What is it girl? Who’s in trouble?

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In this scenario I am Lassie and you are Timmy. I’m all worked up because I’m watching helplessly as a senseless law is passed, a law which has the potential to seriously damage the microfinance sector in Nicaragua and rob many of the poor of financial growth and opportunity. So be patient and listen close as I bark at you…

June 2008: A group of farmers, led by Omar Gonzalez Vilchez from Wiwili, Nicaragua, revolt in front of the government (See Victoria Kabak’s Blog). Not only is the global economy suffering at this time, but commodity prices in Nicaragua have weakened, especially cattle. Thus cash is tight, the farmers can’t make payments on their loans, and they join forces to say so.

July 2008: Daniel Ortega, President of Nicaragua, tells the farmers to take it up with their respective microfinance institutions. And with Daniel’s support, they do. Delinquencies rise, the nation’s microfinance portfolio falls 15% because international funders start pulling out, and the “No Pago” group continues to demand the government do something about this!

Well that was in 2008, so what now?

Photo taken from El Nuevo Diario, "Piden veto a Moratoria"

And here I would like to quote, the economic adviser to the president of Nicaragua, Bayardo Arce,

“This law contributes nothing to the forward movement of the economy… if the people get mixed up in the political game the government officials have made, yes, it can have a harmful effect for the financial system, if not for the national economy. What it’s going to do is the banks aren’t going to lend, and production is going to fall, therefore the employment will go down.” – El Nuevo Diario, “Piden Veto a Moritoria”

A motion was filed to suspend approval until involved parties were consulted [i.e. banks, microfinance institutions, funding sources] but it went unanswered.

Photo from La Prensa, "Después de azuzar a los morosos, Ortega calla"

The president had until March 24th to veto the legislation.

The president’s silence on the subject is inspiring interpretation; hopefuls think it indicates room to negotiate, others believe he’s silent because he will not budge.

“It’s unconstitutional!” The director of ADIM told me. And so I read more to find out. Sure enough, Julio Flores Coca of ASOMIF agrees, he is quoted as saying the law is in violation to the constitution, “The law says only the Central Bank of Nicaragua can govern the monetary system in this country.”

Well, March 24th has come and gone. Despite economists nation wide disapproving, Daniel does not order a veto. Now for a three month period before the law is enforced, giving all parties involved “time” to comply. During this time modifications and changes will be proposed, and we can only hope Daniel will listen.

Run and get help Timmy, a golden retriever can’t save Nicaragua by itself!

By Monica Hamlett, KF10 Managua, Nicaragua

You can help, lend to a Nicaraguan entrepreneur now.

*To give you a little context to that interest rate, most of the funding to ADIM ranges from 14% to 18%. This means the average (for simplicity sake, not weighted and excluding Kiva) would be 16%. How will the institutions pay salaries, purchase software for computers, pay electricity bills, get toilet paper for the office bathrooms, anything?