World Bank & Nicaragua Water/Small Business Funding

The World Bank’s board of Directors announced last week that it had approved “a zero-interest credit for $20 million to support the government of Nicaragua to improve water and sanitation services in rural areas.” An additional $20 million in zero-interest credit will go “to enhance the competitiveness of micro, small, and medium enterprises (MSMEs) and the business climate that affects those firms.”

According to the World Bank Press Release on June 12, 2008, the money earmarked for the development of the water and sanitation infrastructure is focused on improving the access to water in rural and indigenous communities.

The other $20 million for the MSMEs will be “implemented over five years and improve the quality and affordability of services to MSMESs through four components:

  1. Improvements to the business and investment climate for MSMEs.
  2. Matching grants for MSMEs to support, inter alia innovations, environmental improvements, and forward and backward linkages.
  3. Innovative financial services such as a plot partial credit risk guarantee system for MSMEs in coordination with regulated financial institutions.
  4. Improve strategic, technical and coordination abilities of MIFIC in the field of competitiveness… The primary focus of the projects’ interventions will be on urban MSMEs.”

“Both $20 million zero-interest credits funded by the International Development Association have a reimbursement period of 40 years with a 10-year grace period.”

If the credits are appropriately applied, this is good news for rural communities and small and medium businesses in Nicaragua that desperately need infrastructure assistance.

This is also encouraging news for investors in Nicaragua that rely on the govenments’ involvement to create a stable and reliable economic environment.

With his domestic popularity in decline, President Daniel Ortega should welcome the news too, and view this as a vote of confidence from the World Bank and the international community to continue the policy of opening Nicaragua to direct investment.