Micro Credit
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The Problem
According to the United Nations Development Program (UNDP), unemployment in Nicaragua is greater than 20% and underemployment tops 60%. Also, the government does not have the resources to provide the kind of “safety net” available in developed countries. So a very large number of Nicaragua’s population of five million suffer the physical and mental deprivations of poverty: hunger, sickness, illiteracy and hopelessness.
At the same time that jobs are not available, small entrepreneurs have difficulty finding resources to sustain or expand their businesses. Traditional financial institutions have not found it cost effective to provide credit for this sector.
The Solution
Providing credit to the poor had its humble beginnings in 1976 when Muhammed Yunus loaned $27 to a group of 42 Bangladeshi villagers. Since that time this strategy has proven to be one of the most effective in improving the lives of poor people throughout the world.
It is also the case in Nicaragua. The small business loans made by CEPRODEL (and made possible by SOSTENICA investors and others) have allowed thousands of entrepreneurs and their families to improve their lives. It has also improved the economic conditions of the communities in which these families live and work by injecting funds which flow in a multiplier effect from one business to another.
Twenty five years after it’s inception, CEPRODEL manages an average of 10,000 loans a year, approximately 4,000 of which go to first time borrowers each year. The average loan is just under $775, and can be used for commerce, industry, farming and ranching, handcrafts, higher education, and home purchase or renovations.
Read here about how individual borrowers use their loans and the effect it has on their lives.