In Haiti, Small Loans Make Big Impact

Niala Boodhoo (Miami Herald) reports on the impact of small loans for many small merchants (called ti machann) in Haiti, whose businesses were destroyed along with so much more after the earthquake. In Haiti, 80 percent of commerce comes from self-employment in small business ventures. Boodhoo focuses on organizations like Fonkoze, Sogesol, the Haiti Emergency Liquidity Program (HELP), and principles of microlending, through which the merchants may receive cash infusions to help in the short-term and help for covering previous loans, thus helping them recover in the struggling Haitian economy. Here are excerpts with a link to the full article below:

It’s been four years since Bangladeshi economist Muhammad Yunus and the Grameen Bank won the Nobel Peace Prize for three decades of work fighting poverty through microcredit. When the Nobel Committee hailed their efforts to “to create economic and social development from below,” it also thrust a global spotlight on microlending, which focuses on tiny loans, anywhere from $50 to several thousands dollars, mostly to the poor in rural areas.

Organizations like Fonkoze, founded in 1994, follow similar principles of microlending in Haiti: loans, which range from $25 to as high as $25,000, come with literacy and financial training. Much of its lending is to groups, not individuals, and mostly to rural women. But commercial banking institutions in Haiti, including the country’s largest banks, also have for-profit microfinance arms that function in a similar fashion to traditional larger loans.

[. . .] 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.

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. Hastings said the insurance, literacy and financial tools are all part of their goal of lifting people out of poverty.

For full article and video on remittances and the Haitian Diaspora, see http://www.miamiherald.com/2010/05/23/1642091_p3/for-haiti-small-loans-make-a-big.html

Photo from http://baudindentalmission.com/index.html

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