PORT-AU-PRINCE – Maude Fleurisant, a mother of three in Port-au-Prince’s Fontamara neighborhood, sews dozens of plastic bags a week to sell downtown, buoyed by small loans which enable her to buy materials and travel to the market.
“People buy my bags because they know mine are stronger,” Fleurisant said proudly. “It’s helping me”.
Fleurisant is one of 20 women to participate in the first round of micro-loans from Haiti Microcredit, a micro-credit institution which begun this year after the January 12 earthquake.
She has run her business for years, but since the earthquake Fleurisant has relied in part on the loans to help her find and pay wholesalers for the plastic material she uses, as well as send money to her children who left for Cap-Haitien after the disaster. The loans will also enable the entrepreneur to set up a savings account, something she’s never had before.
“I’ve watched it become more successful than I ever thought it would become,” said Colleen Mooney, the program’s director.
Micro-credit institutions are growing in Haiti, as hundreds of Non Governmental Organizations seek ways to help small local enterprises. Traditional banks, one of the few alternatives for small business owners in Haiti, are sometimes too strained to provide small business loans, and can charge much higher interest rates which some clients cannot repay—leading to a cycle of indebtedness.
Micro-credit institutions also cite their personal approach to poverty alleviation. The biggest micro-credit institution in Haiti, Fonkoze, became even more popular because it was the first on-the-ground institutions to organize emergency loans and aid for its members.
Fonkoze was hit hard by the quake: it lost five staff members and director Carine Roenen says as many as 18,000 of its clients lost either their homes or businesses—or both.
But overall, Fonkoze, an abbreviation for the Kreyol phrase “Fondasyon Kole Zepòl” or “Shoulder-to-Shoulder Foundation,” has grown enormously from its first location in 1995 to 41 branches today. The locations are spread throughout the mountainous country of roughly nine million people.
“Our mission is to bring financial services to people that don’t have them,” Roenen said.
Most micro-credit institutions have a multi-step process for their clients. To gain approval for a first loan, clients sometimes have to participate in training or literacy classes, after which they receive a small amount for a first loan. Mooney’s organization gave 5,000 gourdes (US 124.19 ) for its first round of loans this spring, while Fonkoze’s smallest loan is approximately 9,300 gourdes (US $250).
As each successive loan is repaid, the amount of new loans gets larger as the clients’ small businesses expand and they attend training and educational sessions. Micro-credit clients have small businesses selling everything from soft drinks to jewelry to shoes. Almost all micro-credit clients are women, something Roenen says is standard practice because women often run the household and manage family expenses.
“They are the economic spill of the household,” she says. “You have a more direct impact on the entire family.”
Though the amounts of the loans may seem small, they can be a lifeline for many women who receive more than just a loan: a support network, literacy and financial training; even healthcare, in the case of many of Fonkoze’s clients.
“We say we’re more than a loan, we want to walk with you, we want to grow with you,” says Obed Daphnis, who helps oversee micro-credit lending for the non-profit Hope International.
Fonkoze is also working on expanding its efforts beyond its main work of microloans. With more than $8 million in funding from the American Red Cross since the earthquake, Fonkoze has distributed one-time cash grants to clients, expanded the amount of funds available for micro-loans, started a program, Zafen, to link up individuals abroad with potential micro-credit clients, and begun work on a debt-relief program.
“They have the expertise in this area,” says Red Cross spokeswoman Julie Sell of Fonkoze’s work. “It’s something we very much believe in—it’s about empowering the Haitians.”
Fonkoze is also planning a new catastrophic insurance program, something Roenen says is especially necessary after the devastating hurricanes of 2008 and the earthquake this year.
Micro-credit institutions in some countries have come under fire by critics who say that lending institutions take advantage of the poorest of the poor to earn profit on interest rates.
It’s a criticism that micro-credit workers like Mooney acknowledge but flatly reject.
“Some micro-credit organizations make millions off interest,” reflects Mooney, who runs Haiti Microcredit. “Is that really moral, to be profiting off micro-credit when we started it to get people out of poverty?”
But she is quick to point out that her organization, like Fonkoze and many others, is non-profit, and trains and uses locals to take over day-to-day operations. Money made from interest payments are used to pay for operations costs and to expand the lending program. Both Haiti Microcredit and Fonkoze charge interest rates in the low single digits (6% and 5%, respectively), and both say they do not use coercive or intimidating tactics to force repayments, such as calling the police to a client’s home.
The Haitian government itself is supportive of micro-credit programs, saying in its March 2010 reconstruction report that 200,000 families and small businesses depend on micro-finance institutions.
“Creating and maintaining employment for a large part of the population depends on the dynamism of these institutions,” said the report, which also acknowledges the ability of micro-credit organizations to reach many individuals through their strong social networks.
Indeed, at the core of many micro-credit institutions’ principles is instilling a sense of accountability in their clients by establishing strong ties within communities. Haiti Microcredit’s members, for example, are responsible for each other’s weekly payments and have to chip in to pay for anyone who is delinquent, fostering a sense of group trust and mutual dependability.
Mooney and others say that micro-credit brings opportunities to people who would otherwise struggle to meet basic needs.
“Handouts create a sense of dependency. Food donations sometimes are not the best things,” he said. “That’s the benefit of micro-loans: it empowers.”
Still, not all clients are success cases.
“Sometimes they’re not ready for that responsibility,” said Daphnis of some micro-loan recipients.
Roenen, the director of Fonkoze, also acknowledges that micro-loans aren’t always successful for everyone.
“Whereas it’s been proven that micro-credit is good for businesses, it hasn’t been scientifically proven that it gets people out of poverty,” said Roenen, who added that up to one-third of Fonkoze’s clients haven’t significantly improved their financial stability yet, something she says the organization is rigorously studying to try to understand why.
Nevertheless, she said “If you stay with Fonkoze for five years, we will make sure you have a sustainable business, you can put food on the table, and you can put your kids in school. We will give you training and grow your business.”
Even without a perfect record, micro-credit institutions are certain they’re making at least a small difference.
“You realize people are eating better, faces are fuller,” said Daphnis of seeing clients after they participate in the program.
“It’s a joy.”
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