About Us
OUR NAME
The name SOSTENICA derives from Spanish. It joins “Soste,” taken from the Spanish word “sostenible” (“sustainable” in English) with Nica, an abbreviation of Nicaragua. The country name Nicaragua is itself a derivative of the Nicarao people, one of the dominant indigenous communities in Central America at the time of the Spanish conquest around 1500.
THE PROBLEM
Three central problems plague Nicaragua’s economy. The first is capital flight. Less than 10% of Nicaragua’s population earn more than what is needed to live above the subsistence level. Of those few, who do have adequate resources, many choose to shelter their money from the vagaries of the local economy by maintaining investments and savings accounts overseas. As a result, rather than accumulating, capital disappears from Nicaragua’s economy making credit scarce and expensive. Without available credit, small farmers and entrepreneurs find it impossible to expand their production.
A second difficulty is foreign debt. Nicaragua has one of the world’s highest per capita debts. When a nation owes large sums to foreign governments or lenders, an excessively high proportion of the country’s income serves to pay the interest and principal on that debt. Under these circumstances, national investment in social progress and economic development for the poor gets reduced, while the economy directs its energy to developing its hard currency export sectors in the hope of generating revenues necessary for debt service. Once again, under these adverse circumstances, credit for small producers becomes scarce and costly. High interest rates stifle growth, while many small businesses and farmers cannot get loans at any price.
Finally, for hundreds of years Nicaragua’s economy has depended on the production and sale of cash crops. International commodities prices vary according to supply and demand. However a predictable trend has emerged through the decades. The cost of production goes steadily up while the revenues from sales remain constant or even decline. Except during extraordinary times, this economic dependency on international export leads to hardship for the majority of Nicaraguans. Without credit and the ability to produce for local consumption, many Nicaraguans suffer from influences beyond their control.
SOSTENICA – A SOLUTION
A capital-starved economy cannot grow. Only those with access to resources can take advantage of opportunities. Without intervention, current conditions in Nicaragua will make it possible for the rich to increase their resources while leaving the poor without much opportunity to utilize their creative energy and potential. By enabling First World investment in the productive lives of poor Nicaraguan producers, SOSTENICA undertakes to reverse some of the damaging effects of capital flight.
By making micro, small, and medium loans available at rates below, or even comparable to, those available from commercial lending institutions, SOSTENICA strengthens the growth of the sector that most often suffers neglect. Secondly, because the SOSTENICA operates from within the NGO (non-governmental organization) sector, it can target populations and economic activities destined to strengthen local economies and culture rather than contribute to an export-oriented economy. A heavy emphasis on sustainable development leads SOSTENICA to direct credit to those sectors of the Nicaraguan economy that will not pollute, do not increase dependency on imported goods, will strengthen local food self-sufficiency, and can respond to local needs.
THE PARTNERSHIP
SOSTENICA, Inc. works collaboratively with CEPRODEL. The Centro de Promoción del Desarrollo Local (CEPRODEL), which in English means the Center for the Promotion of Local Development, was founded in 1989. SOSTENICA’s founder, began working with CEPRODEL to promote economic development through micro-lending in 1993. Working as partners, the two organizations share administrative responsibilities. SOSTENICA provides services directly to individual and institutional investors in the US, while CEPRODEL oversees the issuance of credit and monitors loans to Nicaraguan borrowers.
Both CEPRODEL and SOSTENICA are major investors in the Fund, which maintains a minimum of 15% equity capital at all times. These capital reserves serve as indication of the parent organizations’ confidence in the Fund and as a partial protection to investors.
SOSTENICA, INC.
SOSTENICA Inc. promotes economic and community development in many regions of Nicaragua through credit, technical assistance and outreach to low income businesses and small farm families. SOSTENICA is a federally approved non-profit under the 501(c)(3) provision of the IRS. In addition to the extension of loans to credit-worthy low income applicants, SOSTENICA promotes sustainable agriculture by working with farmers and University extension programs teaching organic agriculture, integrated pest management, soil conservation, reforestation, and ecologically sustainable practices.