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Weak business confidence continues to take its toll on Nicaraguan banks' lending, which contracted in the first five months of 2011 despite an economic recovery.
The total credit portfolio declined 0.7% year-on-year in January-May, according to the latest figures from the Nicaraguan central bank (BCN).
The figures contrast with the gradual recovery of credit activity across the rest of Central America after the global financial crisis and economic downturn.
The underperformance of Nicaragua's banking system is particularly striking given the healthy pace of its economic growth. The Central American Bank for Economic Integration (Cabei), a regional multilateral institution, expects Nicaragua's GDP to rise 3.3-4.3% this year, above the forecasts for Guatemala, Honduras and El Salvador.
This suggests Nicaragua's banks are erring on the side of caution following a government-supported voluntary loan default movement - called "No pago," or "I won't pay" - that derailed microlending activity.
Following the collapse of Banco del Éxito (Banex) last year, now only six banks are left in Nicaragua. This is half the number operating in the second least diverse Central American banking system, El Salvador.
In contrast to poor lending figures, deposits in Nicaragua are rising sharply, growing 5.9% between January and May to 94.2bn córdobas (US$4.28bn).
This mirrors the trend in other leftist-ruled Latin American countries such as Ecuador and Venezuela, where low investment appetite combined with economic recovery has significantly boosted financial liquidity.