The Haiti Earthquake: How microfinance is helping

January 27, 2010    

At 16:53 on January 12, 2010, a massive earthquake hit Haiti and dealt a tragic blow to an already struggling country. It is estimated that over 100,000 people are dead. Many more are injured and access to medical care remains woefully inadequate. Huge areas of the nation’s capital and several adjacent cities lie in ruins. Up to 1 million people have been displaced–many of them forced to live in the street, injured, sick, and with little food or water.

Today, getting emergency aid to the citizens of this devastated nation is the highest priority. Despite a global outpouring of support, rescue and relief efforts have been hampered by the logistical obstacles of damaged air and seaports, destroyed hospitals, and an overall lack of functioning infrastructure. The help of any and all development organizations with local presence is desperately needed.

With so many basic needs still not met, it may be premature to think of the role of microfinance institutions (MFIs). Or, is it?

Devasted but not defeated… MFIs emerge as strong institutions
In Haiti, like elsewhere, MFIs are involved in providing much-needed assistance simply because they are resilient, strong institutions that find ways to continue operations against all odds. Leading MFIs in Haiti have gained the trust of the local community, and their actions over the past couple of weeks demonstrate a keen awareness of their role—and responsibilities—as part of the community.

Taking care of their staff first. In a first instance, often the very next day after the earthquake, several MFI managers went into action to find out how their staff were affected. The assessment of employees was quick, thorough, and caring. Fonkoze lost five of their 50 staff. Sogesol (in French) reports that the majority of their 189 staff members are in good health, though one has died, three are missing, and five are not yet functional.

Fonkoze, ACME (in French), and Sogesol have taken detailed inventories on the status of employees’ housing. Twelve percent of Sogesel’s employees have completely lost their homes, and another 52% cannot live in their homes because of important cracks that may not survive another aftershock; 11% of staff are living on the streets.

All three institutions have taken measures to assist their staff. ACME provided food to over 40 staff and rushed to pay staff wages, giving out the full amount due without the usual deduction for taxes. Fonkoze established the Relief and Rehabilitation Fund that will be used in part to stabilize staff so they can return to work.

And getting back to business for clients. Even while recovering from personal losses, MFIs report that many staff are determined to work. Where branches are destroyed, staff remain nearby to welcome clients seeking information. To instill confidence, MFIs prioritize being available for their clients all the while planning to recover IT backups, find new space when needed, and define new strategies. But efforts to find clients are daunting. Sogesol to date has not found 50% of its clients, and estimates that 40% of its portfolio will be lost.

“In a country where strong institutions are sorely lacking, MFIs are showing uncommon courage, resourcefulness, and persistence,” says CGAP Deputy CEO Alexia Latortue. “Their buildings may be shattered, but they are still standing.”

Today, 34 of Fonkoze’s 41 branches are managing to function. The organization says its highest priorities right now are establishing an emergency operations center; obtaining cash so clients can withdraw cash transfers and savings, and access new loans; and securing diesel fuel for energy and transportation needs. Fonkoze has been able to assure customers that its remittance service is functioning and that their funds are safe.

Restoring services is equally important in the parts of the country not hit by the earthquake. As many people flee to the provinces, keeping local economies running will become all the more essential.

Several international microfinance organizations have launched fundraising campaigns to support their partners on the ground in helping earthquake survivors get back on their feet. These groups include: ACCION International, BRAC, FINCA International, Freedom From Hunger, the Grameen Foundation, Incofin and WOCCU. Funds are desperately needed in both the short-term as MFIs play their role of responsible corporate citizens, and in the medium-and long-term to ensure that the microfinance industry in Haiti thrives again.

MFIs…still the same role, though unusual times require extraordinary means
As we have seen time and again, dedicated microfinance institutions on the ground are carrying on, providing vital services to their clients. “MFIs are not, and nor should they be, asked to be relief organizations,” says Latortue. “But this does not mean business as usual. Financial services will be crucial to helping clients recover and rebuild. Financial services aren’t just a “nice-to-have” in this situation. Valuable services like accessing savings and transfers from families abroad can be a vital lifeline, and for some families the ability to access cash may mean the difference between life and death.”

Staying the course post-disaster
MFIs like Acme, Fonkoze, and Sogesol among others know they can play a powerful role in the path to recovery–by remaining focused on their mission. And they can draw from lessons learned in previous disasters in Haiti, and elsewhere.

Already, some MFIs are exploring ways to help clients rebuild with special housing products. Some loan write-offs are both inevitable and “the right thing to do,” says Latortue. “MFIs excel in the business they are in and can respond compassionately and creatively without taking on an entirely different mission.”

Fonkoze USA President John Mercier says, “We have a long way to go, but we are in it for the long haul.”