By Sue Lloyd
WCCN Board Member

It was 15 years ago that WCCN began to channel investors’ money into community economic development in Nicaragua through what is now Prestanic, the community loan fund started by the Nicaraguan Council of Churches (CEPAD). Just a year earlier, after the 1990 election ended the revolutionary Sandinista government, WCCN’s director, Sonia Taddy, and the Board had agreed that our focus going forward would be economic issues and projects. The opportunity to partner with CEPAD, a strong Nicaraguan NGO which shared a focus on economic development, came our way. WCCN took the initial steps on the road by which we eventually forged a model for investment in microcredit and community economic development in the third world.

As readers of Nicaraguan Developments, you know that the NICA Fund’s total capital now exceeds $7 million and that we have loaned our 14 partners (including Prestanic) over $27 million in these 15 years. We’ve loaned these funds in a financially responsible and successful way. In addition, from the start investors came to us with a social concern for development in Nicaragua and a willingness to take lower than market return. Many had connections to CEPAD.

In the early 1990s, few in the investment world were looking at social impact as a desired “return” on investment.

There were also very few socially responsible community investment vehicles or opportunities. In contrast, the NICA Fund’s due diligence process of evaluating partner agencies looks in detail at social criteria including the number of women borrowers, group lending and the smallness of loans, community remoteness and the degree they are financially unserved. We also seek to loan for agricultural and livestock projects, housing, and the production of socially beneficial products. In addition, as readers know, WCCN has participated in two in-depth studies to determine how microcredit is meeting the needs of the families and communities served.

Now 15 years later in 2006, we find that as part of the fast growing community investment movement we have a lot of company. According to the Social Investment Forum in 2000 $5.4 billion was invested in communities. By early 2005 this total had reached to $19.6 billion. The Social Investment Forum Foundation and Coop America’s 1% Campaign has a goal of reaching $25 billion in community investment assets by 2007. They call for individuals and institutions to commit 1% of their banking and investment dollars into community development financial institutions (CDFIs). This is an industry which hardly existed in 1991!

CDFIs (also called community investment institutions, CIIs) are usually non-profits and they include community development banks, credit unions, loan funds, venture capital funds, pooled funds, micro-enterprise funds and others. They offer opportunities for investment, usually fixed income investments, loans or deposits in this country and around the world. The NICA Fund is one such investment option. We might be called a pooled loan fund, and our partner agencies, as Nicaraguan CDFIs, include micro enterprise loan funds, and credit cooperatives.

WCCN has its roots in Wisconsin’s sister relationship with Nicaragua and the NICA Fund is part of our wider program. As with CDFIs, WCCN remains a small organization and investors participate in the NICA Fund’s direct connection with the development organizations and with end borrowers— micro enterprises, small manufacturers, co-ops, small coffee producers, farms, etc. Many of us on WCCN delegations in these 15 years have met with partner agencies and visited the families and communities who are our ultimate partners. This is and has been a unique opportunity.

There are similar direct community investing options, community development banks, credit unions and loan funds in every state and most communities of the US. It’s also possible now for someone seeking to invest for the social good and a diverse portfolio through pooled funds such as the Calvert Foundation and large microfinance options such as Accion International and Oikocredit which are accessible vehicles for investing internationally in the third world. Go to www.calvertfoundation.org for a listing of other such options and for further information on the Calvert Foundation, which like most pooled funds offers minimum investments of $1,000. It ended 2005 with $82 million invested through 195 CDFIs and loan funds (including the NICA Fund) in 106 countries. 34.2% of the funds were placed outside the US.

The Chronicle of Philanthropy, October 26, 2006, is hopeful that the awarding of the Nobel Peace Prize to Muhammad Yunus (founder of the Grameen Bank in Bangladesh in the 1970’s) will “provide a lift to the already growing field of microfinance and bring financial services to a larger percentage of the world’s poor.”

Since the first Global Microcredit Summit in 1997 micro loans have reached more than 81 million of the world’s poorest families. 420 microfinance organizations accounted for 78% of these clients, 84% of whom are women.1 Assets in international loan funds in 2005 totaled $165 million. While microfinance is not the be all and end all of needed community economic development it’s a vital step in the transfer of assets to those places in the world most denied access to capital. To learn more go to www.socialinvest.org.

The NICA Fund has grown to become the 2nd largest source of funding to microfinance in Nicaragua. As of December 2005, the organizations which make up ASOMIF, the trade association of microfinance organizations, had portfolios totaling over $142 million, and they reached 298,774 borrowers.2 However, given this, what percentage of Nicaragua’s poorest are reached? We know that poverty in Nicaragua has not been eradicated. It is easy to see that a large percent of Nicaraguans do not have adequate housing. How much more community investment is needed in Nicaragua? And in the world? What would be the impact in Nicaragua, in the US, in the world if small and large investors committed at least 1%?

Are you a community investor? Are you a NICA Fund investor??

References
1 Daley-Harris, Sam, State of the Microcredit Summit Campaign Report 2006.
2 Microfinanzas, No. 10, December 2005.