In the midst of the uncertainty generated by the political and economic crisis, banks in Nicaragua have opted to reserve their resources, a situation that is evident in the increase in the liquidity of the system.
According to data from the Superintendencies of Banks and Other Financial Institutions, between March and October of this year, the liquidity of banks as a function of deposits went from 32% to 45%.
An announcement has been made that in April the first short term mutual fund will start operations in the local market, which will require a minimum of $1,000.
Initially the fund administered by Invercasa will be in cordobas and investment in dollars will be enabled later, with a feature that allows for short-term investments.
Emiliano Maranhao, president of Invercasa Sociedad Administradora de Fondos de Inversión, said "...We expect yields of 2% higher than the average percentage, for example, than what is paid on savings accounts, current accounts do not have interest rates. In this way, 15% of total deposits in the country could be captured, which will favor an industry with strong growth. "
At the end of June the credit portfolio of the banking system recorded an increase of 21.5%, with loans to the commercial sector, personal and industry seeing the most demand.
Despite being the smallest national bank in the Central America, it is the one that has reported the highest growth in its loan portfolio during 2014, growing by 21.55% at the end of the first half of 2014.
The Higher Council of Private Enterprise has welcomed a proposal by President Ortega, to put international reserves funds into the Banco del Alba , provided legal procedures are followed.
"What we want to make clear is that it has to be in line with the law, on the one hand, but in the medium term, yes, it will mean (...) net resources for Nicaragua, we have to see it in that context," said Jose Adan Aguerri , president of COSEP, according to LaPrensa.com.ni.
International creditors, headed by the BCIE, have frozen the funds earmarked for microfinance institutions in Nicaragua.
The frozen funds amount to about $30 million, representing 20% of the total portfolio balance of microfinancers belonging to the Nicaraguan Association of Microfinance Institutions, ASOMIF.
"According the president of ASOMIF, Rene Romero, the effects of the global financial crisis and the ‘No-Pago’ (Non-Payment) Movement are weighing on the country's microfinance system, so much so that international creditors are waiting for Nicaraguan institutions to improve their internal indicators before going ahead with disbursements", reported Elnuevodiario.com.ni
The U.S. company Factor Brokers is offering to pay 80% of the bill when the goods are delivered, and the remaining 20% when the buyer completes payment.
Charles Harding, a representative of the Office of Business Development for Latin America and the United States said that this novel service is international factoring.
"Currently we have a very large portfolio in the area of perishable goods and one of the services that we offer is credit insurance, payment and risk" said the executive to Elnuevodiario.com.ni.
The new law will help raise funds primarily for small and medium enterprises.
"The text of the law refers to the currency bill as “a negotiable security, which will serve as legal support when transactions are issued between employers and a financial institution, if the purpose is to raise funds", published Laprensa.com.ni.
The president of the Chamber of Commerce and the Nicaraguan Council of Micro, Small and Medium Enterprises (Conimypime), an organization which demanded this law, said the new law favors the industry and once in place, it will facilitate the mobilization of about $ 50 million a year.
The volume of total deposits accounted for 50% of GDP and becomes mostly government debt.
El Nuevo Diario reports, "in that sense, the Central Bank managed not only to extract resources from the economy, but also strengthened the country's international reserves, while private financial institutions also bought government securities, instruments used to finance the nation´s deficit."
The proposal has already been favorably reviewed by the Economic Committee of the National Assembly and its approval is expected next week.
The law would make exchangeable invoices a legal proof of transactions, where they are issued between financial institutions and businesses seeking to acquire funds, particularly micro, small and medium sized enterprises (MSMEs).
Through an agreement with the IDB's Multilateral Investment Fund (Fomin), the company Credifactor will offer factoring (selling invoices at a discount) services to small and medium sized enterprises.
The total cost of the project is approximately two million dollars, which will enable Credifactor to develop its capabilities, carry out training and expand its services across Nicaragua.
According to Fitch Ratings, even though the economic scenario has improved, Central American banks face challenges related to the quality of their assets.
Central American banking systems have weathered the financial crisis relatively well. Even though profits fell considerably during 2009, industry solvency levels remain good. Profits fall mostly because banks opted for liquid assets and increased their expenses in provisions.
According to Fitch Ratings, even though the economic scenario has improved, Central American banks face challenges related to the quality of their assets.
Central American banking systems have weathered the financial crisis relatively well. Even though profits fell considerably during 2009, industry solvency levels remain good. Profits fall mostly because banks opted for liquid assets and increased their expenses in provisions.
Banking liquidity in cordobas increased from 32% in 2008 to 48% in 2009, and in U.S. dollars it raised from 30.4% to 41%.
Economists also remark that yields dropped in the last months of 2009.
“In 2008, the average return over capital was 17.2%, a figure that dropped to 5.5% on December 2009… Additionally, while loans decreased, deposits increased”, reported El nuevodiario.com.ni.
As in Panama, there are hundreds of millions of untapped dollars in loans that were obtained to prevent illiquidity in the Costa Rican banking system.
The government of Costa Rica rejected the loan for $500 million that the Inter-American Development Bank (IADB) had granted at the end of 2008 and for which the approval by the Legislative Assembly had already been obtained.
Profitability drops as asset liquidity increases, but liquidity is what ensures the life of the banking business and their customers' money.
Panamanian banks have not used the extra funds that the financial incentive program (PEF) made available to them in order to stimulate lending. In addition, it must be considered that said funds are very expensive, and they have simply not been needed.