Comments on: Ley Moratoria (Moratorium Law) Passes in Nicaragua

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By: Who Sets the Agenda for the Microfinance Industry? «

Who Sets the Agenda for the Microfinance Industry? « — Fri, 17 Jun 2011 14:04:43 +0000

[...] Ley Moratoria (Moratorium Law) Passes in Nicaragua [...]

By: Nicaraguan MFIs Forge Ahead in Wake of ‘No Pago’ Crisis «

Nicaraguan MFIs Forge Ahead in Wake of ‘No Pago’ Crisis « — Mon, 02 May 2011 16:14:13 +0000

[...] Microfinance Crisis: Looking Back, What Did We Learn? Ley Moratoria (Moratorium Law) Passes in Nicaragua Nicaraguan Microfinance in [...]

By: Nicaragua’s Microfinance Crisis: Looking Back, What Did We Learn? «

Nicaragua’s Microfinance Crisis: Looking Back, What Did We Learn? « — Mon, 24 Jan 2011 14:19:01 +0000

[...] previous posts we examined the nature of the No Pago Movement and the Moratorium Law. Here, we ask: What can the microfinance industry as a whole learn from these [...]

By: Fehmeen

Fehmeen — Wed, 24 Mar 2010 19:57:17 +0000

Thank you for the link. It’s comforting to learn about this endeavor and I plan to write a post about it on my blog so more people know about it! I just hope MFIs that are highly profit oriented find short term incentives to follow this code, instead of creating circumstances that require the stick approach (as in the above case).

Just an observation: principles highlighted in the Smart Campaign come under the umbrella of Corporate Governance. You could consider promoting it as such to a certain segment.

By: Sergio Guzmán

Sergio Guzmán — Wed, 24 Mar 2010 19:37:07 +0000

Dear Fehmeen,

I agree with you, this I think is one of the main reasons why the Center alongside industry leaders have gotten together to launch the Smart Campaign, an effort to promote client protection in the microfinance industry.

I would encourage you to visit http://www.smartcampaign.org so that you can see exactly how we are promoting MFIs to be more responsible in their interactions with clients.

Your comments are deeply appreciated!

Sergio

By: Fehmeen

Fehmeen — Wed, 24 Mar 2010 19:29:18 +0000

I agree that the industry need not be jeopardized, but the MFIs could have prevented this crisis. The Grameen Bank model, if followed in spirit, guards against default risks as well as rebellions similar to the one above.

When loans are distributed, 5% of it is kept aside by each member of the group as an ‘emergency fund’ which is dipped into when a borrower faces the risk of defaulting. At the same time, the loan in question is re-scheduled (often, the duration is stretched) to assist the borrower.

Most MFIs refuse to extend a second loan to defaulters and that leads to plenty of problems on its own, but Grameen Bank simply reset the credit history of the particular borrower and let them start over again.

It’s small things like this that prevent people from thinking they’re being exploited, which may fuel rebellion.

I may, of course, be wrong because I’m not aware of the details regarding the Nicaraguan protest. But MFIs need to do their part too.

By: Sergio Guzmán

Sergio Guzmán — Wed, 24 Mar 2010 18:29:27 +0000

Dear Fehmeen,

Thanks for your comment. You are right in the fact that one of the MFIs in question did employ questionable practices on two of their clients who were on arrears. However, we don’t think that this is reason enough to jeopardize the industry as a whole.

Sergio