Monday, May 24, 2010

The role of microcredit in Haiti after the earthquake

Right after the January earthquake, microcredit banks in Haiti went quickly back to work. Some of the banks gave their clients some cash to get by after the earthquake. All of the banks went to try to find their clients, first of all, to make sure they didn't perish. But also to try to renegotiate the loans so the tragedy didn't force them into default.

Microcredit is a big help to a large sector of the Haitian economy. Over 80 percent of business are small self-proprietorships. The kind of little businesses that may not have the collateral to get a loan from an established bank.

From the Miami Times, writer Niala Boodhoo tells us about the work of one of our favorite microcredit banks, Fonkoze.

Fonkoze is the largest microfinance organization in Haiti, as measured by the number of its clients, who are spread primarily outside of Port-au-Prince in the countryside.

Like the Grameen Bank, nonprofit Fonkoze describes itself as the bank of Haiti's poor: It has 200,000 saving accounts as well as 45,000 loans, and has just also help launch a new pilot website, Zafèn, which it hopes will connect especially the Haitian Diaspora directly to business owners in Haiti who are looking for loans.

``We believe there is a staircase out of poverty,'' said director Anne Hastings, inside Fonkoze's new temporary headquarters in Port-au-Prince. The bank's permanent headquarters were destroyed by the earthquake, along with several other branches, including at the earthquake's epicenter in Leogande, where Fonkoze brought in a mobile unit to provide banking.

One of the main walls inside the branch at Cabaret, just outside of Port-au-Prince, has a huge crack. Workers strung up tarps and took their laptops outside where clients like Paul are being served.

``I started working with Fonkoze to get a little bit of money,'' said Paul, as she stood outside near one of the tarps.

Paul was describing the bank's first-tier loan program, which they call Ti Kredi, or little credit, loans as small as $25. She eventually moved into the second tier, forming a group with other women who manage a $1,000 loan together. Those groups meet regularly for literacy and business training.

Since the earthquake Fonkoze has focused, as Hastings said, on getting its clients back on the staircase.

For years Fonkoze has partnered with Haiti's Alternative Insurance Company to also offer microinsurance in each loan, so if that the loan holder dies, not only is the loan forgiven, but the family is given a small indemnity to help with funeral costs.

The two were about to introduce a catastrophic microinsurance program just before the earthquake. They decided they would treat all of Fonkoze's loan clients as if they were enrolled in the program, resulting in 17,000 loan clients affected by the earthquake having their loans forgiven. Clients also received a 5,000 gourde ($128) indemnity.

``I think insurance is there to improve the quality of lives of individuals,'' said AIC President Olivier Barrau, who started the microinsurance program with Fonkoze in 2007, and said it is designed to help educate all Haitians, who are chronically underinsured, about how insurance should be not just a financial, but social tool.

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1 comment:

Matt Davies said...

Whilst vital in giving a livelihood to hundreds and thousands of Haitians, we know that micro-credit cannot be the answer for hundreds of thousands of the poorest Haitians, who, when given beans in food parcels, do not even have the fuel to cook them. Haiti's recontruction must take their experience into account to build a more equitable country that respects all human rights for all Haitians.