Featured Essay: Nicaragua

The Legislative Assembly of Nicaragua passed a “Special Microfinance Association Law” in early 2004.  Juan Vega, regional director of the PROMIFIN project, provides a detailed analysis of the various viewpoints in Nicaragua and the potential consequences this law may have on the country's growing microfinance industry that serves over 50% of clients in the financial system.

Vega's essay discusses the legislative process and the ensuing discussions and debates among all stakeholders for proposed amendments to this legislation, including the debate over:

• whether or not Nicaraguan MFIs should be allowed to take deposits,
  
  
• who is the appropriate regulator,
  
  
• and what are sustainable capital requirements.

This essay also discusses the costs of implementing such a regulatory environment, including how to pay for regulation and supervision of the industry, and what costs MFIs will incur to become regulated entities.