Tuesday morning this week, Fidel Castro stirred interest in his island state by resigning as leader of Cuba. He has formally handed power to his aging brother Raul, an unsurprising move given Fidel’s hospitalization in 2006. Conspiracy theories abound and onlookers wonder if this most recent development might indicate or launch serious shifts in the country’s political and economic systems.
Cuba has stood as a communist state since 1959, and so it comes with little surprise that the Index of Economic Freedom, an index developed by the Heritage Foundation and the Wall Street Journal, ranked Cuba as 156th out of 162 reviewed countries in 2007. Its position, however, may slowly begin to budge. Though data is limited, poverty rates currently appear to linger high in Cuba. In addition, Cuba’s roughly 11.3 million citizens feel a palpable need for improvement in quality of life.
Amidst the array of political and economic instruments necessary for growth in the country, room has been made for microfinance. The government of Cuba legalized the micro-enterprise sector in 1993, and since then, the want for formal financial services has become more apparent, especially considering Cuba’s large highly literate and educated workforce. According to information made available by the Microfinance Gateway, the Banco Popular de Ahorro in Cuba is presently functioning as a microfinance institution, even offering its clients the option of using ATMs in the processing of deposits, bill payments, money transfers, and loan repayments.
Initiatives such as the Local Human Development Program (LDHP) of the UNDP have also been specifically funding microfinance projects on the island. The LDHP has created a Rotary Fund for Local Development Initiatives which provides loans to small and medium businesses at low interest rates. So far the fund has been implemented in the provinces of Pinar del Rio, Gramma and the municipality of Old Havana with prospects for further expansion. Nevertheless, challenges are unsurprisingly frequent and include a range of legal restrictions on development projects, a lack of sovereignty over profits, a lack of awareness of microfinance, low levels of involvement by local government in development projects, and a lack of financial resources from local governments. As of 2004, this Rotary Fund project was proposing collaboration with the commercial bank Banco de Credito y Commerico (BANDEC), where borrowers would be provided a hard currency account. The project appears to have since stalled, but it, along with other such projects, serves as a beacon for future development. As Cuba’s political skeleton adjusts to these changes in leadership, the microfinance industry should undoubtedly stand ready to jump in.