Non-Conventional Rural Finance and the Crisis of Economic Institutions in Nicaragua

Nicaragua could become one of the few Latin American countries with an equitable rural development path. Since 1983, different phases of land reform have reduced the property share of large estates from about 36 per cent to just over 10 per cent and have transferred it to small-scale producers (INRA-OEA, 1991). Further, economic analysis has shown that smaller scale peasant production systems provide social value added and net generation of foreign exchange at least equal to that of most larger scale entrepreneurial farms (Bastiaensen, 1994; Maldidier, et al., 1995). Under today’s conditions of structural adjustment one could thus expect peasant systems to thrive. However, a quick glance at reality shows that such optimism is not warranted. One of the reasons for the disheartening state of affairs is the crisis of the economic institutions. War and harsh political struggle as well as the transformation of the agrarian structure have disrupted the country’s socio-economic fabric. At present, one can but observe the incompatibility between the relatively equal distribution of land and the shattered remnants of the previous economic institutions. As yet, no strong new and more appropriate institutional structures have emerged.