MICROCAPITAL STORY: Violent Protests Against Nicaraguan Microfinance Institution

Following violent protests at the offices of Fundación para el Desarrollo de Nueva Segovia (Fundenuse), a microfinance organization in Nuevo Segovia, Nicaragua, five police officers were injured and a protester was blinded in one eye by a rubber bullet, reports the Tico Times. In addition, a Fundenuse worker was kidnapped for five hours and threatened with bodily harm, according to a statement by the Nicaraguan Association of Microfinanciers (ASOMIF). A special investigative police commission has been called.

According to Police Chief Aminta Granera, police officers were greeted at Fundenuse’s offices by protestors with weapons such as machetes, shovels and Molotov bombs. Tensions in northern Nicaragua have been high since President Daniel Ortega visited the region on July 12 and in an incendiary speech, called on the population to protest against MFIs charging usury interest rates in order to convince them to renegotiate their rates: “We need to end this policy of usury…go march and plant yourselves in front of the offices of the usurers…Be firm! The usurers don’t have any other option: either they renegotiate or they renegotiate”. Ortega did not cite a particular MFI, and several microfinance organizations in the region were forced to close their doors due to protests led by a group of farmers called Movement of the Producers of the North (MPCS).

ASOMIF had already signed a debt restructuring agreement, which Ortega was unaware of prior to his visit. A statement by ASOMIF read: “We express our surprise and worry for declarations made by the president of the republic on July 12 in Jalapa, calling for a renegotiation with microfinanciers, even though we’ve already agreed to a debt restructuring agreement with the members of the movement”. After the height of the protests, Emigdio Lola, the head of Fundense, affirmed that the organization would continue its microfinance work with its clients in good standing. For the 101 clients involved with MPCS, Fundenese is offering a 21% interest rate, forgiveness of late repayment penalties and no commission. In addition, Lola expressed his surprise that the protestors concentrated their attacks on Fundense.

According to the Mix Market, Fundenuse was founded in 1993 and as of December 2007 had total assets of USD 12.3 million and a total loan portfolio of USD 11.3 million with 15,757 active borrowers. In 2007 it earned a return on equity of 30.91 percent and had a debt to equity ratio of 119.18 percent. In October 2007, Planet Rating awarded Fundenuse a B rating with a stable outlook.

ASOMIF is a network of 20 non-for-profit and credit union entities in Nicaragua, representing a total loan portfolio of USD 140 million. The association was founded in 1998.

By Jocelyn Cheng, Research Assistant

ADDITIONAL RESOURCES

Comunicado de ASOMIF. July 24 2008.

The Mix Market Profile for ASOMIF: http://www.mixmarket.org/en/partners/partners.show.profile.asp?token=&ett=1096

The Mix Market Profile for FUNDENUSE: http://www.mixmarket.org/en/demand/demand.show.profile.asp?ett=1891

Daniel Ortega: El Poder del Pueblo Presidente. Jalapa, July 12 2008.

Blake Schmidt, Police investigate violent protests in northern Nicaragua. Tico Times, July 25 2008.

Leoncio Vanegas, Fundenuse por un clima de distension. El Nuevo Diario, July 31 2008.