UN development agency renews agreement to provide loans to poor in Nicaragua

9 April 2001

Following three years of success in extending loans for micro-enterprises and small rural businesses in northern Nicaragua, an affiliate of the United Nations Development Programme (UNDP) has renewed an agreement with a Nicaraguan financial institution to continue support for a $1.75 million revolving loan fund through 2003.

The goal of the initiative run by the UN Capital Development Fund (UNCDF), in cooperation with the Financieras Nicaraguense de Inversiones (FNI), is to alleviate poverty by providing access to financial services for poor communities in the Departments of Jinotega, Nueva Segovia, Estalí, Matacalpa and Madriz, UNDP said in a statement issued today in New York.

During the first phase, the project allocated 20 loans totalling $3.1 million to nine local micro-credit institutions in the region, which provided services for 4,380 people. Women accounted for nearly 60 per cent of the total number of borrowers. Three-quarters of the loans are for less than $500, an indication that the project is reaching borrowers who are poor, UNDP said.

The project also aims to help the local credit institutions become self-sustaining, with four out of five institutions supported by the project having achieved that goal so far. "The easy availability of loans without any conditions is an obstacle to the adoption of better financial practices," said Carmelo Angulo Barturén, UNDP Resident Representative. "The criteria for eligibility for loans should be based on objective factors, geared to the circumstances and needs of the target groups and a commitment to promoting sustainability."

According to Mr. Barturén, loans provided at subsidized rates are not a guarantee of success in providing support for micro and small businesses. Priority should be given to providing access to credit, which he said could only be assured if the credit institutions were sustainable. The project's most significant achievement has been to change the outlook local institutions from an aid-oriented to an entrepreneurial approach, he added.

In other news from UNDP, the agency reported today that it was joining forces with an organization called the Open Society Fund to rehabilitate rural schools in Lithuania through a $140,000 project. Lithuanian Vice Minister of Education Vaiva Vebraite, who signed the project agreement, emphasized the importance of the project as a model for the country.