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Nicaragua Financial Services to Microentrepreneurs: A Study of Rural Credit Unions

In Nicaragua, credit unions offer access to capital and savings mechanisms to poor, rural entrepreneurs. Capital enables the entrepreneurs to grow their businesses and savings mechanisms generate greater liquidity for the enterprises and the households. This paper is the result of a study by USAID and WOCCU who have been working to expand the financial services of Nicaragua’s rural credit unions in a project which started in 1996. The experiences of six high growth credit unions with microenterprise financial services were reviewed.

These credit unions offered flexible, customised lending to meet the needs of first-time and small borrowers. In particular they provided:

Flexible collateral and capacity-to-pay lending criteria for loans of less than $500
Monthly, bi-weekly, weekly or daily loan repayment plans
Stepped or graduated lending to first-time loan applicants and those with limited capacity to pay.

It is interesting to note that more than 56% of the microenterprise loans were to women.

The study found that these credit unions were filling an unmet need for rural micro entrepreneurs. Borrowers reported that the credit unions’ services were more convenient and provided faster turnaround on loan requests than other agencies. They had been able to obtain discounts on purchases and “wait for their price” on non-perishable goods, as well as generate additional earnings on savings.