Haiti: Could Mobile Banking Be A Legacy of the Earthquake?

Tomorrow will mark the one year anniversary of the terrible earthquake that struck Port-au-Prince, the capital of Haiti. While much of the global aid community was focused on disaster response and establishing humanitarian camps for the displaced, there was also a desire to start putting in place financial systems that could be used to help both the immediate aid efforts as well as to establish sustainable long-term financial services for all Haitians.

As part of this longer-term response to the disaster, the Bill & Melinda Gates Foundation, in coordination with USAID, made $10 million available for the Haiti Mobile Money Initiative (HMMI) to encourage mobile operators and banks to launch mobile money services. Yesterday the first prize, for $2.5 million, was awarded to mobile operator Digicel and their partner bank ScotiaBank.

I caught up with Greta Greathouse, Chief of Party for the USAID funded Haiti Integrated Finance for Value Chains and Enterprises project (HIFIVE), which is responsible for running the HMMI.

1. Chris Bold: How long had HIFIVE been working in Haiti before the earthquake?

Greta Greathouse: HIFIVE opened its doors for business on July 20, 2009. The project had completed the “start up” phase and was making progress towards its objectives on January 12 when the earthquake struck. A number of the senior technical people from HIFIVE were with me that afternoon at the Central Bank to discuss one of the key HIFIVE initiatives; the encouragement of the use of ICT solutions to expand financial inclusion. We had a long discussion with a number of the Central Bank’s directors and senior staff on the role that a positive regulatory environment could play in facilitating the creation of sustainable mobile money services. Minutes after leaving the Central Bank, while we were driving through downtown Port au Prince, the earthquake struck, changing Haiti and the lives of its people in a few seconds.

2. CB: Why was mobile money seen as important in responding to the damage caused by the earthquake?

GG: Even prior to the earthquake the availability of and access to financial services in Haiti was very limited, both geographically and due to the economic status of most Haitians. A large part of the population had little or no access to financial services that were convenient, safe and affordable.

The financial sector suffered tremendous losses from the damage inflicted by the earthquake. Over 30% of the buildings and branches of banks, microfinance institutions, credit unions and money transfer operators were destroyed or badly damaged. In the days immediately following the earthquake severe liquidity problems mounted as banks remained closed. When banks did reopen, there were even longer lines and waiting times and people had to travel greater distances to do any transaction.

Another incentive was the desire of the government and NGOs to help the victims of the earthquake by providing “cash for work” programs that would create temporary employment and help to clear rubble and repair infrastructure. These programs put millions of dollars every week into the pockets of the workers; however, the NGOs and donors needed to find a better way to pay the workers than delivering money in envelopes at work sites; a costly, inefficient, and unsafe method.

Of course mobile financial services were never going to be a silver bullet, and there were many other areas that needed attention, such as tackling diseases, rebuilding houses and ensuring that clean drinking water is universally available. But mobile financial services had potential as a solution that would support many other relief efforts and hopefully leave a legacy of safe, easily accessible and affordable access to financial services for the poor even after the relief agencies had departed.

3. CB: What was the rationale for setting up a competition?

GG: The goal was to provide incentives that would encourage a rapid response. We were seeking an immediate solution, not one that was three years away. Our dialogues with the MNOs prior to the earthquake had shown they were already interested, but perhaps not yet committed. Assuring the development of sustainable product offerings was also important. Observations of other mobile money deployments had shown that commitment to a rapid, large-scale deployment of agents was critical to reaching the scale necessary to have a sustainable business model. Rather than saying to the private sector: “here is a grant to build a service”, we opted for the “build it and, if it meets our criteria, there will be awards” approach.

4. CB: How did you structure the fund to try to provide the right long-term incentives?

GG: The criteria of HMMI reflect a two level approach including what we hope will be a judicious split of how prize money is earned. First, there was significant prize money for the “First to Market Award” with a relatively short timeline to encourage quick product launches and an emphasis on the creation of “new outlets” to expand the points of access to financial services available to Haitians. To win the prize 100 agents each had to carry out 100 “cash-in” or “cash-out” transactions at their outlet on behalf of the service.

Second, there will be “scaling” prizes available to any operator who meets market size targets over the next 18 months to keep the emphasis on building out the services and expanding the points of service and to encourage other market players who have also launched services.

5. CB: Has the HMMI been a success? What would you have done differently if you could go back a year?

GG: We are thrilled with how the sector has responded, with two mobile money services launched before end of last year. In that sense, HMMI is already a success. The next challenge is to see if the product offerings and business models respond to market needs and reach scale. It is early days, but we certainly see hopeful signs that it will work.

Of course, if it were in my power, I would erase the earthquake and every bit of damage it has brought to the lives of Haitians. As for HMMI, this has been a learning process for everyone involved, as no one has ever tried to use incentives in this way to bring about a technological revolution that could have such an important impact in a country facing so many obstacles.

Given the challenges facing post-earthquake Haiti, one could have wished for a bit more time. Who has ever had to face the combined challenges of earthquake damage of apocalyptic dimensions, connectivity issues, hurricanes, cholera, post election violence, gas shortages all within the same year? Despite it all, the government of Haiti and the private sector, working together, have made mobile money services a reality for Haitians.

- Chris Bold