A letter from WCCN’s Executive Director

As we have reported over the last year, as a result of the global economic crisis, the microfinance industry worldwide is facing one of its biggest challenges since it was created three decades ago. The resilience of the industry is facing its hardest test yet, and although there are a lot of indicators that show that it will survive, there is no doubt that it will end up with some lasting wounds. Some countries will be impacted more than others. As some end borrowers are affected by the economic crisis and might not be able to repay their loans, some microfinance institutions are facing stressful times. I would not be surprised if some microfinance institutions in some countries will have to wind down operations or merge with others.

Over the last year, WCCN has been navigating these turbulent waters as the crisis develops and evolves. It is still too early to say that we will remain untouched by the effects of the crisis. However, I am happy to report that, thanks to our 18 years of experience working on microfinance, sound and responsible lending policies and practices, and a committed board and staff that are closely monitoring the situation on the ground, we have been able to keep everything under control, as well as decrease our exposure to microfinance partners that have become riskier as a result of the current crisis.

During our visit to Nicaragua in June, we were able to see firsthand how the crisis has impacted borrowers and microfinance institutions alike. Some borrowers told us about how difficult it has become to make ends meet. I encourage you to read the cover article of this edition of Grassroots Connections, written by Nicholas Vendervelde, who clearly depicts what we witnessed during our conversations with some borrowers in rural areas of León, Nicaragua.

However, the current difficulties that the microfinance industry faces can’t be attributed exclusively to the economic crisis. Country risk issues, such as political instability, often play a significant role. This is currently the case in Honduras, where the military forced the President to step down and Congress elected a replacement. In this edition of our newsletter, we are publishing a very interesting analysis written by the Diocese of Trujillo, the founder of Credisol, our first Honduran partner. As the political crisis remains unresolved, there is a possibility of further deterioration of the country’s economic conditions, as other countries impose political sanctions on Honduras to pressure the illegitimate government to restore democracy.

WCCN is taking a very proactive approach to deal with the current crisis. We are also preparing to continue our expansion to other Latin American countries. I never tire of saying how your support continues to be one of our major strengths as an organization, and we need you to remain informed and connected to us now more than ever.

Sincerely,

Carlos Arenas
WCCN Executive Director