beginning to work in Nicaragua, and WCCN made the decision to create the NICA Fund by adding such groups as lending partners. It was a means of diversification which allowed us to spread and reduce the risk to our investors’ money. In addition, for the first time, by virtue of lending to multiple partners, the loan decisions were in our hands and we were able to exercise adequate due diligence prior to each loan.

We were into a period of new growth as the NICA Fund began its development, without a clear model, into a somewhat new but effective version of microfinance. In Nicaragua, our partners distribute funds in small portions (loans) to end-borrowers at the local level throughout the country. WCCN concentrates on making sure the partners are financially worthy and on the all-important bringing-in of investors’ funds here, where the resources are.

The NICA Fund, valued at $2.3 million in 1998, now totals $9.6 million. In the last decade, it made 120 loans totalling $37 million to 17 microfinance NGOs. In this time, Nicaragua became the leader in microfinance in Central America, and near the top in all of Latin America. Since the global Microfinance Summits in 1997 and 2006, the industry has appeared on radar screens far beyond the world of investors. Timelines for eliminating world poverty abound, and have come and gone, but the microfinance industry will have played a major role when this is accomplished.

During our years of lending, we have focused on defined social impact goals of reaching women entrepreneurs, rural areas, and those needing very small amounts of credit. Additionally, we have seen that NICA Fund lending can provide resources for program-related loans and projects reaching some of the “poorest of the poor,” for whom micro-loans are not appropriate.

Going forward, it is possible that expanding into El Salvador and Guatamala will bring opportunities for social impact to areas with as much or more need for credit and in need of community-based development. We also hope the ability to invest small amounts through MicroPlace will introduce microfinance more broadly in the US, and create a new source of growth for WCCN’s efforts. Maybe we will see a new reality in which the grassroots in the “first world” — even in a collapsed economy — provides the means for needed economic development by and for the grassroots in the “third world.”