> Posted by Sergio Guzmán
Nicaraguan protesters during an earlier period of "No Pago" movement activities.
It seems like it is too good to be true, but the “No Pago” Movement leaders have agreed to have their members individually negotiate with MFIs the restructuring of their loans. This is a major concession from the movement that rallied and protested in front of MFI branches and even successfully lobbied the National Assembly to pass a Moratorium Law forcing MFIs to renegotiate loans. This created a major setback for MFIs in the country who saw their portfolio’s quality deteriorate and their investors flee during the height of the protest.
The “No Pagos” wanted collective bargaining rights in order to restructure their loans in the laxest possible way. Neither the MFIs nor the government gave in to their requests and now the movement’s 1,500 members (down from estimates of 5,000 – 13,000 at the height of the crisis) are approaching their financial service providers in a bilateral effort to renegotiate their obligations.
Why did they give up? As Omar Vilches, leader of the movement, explained, the members did not want to jeopardize their future ability to obtain loans and were facing pushback from the MFIs who did not want collective bargaining.
It was estimated that the crisis created losses of up to US$20 million for the MFIs that restructured more than 32,000 loans.
Hopefully, the renegotiation of loans with individual borrowers will contribute to the unraveling of this two-year episode. This would be a good time for the sector in Nicaragua to look back at the causes of the crisis and implement solutions to avoid a repetition. A good place to start would be this 6-Point Action Agenda to Recalibrate Microfinance.
Image credit: El Observador Económico
Have you read?
Nicaraguan MFIs Forge Ahead in Wake of ‘No Pago’ Crisis
Nicaragua’s Microfinance Crisis: Looking Back, What Did We Learn?
Ley Moratoria (Moratorium Law) Passes in Nicaragua
Nicaraguan Microfinance in Crisis
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September 13, 2011 at 3:30 pm
alexcountshaitibook
Excellent post on the Nicaragua situation — like most CFI blogs it gets to the point and illuminates in clear prose. It would be interesting to compare the lessons of Nicaragua and India and perhaps other countries like Pakistan that have had milder versions of this kind of crisis. I love the link to Beth’s blog on the six point plan. The final point about “fair trade microfinance” is especially important. The “Seal of Excellence” initiative housed at the Microcredit Summit Campaign has the potential to create a platform and a unified approach to making this idea of “fair trade m/f” happen without much if any “reinventing of the wheel”. –Alex Counts, President, Grameen Foundation
September 15, 2011 at 2:27 pm
Sergio Guzmán
Dear Alex, thank you very much for your kind compliment!
Regarding your idea of comparing the situation in Nicaragua with similar places like India, Pakistan or even Bosnia, what do you think are some of the similarities of these places? What other markets where Grameen – Foundation works present similar symptoms of overheating?
Sergio
September 15, 2011 at 3:29 pm
alexcountshaitibook
India, Morocco, Pakistan, perhaps Bosnia (don’t know much about that) and maybe Ecuador have some similarities, and of course there were the earlier crises in Bolivia. Bangladesh is a different case in most key respects. Probably I am missing others.