MICROCREDIT FAILS TO AID POOREST; IN HAITI, SMALL LOANS HELP REDUCE POVERTY, BUT THEY ARE NOT THE SOLUTION, LENDERS SAY.
THOMONDE, Haiti: Even as political violence rages on in Port-au-Prince and the economy plummets, business is brisk at Solange Deroses open-air market stall in this tree-lined town in the heart of Haitis parched Central Plateau region.
– Things are great today, says Derose, 45, as she scoops rice from her cluttered table of bars of soap, tomato paste, dried fish, bouillon cubes, salt and cooking oil, as a customer waits in the shade of the stalls thatched banana-leaf and stick roof. – I do not know how much I am making, but it is more than I used to.”
Derose says she is grateful for a small loan she received from Fonkoze, Haitis leading microfinance institution, which allowed her to expand her inventory and buy a donkey to transport her products from home to the market at a cheaper price.
Microfinance success stories such as this one abound in developing nations, leading the United Nations to declare 2005 “International Year of Microcredit.” In Haiti, with international aid beginning to flow to an interim government that has the blessing of the United States and the backing of more than 8.000 U.N. peacekeeping troops, aid organizations are looking to microfinance as a key to rebuilding this devastated nation.
But at Fonkoze, which gives loans to more than 25.000 street vendors (gadehandlende) and other small-business owners at a default rate of less than 2 percent, the prevailing mood is that of caution, not optimism.
Anne Hastings, director of Fonkoze, says she would be the first to warn of the limits of microfinance, especially in Haiti, a nation beset by staggering poverty and crippling natural disasters.
– We are really reaching primarily the upper half of those who are in poverty, says Hastings, adding: – For the poorest of the poor, which is a majority in Haiti, we now know that microcredit alone is not the solution. Instead, it ends up being a burden.
In Haiti, people with even modest resources like Derose are the exception.
Down a dirt and rock road from the market, Rene Jacob stacks a four-foot sack of charcoal against a tiny faded green wood-plank house. Jacob, 40, a wiry man with soft eyes and a gentle demeanor, says he makes the charcoal by cutting down branches from the seven trees that are spread around the small piece of property his family has rented for 30 years at the edge of Thomonde.
Jacob says he can sell the charcoal for 2,70 US dollar, but must wait for the branches to grow back before he can make more. Asked how he survives, he dashes behind the house and returns with a plastic gallon jug containing a reddish liquid.
– This is my hope for tomorrow, he says with an earnest smile. – This gallon of alcohol is my whole life. When I see my wife, my baby, my mother are hungry, I must sell this alcohol to get money so we can survive. … I do this because I have nothing else to do.
Jacob buys kleren, a homebrewed sugarcane-based alcohol, mixes it with a concoction he makes from roots he has scavenged, and sells glass flasks of the finished product to men who believe it is an aphrodisiac. He can make up to 1,35 dollar if he sells a whole gallon, he says, but he rarely does so in one day.
His 8-year-old daughter was recently sent home from school because he did not have roughly 8 dollar to pay for her three months of tuition, a common requirement for the poor in Haiti, where public education is woefully underfunded and the majority of students go to private schools.
He says he usually makes enough to buy medicine for his mother who is sick with tuberculosis or to provide one meal a day of rice or corn to the seven family members who are crammed into his house.
Sometimes friends give them something to eat if profits from his alcohol sales are slim. He says he has heard of Fonkoze, but is not interested in applying for the 81 dollar start-up loan because he is afraid of going into debt.
– The last thing you want to do is make a poor person even poorer by giving them a loan they can not pay back, says Lauren Mitten, of Development Alternatives Inc., a private contractor that runs a microfinance project in Haiti for the United States Agency for International Development (USAID).
– There are lots of microfinance institutions trying to reach the same people with the same products. But no one is reaching the extreme poor, she noted.
According to a law passed by the U.S. Congress in 2003, USAID must ensure that 50 percent of the money it gives to microfinance is targeted to the “very poor,” defined as those people living on less than one dollar a day or the bottom 50 percent of all those living under the poverty line determined by each nation.
But some experts say the problem is not so much that microcredits are not reaching the extreme poor, but that they are ill-suited for them.
– The poor are not homogenous, says Rabeya Yasmin. She has pioneered a program based on grants targeted at the extreme poor for BRAC, formerly known as the Bangladesh Rural Advancement Committee, which lends money to almost 4 million women in Bangladesh, making it one of the largest microfinance institutions in the world.
– Microfinance has been incredibly successful at poverty reduction among moderately poor groups. But the extreme poor have been neglected, and it is high time we start treating them differently. Until now, they have been absolutely hidden from view, she says.
Yasmin is at the forefront of a growing group of microfinance experts who think that giving cash loans of any size to the extreme poor can be counterproductive.
While extreme poverty often is used to refer to those people who live on less than one dollar a day, in Haiti, 65 percent of the population fit this description, according to the United Nations Development Program.
Instead of loaning money, BRACs Ultra Poor Program provides beneficiaries with a mixture of hand-outs, productive assets – often farm animals – and training in the hopes that at the end of two years they will be capable of entering the institutions regular microcredit program.
Yasmin visited Haiti at the request of Hastings last November, and Fonkoze hopes to replicate the grant-based program, beginning in the Central Plateau, with the help of Zanmi Lasante, the Haitian branch of Boston-based health care organization Partners in Health.
Both Fonkoze and Zanmi Lasante have their work cut out for them.
Far from the violence racking Port-au-Prince, the more than 500,000 people who live in the Central Plateau trudge through the same grinding poverty as did their parents and grandparents.
Some say conditions have grown even worse, as arable land has shrunk because of deforestation and the flooding of farmland in 1956 to build a dam that provides electricity to Port-au-Prince. Many families survive by growing subsistence crops in dry, rocky soil typical in many parts of Haiti, where massive deforestation has left the land barren and provided ripe conditions for floods and mudslides.
– Some donors are uncertain about this project because Haiti does not have a stable government, and it has a failing economy, and there is too much insecurity, says Hastings concluding:
– But I say this is exactly the place to test what we are trying to do. If we can do it here in Haiti, here in the Central Plateau, we can do it anywhere.
Kilde: The Push Journal
