Ten months after the major earthquake that rattled Haiti in January 2010, microfinance institutions (MFIs) and banks still struggle to regain clients, manage late payments and deal with increasing loan defaults. New industry regulation is also expected after requests to the government from MFIs and banks that are concerned that their clients’ money is not well-protected in case of financial institution default.
The earthquake struck MFIs and microfinance banks hard. FINCA Haiti, a local MFI affiliated with US-based nonprofit FINCA International, wrote off almost a third of its microloan portfolio due to clients dying or losing their businesses. The percentage of microcredit clients in Haiti who have defaulted or are at risk of doing so has reportedly doubled in a year to 18 percent. Many MFIs and banks reportedly anticipate closing or reducing their operations if conditions don’t improve.
Some MFIs are relying on grants and other funds from US-based organizations to keep business going. After the earthquake forced so many loan write-offs, FINCA Haiti, the Société Générale Haitienne de Solidarité (SOGESOL), a subsidiary of the large Haitian bank SOGEBANK, and Fonkoze, an MFI in Haiti, received a USD 1 million grant to share from Citi Foundation, a philanthropic arm of Citibank. Fonkoze later wrote off 10,000 loans and then distributed new loans and cash payments to the same clients with USD 8.5 million in funding from the American Red Cross, an emergency response organization in the US. Greta Greathouse, of the United States Agency for International Development (USAID), stresses the importance of this funding since the Haitian economy relies on microlending to regain strength. She says the MFIs and banks that distribute microloans have become “simply too big to fail.”
The Haitian government is also expected to create regulations specific to the microfinance industry in December. Currently, there are no clear protections for clients’ savings if an MFI goes out of business. As of 2009, Haitian MFIs reported USD 11.8 million in deposits [1].
By John Howard-Smith, Research Associate
About FINCA Haiti: FINCA Haiti, founded in 1989, is headquartered in Les Cayes, Haiti with branches in Aquin, Petite Goave, Ounaminthe and Charonniere. FINCA Haiti is one of the 21 country branches of the Foundation for International Community Assistance (FINCA International). FINCA International is a non-profit organization founded by John Hatch in 1984. FINCA International is currently headquartered in Washington, DC. As of 2009, FINCA Haiti had 12,400 active borrowers, a gross loan portfolio of USD 2.1 million, total assets of USD 2.7 million, return on assets (ROA) of -45.9 percent and return on equity (ROE) of -262 percent.
About Fonkoze: Fonkoze is a microfinance institution (MFI) in Haiti established in 1994 with the mission of “building the economic foundations for democracy in Haiti by providing the rural poor with the tools they need to lift themselves out of poverty.” As of 2009, Fonkoze had a gross loan portfolio of USD 4 million, total assets of USD 9.58 million, return on assets (ROA) of -25.9 percent and return on equity (ROE) of -144 percent.
[1] The New York Times: “Can Microlending Save Haiti?”, http://www.nytimes.com/2010/11/14/business/global/14haiti.html?pagewanted=all
MicroCapital.org story, January 19, 2010: “MICROCAPITAL BRIEF: Microfinance Organizations Launch Fundraising Efforts to Help Haitian Earthquake Victims”, https://www.microcapital.org/microcapital-brief-microfinance-institutions-launch-fundraising-efforts-to-help-haitian-earthquake-victims/
MicroCapital.org story, January 28, 2010: “MICROCAPITAL BRIEF: US Government Facilitates $2m Cash Transfer to Haitian Microfinance Institution (MFI) Fonkoze”, https://www.microcapital.org/microcapital-brief-us-government-facilitates-2m-cash-transfer-to-haitian-microfinance-institution-mfi-fonkoze/
MicroCapital.org story, May 11, 2010: “MICROCAPITAL BRIEF: Citigroup Pledges $1m to Help Rebuild Microfinance Sector in Haiti Following January Earthquake”, https://www.microcapital.org/microcapital-brief-citigroup-pledges-1m-to-help-rebuild-microfinance-sector-in-haiti-following-january-earthquake/
MicroCapital’s Microfinance Universe profile: FINCA Haiti, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FINCA+Haiti
MicroCapital’s Microfinance Universe profile: Fonkoze, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Fonkoze
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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