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Cablegate: Nicaragua: Application for Opic Finance - Procredit

VZCZCXYZ0025
RR RUEHWEB

DE RUEHMU #0949 2722137
ZNR UUUUU ZZH
R 292137Z SEP 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 4604
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS MANAGUA 000949

SENSITIVE
SIPDIS

STATE PASS OPIC: RGREENBERG

E.O. 12958: N/A
TAGS: EINV EFIN EAID ECON PGOV PREL NU
SUBJECT: NICARAGUA: APPLICATION FOR OPIC FINANCE - PROCREDIT

REF: (A) State 096859 (B) Managua 941 (C) Managua 929 (D) Managua 625, (E) Managua 116, (F) 2009 Investment Climate Statement, (G) 2008 Managua 1437, (H) 2008 Managua 1096

1. (SBU) The following information is provided in response to Ref A
seeking Embassy Managua's comments on OPIC's plans to provide
financing to Banco ProCredit Nicaragua via a subordinated loan to
ProCredit Holdings A.G. ("PCH").

2. (SBU) The microfinance industry is under threat in Nicaragua.
The "No Pago" (No Payment) movement has forced many microfinance
institutions (MFIs) to close their offices, especially in northern
Nicaragua (Refs B, E, F and H). Weak rule of law and poor internal
controls in some MFIs have made them susceptible to infighting and
embezzlement (Refs C and D). Meanwhile, the GON's aggressive
expansion into microfinance through the National Rural Fund (CARUNA)
-- an MFI funded through the Bolivarian Alliance for the Americas
(ALBA) -- has heightened competition in the industry (Ref G).

3. (SBU) Action Request: Embassy Managua recommends that OPIC send a team to Nicaragua to better understand these recent developments in the microfinance industry.

Banco ProCredit Nicaragua
-------------------------

4. (U) Embassy Managua is not aware of any derogatory information concerning Banco ProCredit. Banco ProCredit started operations in Nicaragua in 2000 as an MFI named Financiera CONFIA. In 2005 it became a bank, supervised by the Nicaraguan Superintendency of Banks (SIBOIF), and began receiving deposits from the public. As of June 2009, ProCredit Nicaragua's assets, according to the Nicaraguan Superintendent of Banks, are $164 million. In June 2009, Fitch Ratings gave ProCredit Nicaragua a rating of AA-. Due to the current macroeconomic conditions in Nicaragua, it is expected that Banco ProCredit will suffer minor losses. Loans in default have increased, as well as the number of restructured loans. Banco ProCredit has a large number of deposits from state institutions.

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