By Jacqueline van Hartley
Nicaragua has one of the lowest rates of financial inclusion in Latin America. Only 1 in 5 adults over the age of 15 have access to a formal bank account. Nearly a third of the population lives on less than $2 a day. Not surprisingly, microfinance is incredibly difficult in Nicaragua.
Accion’s partner Financiera FAMA (FAMA) has proven that reaching customers responsibly in such a challenging environment is possible.
In 2008, the financial crisis sparked the “No Pago” movement, and protests erupted across the country. The movement was driven by some microfinance clients who had been hit hard by bad financial practices, including hidden fees, forced saving, and high late payment charges.
While many players exited the market, FAMA adapted — returning to traditional microcredit in order to continue serving entrepreneurs responsibly when they needed it most. Since the “No Pago” movement, the Nicaraguan government has worked to strengthen the sector through a new regulator and supervisor. Through this time period, FAMA continued to perform remarkably well, reaching more borrowers in new areas when other banks were not.
FAMA has expanded financial access to microentrepreneurs for more than two decades. From its beginning in 1991 as a non-profit led by a group of Nicaraguan business leaders with the support of Accion, FAMA has grown to become one of the leading microfinance institutions in the country. Today, it serves 10 percent of Nicaragua’s total microfinance space with 58,000 clients — most of whom are women.
Even as FAMA celebrates its 25th anniversary as a microfinance institution dedicated to microentrepreneurs, it stays focused on the future. With fresh funding from Accion and two new investors, FMO and Triodos, FAMA will continue to innovate and adapt.
After a quarter of a century working together, we’re excited to continue our partnership because FAMA is:
- Creating a social impact: FAMA reached customers with responsible loans despite a highly challenging regulatory environment. The company continues to do so today as one of the key players.
- Filling a market need: With only 15 percent of adults in Nicaragua with formal bank accounts and a high percentage of rural population, there is a clear need for microloans at reasonable interest rates. FAMA lends to their clients at an average rate of 36.6%, slightly lower than the average of competing MFIs.
- Showing an ability to innovate and adapt: FAMA performed well financially and continued to find ways to lend despite the “No Pago” crisis. FAMA is a great example of an institution that innovates in order to serve a market in need. They are looking ahead to create an agent network, build an online banking platform, offer e-wallet service, and provide financial education to its clients using newly injected capital.
FAMA’s next step? Reaching more rural communities. In a country where 2 out of every 5 people live in these rural areas, that expansion is crucial for financial inclusion. FAMA is building out its own agency network and an online banking platform to make sure more it can deliver financial services to more of the population.
As FAMA enters this next chapter, we look forward to watching it evolve and reach even more people with more services than ever before.