The revolutions and counter-revolutions in Nicaragua ended more than a decade ago, yet Nicaragua is still struggling to raise the living standards of its population and rebuild its shattered economy. In the wake of the revolution and subsequent civil conflicts, Nicaragua's economy declined precipitously. Per capita income was reduced by 50% from 1980 to 1990. More than 15% of the nation's population was displaced. During this time. Though Nicaragua was able to slowly rebuild its economy during the 1990s, it was slammed hard by Hurricane Mitch in 1998 and is still trying to recover.

Much of the economic reconstruction during the 1990s was due to the efforts of the National Programme of Reconciliation and Socio-economic Rehabilitation, which was launched in January 1992. This initiative included the "Development Programme for Displaced, Refugee, and Repatriated Persons in Central America" (PRODERE), covering an area including the northern town of Quilalí and, across the Jícaro River, the agricultural region to the east, in which UNCDF participated.

UNCDF has been involved in Nicaragua since the early 1980s, supporting the country through a myriad of development initiatives. Early programmes involved constructing important infrastructure, such as a bridge over the Jícaro River, the rehabilitation and extension of the Quilalí Water Supply System, and the construction of a small hydro plant in Wiwilí.

Local Governance

UNCDF's most recent initiative in Nicaragua was launched in 2001. Called the Municipal Strengthening Programme of the Nicaraguan Institute for Municipal Development, this project aims to support sustainable local development by improving local governance. The overall objective of this project is to help the Nicaraguan Institute of Municipal Development (INIFOM ) to identify and diffuse "good practices" of promotion of local economic development by municipal authorities. Through this project, UNCDF resources and expertise are directed towards:

• Training the INIFOM "Operations" and "Policy and Studies" Directorates, so that they can provide leadership to the internal and inter-organizational efforts to develop the municipal planning technology in Nicaragua and produce the related guidelines and manuals;
• Training mayors and municipal councilors to use the instruments and procedures of the improved municipal planning process;
• Creating capacity for extension and technical assistance in municipal planning, by training trainers within INIFOM, AMUNIC, NGOs, private consultants and technical staff from larger and more capable municipal administrations in the departmental capitals;
• Training the members of the municipal technical units (UTM) set up with the FISE and/or PROTIERRA assistance and promote their transition to municipal planning units integrated into the organic structures of the municipal administration; and
• Financing the preparation and evaluation of statutory instruments of physical/environmental planning in four pilot municipalities.

The project falls within a multi-donor initiative and works with central as well as local levels of governance. The Governments of Denmark and Finland are working with UNCDF in this programme to support the institutionalization of the decentralization initiative in Nicaragua.

Microfinance

Since 1998, a UNCDF-funded project has channeled U$2.86 million to Microfinance Institutions (MFIs) operating in five northern departments of Nicaragua. The project has influenced industry standards in this Central American country by introducing a revolving credit fund administered by a local institution. Credit repayment rates of 100 per cent demonstrate the importance of combining institutional strengthening with access to financial credit.

The project combined a revolving credit fund of US$1.75 million, administered by Financiera Nicaraguense de Inversiones (FNI), a public seond-tier institution of the Nicaraguan financial system, and a technical assistance component to selected MFIs based in the five northern departments of Nicaragua.

This microfinance project reached its objectives in 2000, after just two years of full implementation: a deepening of the financial system in the target region, leading to an improved supply of microloans to less-favored income groups. Furthermore, the project introduced, together with FNI, a financial criterion that has become the industry standard in Nicaragua. The loans channeled through the project have mainly been used for agriculture and small-scale commerce.

Following three years of success in extending loans for micro-enterprises and small rural businesses in northern Nicaragua, UNCDF renewed an agreement with Financieras Nicaraguense de Inversiones (FNI) in early 2001 to continue support for a $1.75 million revolving loan fund through 2003.

The goal of the initiative is to alleviate poverty and raise both the level of well-being and income of people in region by providing access to financial services for poor communities.

During the first phase, women accounted for nearly 60 per cent of the total number of borrowers benefiting from loans provided by micro-credit institutions through the project.

In addition, four out of five institutions supported by the project have achieved financial self-sufficiency. Three-quarters of the loans are for less than $500, an indication that the project is reaching borrowers who are poor.