Countries & Regions

The Nicaraguan microfinance market has been hit hard over the past few years by a number of converging factors, leaving MFIs to face indicators of declining service outreach, profitability and portfolio quality. A political-social movement in 2008 that became known as ‘No Pago’ (No Payment) caused many microfinance borrowers to stop repaying their loans and was a large contributor to the deterioration of loan portfolios throughout the country. Presently, Nicaragua maintains the highest risk indicators of Central American countries with PAR > 30 of 16.6%, but has begun to write new legislation that looks to bring increased stability and security into the market. An analysis of how the No Payment Movement and other factors have affected the Nicaraguan microfinance sector can be found throughout the Nicaragua Country Briefing:

• Overview: The sector is comprised of 5 different types of institutions, including over 200 credit unions operating throughout the country that are offered support and technical assistance from a network of Cooperative Associations.
• Supply & Demand: Global economic contractions coupled with domestic political and social instabilities caused portfolio balances to continue to fall in 2010, and also contributed to the reduction and shutdown of services of certain microfinance actors.
•  Funding: With a regulatory framework that does not allow for NGO MFIs to receive client deposits, most actors in the sector must look to debt to fund their activities. This has however become difficult in recent years as market instabilities have caused lenders to think twice about the soundness of the investment.
•  Performance: Decreasing revenues and increasing operating expenses have hurt the profitability of the sector over the past 3 years, as seen by a median return on assets in 2010 of -4.6%.

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