Global microscope on the microfinance business environment 2012

47
■ Nicaragua
Key characteristics of the microfi nance business
environment:
l Nicaragua’s microfi nance sector has experienced
signifi cant volatility from political and economic
shocks in the past four years. The sector was
severely debilitated in 2009-10 by a combination
of the global economic downturn and the rise of a
powerful debtors’ movement, the Movimiento No-
Pago (non-payment movement), which forced the
passage in the National Assembly of a controversial
debt moratorium law. However, the sector has
begun to recover following the approval in mid-
2011 of a new microfi nance law, which improves
supervisory capacity and transparency.
l There is a large potential for microfi nance in
Nicaragua. The lack of interest from the main banks
in fi nancing small and medium-sized agricultural
producers—owing to the higher operating costs
involved—has created a large unmet demand for
rural credit facilities.
l There is a wide variety of microfi nance providers
in Nicaragua, most of which are now regulated and
forced to put in place strict accounting and
transparency standards. The 2011 microfi nance law
has put particular emphasis on improving interest
rate transparency, allowing MFIs to set interest
rates freely but barring them from imposing other
types of charges on borrowers as well as setting a
maximum limit on what institutions can charge for
payments in arrears.
l Financial transactions through agents are in
their initial stages, with no clear norms on how to
regulate and develop new methods to expand the
reach of microfi nance. However, some providers
have put in place some pilot projects, including
mobile banking services.
Key changes and impacts since last year:
l The full effects of the 2011 microfi nance law are
not yet fully visible, as the law came into effect in
early 2012. The new supervisory body for
microfi nance institutions, the Comisión Nacional
de Microfi nanzas (CONAMI), was formed only in
March, after some delays. CONAMI is expected to
© The Economist Intelligence Unit Limited 2012
<strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012
take on its full responsibilities and begin issuing
norms for the sector in the second half of 2012.
l Among the norms that CONAMI will need to
address in the short term are those related to
accounting practices and client protection. This is
because the 2011 microfi nance law requires MFIs
to consult the credit history of all clients, and it
obliges these institutions to set up standardised
mechanisms and resources for client complaints,
which were previously available only to clients of
institutions regulated by the Banking Authority.
l The government appears committed to the
recovery of the microfi nance sector, sidelining
politically motivated groups such as the
Movimiento No Pago. Moreover, it is providing
technical capacities and fi nancial support to
CONAMI, which is essential for the body to function
properly. The sector is in fact expected to post
growth for the fi rst time in four years in 2012, and
external funding is gradually returning.
Nonetheless, challenges to the sector remain,
including dependency on external funding,
institutional risks given the country’s weak judicial
system and ineffi cient bureaucracy, and the
development of new products that could respond
more effi ciently to client demand.
■ Panama
Key characteristics of the microfinance business
environment:
l General fi nancial sector regulation and
supervision are considered high-quality, but
regulation specifi c to microfi nance is still lacking.
Supervision of institutions operating in
microfi nance is dispersed across separate entities
for, respectively, banks/specialised banks, fi nance
companies, and co-operatives.
l The long-established, sole credit bureau is
generally considered to be of good quality, and is
widely used and reported to by the range of
institutions in microfi nance.
l Client protection remains an area of underregulation
and uneven progress, although efforts
at voluntary self-regulation through the sectoral