'Until about a year and a half ago, you practically couldn't talk about this issue, but now the situation is different,' a European diplomat told IPS. He preferred not to be identified, to avoid undermining progress on the issue, which has its own particular complexities in the case of Cuba. 'The idea of microcredit went from being almost sacrilege to something interesting,' he noted.

Juan Diego Ruiz, general coordinator of Spanish cooperation in Cuba, said the word microcredit is not part of the Cuban vocabulary, and actually might not be the most correct term in this case.

'Today what's being talked about more is credit policy, credit for the productive sector, and it's an issue that is being discussed both on the street and in offices,' he told IPS.

One of the entities feeling out the situation on the ground is the Italian National Committee for Microcredit. It has organised a couple of visits to Cuba, evidence that the subject of microfinance is drawing attention little by little in the context of development projects and an opening to the private sector, where international cooperation could play an important role.

This type of loan was created in the 1970s as a financing alternative for low-income people in need of capital to set up small businesses. Unlike traditional credit, no collateral is required, the amount is usually relatively small, and payments are weekly or biweekly.

These differences lead to micro-financing institutions being described as entities with high administrative costs covered by the high interest rates generated by their portfolio of clients, composed of a large number of small, short-term loans, without guarantees, concentrated in a specific geographic area.

Credit exists in Cuba in the form of Cuban pesos and focused on consumption, such as the individual purchase of domestic goods, and agricultural cooperatives.

But the strategy launched by the sixth congress of the ruling Communist Party of Cuba (PCC) to modernise the economic system anticipates expanding and diversifying possibilities in terms of bank loans.

The 313-point programme charting the country's economic and social guidelines for the coming years specifies that credit policy will be essentially oriented towards providing necessary support for activities that stimulate national production and generate hard currency income or replace imports, as well as activities that promote development.

Meanwhile, since March, banking and credit policies have been in place for individuals, such as loans for farmers to buy equipment and supplies in retail stores with the goal of boosting national food production.

Also, loans may be granted to people authorised to engage in self- employment, to finance their working capital and investments via the purchase of assets, supplies and equipment, and to allow these self- employed workers to sell products and services to state entities through contracts.

It is precisely in these emerging sectors, which have developed from the distribution of idle state land to thousands of farmers and the expansion of trades and activities in which self-employment is allowed, where microcredit could have the greatest impact, at least initially.

However, the legal framework that will regulate the new policies on credit in general has yet to be defined.

In these new forms of non-state activities, small-scale loans could facilitate access to machinery, tools, supplies and equipment, and increase the individual's ability to contract services or labour, which would stimulate the economy.

It is in the area of self-employment 'where microcredit fits best, with a focus on individuals,' Tomas Marco, head of agricultural development in Cuba for the Spanish Technical Office for Cooperation, commented to IPS. 'What's opening up is a possibility; it's not even a certainty. Nobody knows if loans in hard currency for self-employed people will be permitted.'

Cuba's dual currency system, in which the Cuban peso is the national currency and the convertible peso (CUC) replaced the U.S. dollar as hard currency in all transactions in 2004, is another challenge to overcome in making credit more widely available. However, no short-term changes to the system are on the horizon.

'Another major obstacle is purchasing power,' Marco said. 'You might give a hard currency loan to a UBPC (Basic Unit of Cooperative Production in agriculture), but the cooperatives cannot directly buy in hard currency. We have to wait until regulations are created for the (new economic and political) guidelines, and see how these aspects are regulated.'

Rodolfo Hernandez, an official with the Swiss Agency for Development and Cooperation (SDC), said microcredit could benefit Cuba 'fundamentally' in the low and medium-income sectors, with a certain amount of priority given to women and young people.

'It would be important for loans to be granted in both currencies, for shops and other locales to be created that sell at the municipal and sub-municipal levels, and for the credits to carry a payable interest rate that would make the process sustainable and that would make loans accessible to people in low and medium-income segments of the population,' the expert said.

In his opinion, funds should be channelled through the Bank of Credit and Development or local banks created for that purpose, and by associations of cooperatives - whose partners are other cooperatives - that have enough income to take on the commitment.

For his part, Ruiz did not rule out that in the context of international cooperation, non-commercial but reimbursable credit instruments could operate. 'The opportunity and the will are there. In recent months, our headquarters (Spanish Agency for International Cooperation) has made several visits, and has reported on credit experiences that could have work here,' he commented.



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