Strengthening Supervision of Microfinance in Nicaragua

Project Development Objective (PDO)

The main objective of this technical assistance project is to strengthen the supervision framework and capacities for Nicaragua’s National Commission of Microfinance (Comisión Nacional de Microfinanzas, or CONAMI) for the goal of facilitating sustainable and responsible financial services for the low-income population.


Since their establishment, all 17 microfinance institutions (MFIs) in Nicaragua have registered with CONAMI as required by law, and 9 other smaller MFIs have also registered, for a total of 26 MFIs as of September 30, 2013. With the support of the Inter-American Development Bank and the World Bank, CONAMI has approved 13 regulations since the law was adopted. Currently, it is developing five additional regulations for approval.
With the implementation of an adequate regulatory framework, the need now is to strengthen the supervisory function of CONAMI and build capacity among its technical staff to be able to enforce the recently sanctioned regulations. The project team has identified some of the main gaps preventing development of the sector: the lack of manuals and guidelines and the technical staff’s lack of specialized skills to analyze the MFIs’ systems and policies for lending, collection, credit risk management, internal controls, and performance of the portfolios.


The envisaged activities of this technical assistance project are as follows:
1.  Assisting in the drafting of examination and supervisory guidelines that account for the regulation
     framework and the peculiarities of Nicaragua’s MFIs 
2.  Developing a supervisory manual comprising integrated off-site and on-site procedures, which
     will provide guidance to supervisory personnel in planning and conducting on-site inspections in
     conjunction with an on-going off-site supervision
3.  Conducting capacity development (training) of CONAMI staff for the implementation of the
     supervisory framework, including hands-on training in a selected MFI to put in practice the
     supervision manual.

Expected Outcomes

The expected outcomes of the project are the following:
1.  Short-term outcomes: Through hands-on supervision with selected MFIs, CONAMI staff will
     acquire more knowledge and capacity to regulate and supervise MFIs. 
2.  Medium-term outcomes: The new supervision framework is expected to be rolled out at a
     sectorwide level, making CONAMI’s regulating and supervising of MFIs more effective;
     consolidating CONAMI as the regulator and supervisor of the microfinance sector; and generating
     MFIs that are better structured and managed to perform in the microfinance sector, thereby 
     internalizing adequately the risks of the activity and developing a more competitive and
     transparent microfinance market.
3.  Effect: The project is expected (a) to contribute to both a more stable and inclusive microfinance
     sector and a sounder and more resilient financial sector; (b) to provide the low-income population
     of Nicaragua with access to broad and responsible financial services from MFIs that are regulated
     and supervised in line with the best practices; and (c) to expand the financial products and
     services offered by the MFIs.