Think banks overcharge for credit cards? In Nicaragua, you’ll pay 60% interest to make your purchases with plastic, and 90% if you default on your monthly minimum payment to its major banks. Currently, there are 150,000 delinquent cases before the courts .That’s one of the effects of the global economic meltdown on this Central America country. Little wonder that credit unions are growing in size and strength as the preferred alternative to mainstream lending institutions.
CARUNA was founded in 1994 with 38 members with annual contributions of $300 and $100,000 in seed money from the European Union. Today, the credit union has some 20,000 members, 52 % of whom are women, has 560 employees and has 30 branches throughout Nicaragua and in neighbouring Costa Rica and Honduras. In addition, it has agreements with over 30 co-operative agencies to provide services at satellite locations and has 30 active investors world-wide.
The majority of its services are used to support agriculture production, which in the view of commercial banks is too risky to extend credit. CARUNA offers a number of programs to support so-called “high-risk” entrepreneurs, ranging from a small cattle retention program that offers loans to small-scale farmers to keep their animals to a micro-credit program tailored specifically for women to sell items like tortillas, small pastries, yuccas and oranges.
In total, CARUNA has given out 100,000 micro-credits at 4% interest to help Nicaraguans achieve their business goals and hopes for the future. This was done with the help of a $10 million loan, received at 1% interest, from the Bank of Social and Economic Development of Venezuela.
Like CARUNA, agriculture is the central focus of CCA’s efforts in Central America. In El Salvador and Honduras, CCA has worked with agricultural co-ops to improve their production and marketing, as well as to find ways to involve youth and in Guatemala, CCA has partnered with Quatro Pinos, a federal of agricultural co-ops that has evolved into a successful enterprise, growing vegetables for export to North American and Europe. In Costa Rica, the association sourced local agronomic expertise to improve on-farm production. The CCA also provided production loans to farmers through a cooperative and worked with the co-op to build marketing and trade capacity.
CCA has delivered programming to Central America for most of the time the organization has been involved in international development, dating back 25 years.