Microcredit Program Analysis: FINCA Nicaragua
For an Economic Development class I took at Wheaton College, I wrote a final research paper about FINCA Nicaragua and a brief analysis of the effectiveness of its loan program. The introduction is presented below, and the paper is linked at the bottom of the page.
Introduction:
Hyperbole often dominates the discussion about microcredit’s effectiveness at alleviating poverty in the Global South. On one side of the ideological debate are those such as Muhammad Yunnus who describe microcredit as the panacea to alleviating poverty in the developing world-a cure so effective that, in the future, children will have to go to museums to learn what poverty once was. Others contend microcredit adds to household debt burdens while doing little to lift these households out of poverty. Still others argue that microcredit distracts policymakers’ attention away from addressing structural societal reforms necessary to alleviate poverty in the developing world (Bruck, 2006, p.6). This paper aims to examine the effectiveness of microcredit at alleviating poverty in Nicaragua by examining the loan program of the non-profit microfinancer Foundation for International Community Assistance (FINCA) Nicaragua. The issues within microcredit to be addressed using FINCA as the focal point are the issues questions regarding joint-liability group lending versus individual lending; financial systems versus the poverty pending approach; and microcredit’s effectiveness at alleviating poverty.
Through a review of literature surrounding microcredit effectiveness at alleviating poverty throughout the Global South, I hope to describe FINCA’s policies and use these policies as the lens through which to analyze FINCA’s micro-loan effectiveness using the greater literature surrounding microcredit’s impact. While this paper will be focused on the literature surrounding microcredit’s effectiveness, I feel that the best way to judge the true effectiveness of microcredit is to hear from those who have had actual experience with these programs-the microentrepreneurs who rely on microcredit loans.
I learned the importance of listening to the clients during my entrée into questioning the effectiveness of microcredit during six months I spent in Nicaragua, the second poorest country in the Western Hemisphere. Three months of my time was spent working with the microfinance organization Foundation for International Community Assistance (FINCA) to set up microcredit Village Banks in the municipality of Nueva Guinea. During my time with FINCA Nicaragua, I saw that with the right policies, microcredit can make a substantive difference in the lives of the very poor. I learned this from my fieldwork directly interviewing and questioning microentrepreneurs for their summation of FINCA’s loan program.
This paper will emphasize more the review of literature surrounding empirical analysis of microcredit loan policies which FINCA has adopted. Microcredit policies which FINCA utilizes will be laid out, and analysis from publications will be applied to gauge established summations of like microcredit programs. In addition to this quantitative analysis, qualitative content will be utilizing using the personal interviews and participant observations gathered from FINCA microcredit clients in Nueva Guinea, Nicaragua.
Entries (RSS)