Progress In Haiti, Two Years Later

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

Two years ago today, a massive earthquake devastated Haiti.  Some 250,000 people perished among a population of about 9 million.  Not only did this disaster kill a greater proportion of a nation’s population than any other in history, but it toppled thousands of homes and buildings, destroyed cultural treasures such as the national cathedral and killed dozens of U.N. workers, including the commander of the mission.  A chaotic relief effort and weeks of nonstop media attention followed. When reporters return to Haiti on this anniversary, expect hand-wringing about bungled aid efforts juxtaposed with heart-warming tales of grassroots groups working effectively, though on a tiny scale.  But those storylines tell only part of the story. It’s important to remember that 2009 was actually one of Haiti’s best years in decades.  Law and order, even in the worst slums, had become the rule rather than the exception.  Major infrastructure projects were nearing completion.  Despite his flaws, President Rene Preval allowed a vibrant free press. Since then, positive trends have quietly continued.  Travel times to the central plateau have been cut substantially.  A massive teaching hospital – a joint venture between Zanmi Lasante and the government – is nearing completion.  The cholera epidemic could have been much worse.  A new president emerged from a credible if messy democratic process, and is popular at home and abroad. Though much post-disaster aid was used unproductively, some of it effectively built up Haitian institutions that predated the earthquake.  One of the most exciting of these local organizations is the country’s leading microfinance institution, Fonkoze (Creole for “shoulder-to-shoulder foundation”).

Fonkoze borrowers like the women above join "solidarity groups" that enable them to support each other.

The earthquake devastated many of Fonkoze’s 50,000 loan clients (and their micro-businesses), as well as its 200,000 depositors and 800 staff.  The headquarters were destroyed and one-quarter of its 41 branches were badly damaged.  With the banking system shut down, within days Fonkoze was running short of cash to pay out remittances.  (Fonkoze’s national network of branches was more extensive than any of the country’s financial institutions, so it was a key player in enabling people to receive money sent from relatives working abroad.) Did this organization collapse under the weight of the quake and its aftershocks?  Far from it.  In fact, today it is probably stronger than at any time in its history. Fonkoze did not stand idly by in the hours after the temblor.  When funds began to run dry, a daring airlift of $2 million in cash from Fonkoze’s bank in Miami to 10 locations throughout Haiti – accomplished with the support of the U.S. military and the Multilateral Investment Fund – succeeded in record time and without the loss of a single dollar.  Fonkoze went on to pay out $95 million in remittances during 2010, earning a tiny commission on each transaction. A few enlightened donors saw the potential of leveraging Fonkoze’s human and physical infrastructure and relationships with tens of thousands of small business owners (mostly women).  Initially it was proposed that the entrepreneurs pre-earthquake loans be forgiven and new ones dispersed, in an effort to quickly jumpstart the rural economy.  Fonkoze’s management had a slightly different idea – one that the American Red Cross, Whole Planet Foundation, Fonkoze USA and others agreed to support. The plan?  All loan clients would be treated as if they had taken out a catastrophic insurance policy that was weeks away from being launched when the earthquake hit.  This would not only get the clients fresh capital quickly, but it would also teach them to benefits of buying insurance.  Nearly 20,000 micro-businesses were recapitalized in a matter of a few months. When the micro-insurance program was formally launched in January 2011, clients embraced it, gladly paying 3% of their loan amount as a premium.  When floods hit southern Haiti nine months ago, Fonkoze received a payment from its insurance partners of more than $1 million, enabling it to quickly get 4,000 clients back on their feet without a single dollar of “aid.” As the international community considers its next steps in supporting Haiti, or in responding to other disasters, I hope that the transition from the “search, rescue, shelter and feed” phase to one focused on strengthening local institutions will be faster.  Defaulting to doing business with “Beltway bandits” must stop.  Organizations like Zanmi Lasante and Fonkoze, which have “sandals on the ground” long before a disaster strikes, can be powerful and cost-effective engines of reconstruction and innovation.