New rules govern formations, mergers, functioning, operation, suspension and liquidation of microfinacers, and establish the minimum capital for start-up.
The bill, which already has the backing of the Monetary Board (MB), will be sent to Congress for approval.
"The president of Banguat, Edgar Barquin, explained that this rule has a legal framework by which companies can capture savings deposits and undertake term lending, but they must be under the guise of public limited companies with a minimum capital of $5 million (Q39 million).
On January 11, 2012 the Law on Promotion and Regulation of Microfinancers comes into force.
From 2009 up to 2011 the global financial crisis and the local crisis has negatively affected the microfinance sector, which has generated successive losses.
The president of the Nicaraguan Association of Microfinance Institutions (ASOMIF) and general manager of the Foundation for Rural Social and Economic Development (Fundeser), Rene Romero expects that the new legislation will bring "stability and institutionalisation" to the microfinance sector.
Analysts say that the regulations contained in the bill issued by the Guatemalan Superintendency of Banks are restrictive for the sector.
Byron Dardón in his article for La Prensa Libre interviewed Cesar Stump, director of the Rural Development Cooperation of the West and an analyst from the Association of Social Economic Research (ASIES), Carlos Gonzalez.
New regulations, issued by the Guatemalan Superintendency of Banks, regulate the establishment, merger, operation, suspension and liquidation of Microfinancing companies.
The bill establishes a minimum capital for the start of operations of $2.5 million for credit and investment microfinancers and $5 million for credit unions.
"Institutions can be transformed into savings and credit microfinancers, if authorized by the Monetary Board, after a ruling by the SIB.
The issuance of a $25 million has been frozen due to pressure from the defaulters.
A group of producers and small businesses that owe $15 million to microfinancers, called the ‘No Pago’ movement, are putting pressuring on the Association of Microfinance Institutions (ASOMIF) and the government, asking them to assume the debts and help them avoid eviction from their defaulted properties.
The Nicaraguan Assembly has passed a law on the promotion and regulation of microcredit.
According to Gutierrez Wálmaro of the association of microfinance institutions (ASOMIF) the effect of the new regulations will result in a reduction of interest rates charged by microfinancers over the next three years.
"He adds that the only additional fees that could be charged are interest arrears, which also have a limit, as it can not be greater than 25 percent of the base interest rate agreed upon when the loan is approved”, noted an article in Laprensa.com.ni.
The Alba Caruna cooperative may continue to operate as second-tier bank with microfinancers beyond regulation of the new law.
The exclusion was requested after taking into account that the cooperative not only provides loans to its members but also to third parties.
".... Sandinista representatives got the backing of the majority of the seats in the National Assembly to keep cooperatives outside the regulations of the microfinance law", reported an article published on La Prensa’s website.
In the coming weeks, the bill which has been approved by the public and private sector will be sent to the Assembly.
The committee has already been formed (five members, two from the private sector and three from the public) which will be responsible for overseeing the microfinance sector, as stated in the bill.
According to an article in Laprensa.com.ni, “the bill for Microcredit Development states that the minimum capital of an MFI must be 200 thousand dollars, it does not determine credit limits, or fix interest rates. ‘This must be determined by the market '." said the President of the Superior Council of Private Enterprise (COSEP), José Adán Aguerri.
The Law for the Promotion of microcredit proposed by the government is starting to make sense for the private sector.
For the Nicaraguan Association of Microfinance Institutions (ASOMIF), discussion of the governmental law is starting to find more points in common than differences with regards to the current needs of the sector, and is progressing well.
By October it is anticipated that the law will be approved after seven years in the National Assembly.
Freddy Torres, member of the National Assembly's economy committee, indicated that progress had been made, adding that they are awaiting a final review by a Peruvian microfinance expert before sending it for approval by the Assembly.
"We have reached several conclusions, one of which is that micro-finance companies are going to be regulated by the banking regulator," he told Laprensa.com.ni.