VIEWPOINT: Support NGOs, not Microfinance lenders in Haiti: Kasia Paprocki

Kasia Paprocki of the Goldin Institute has a different view on microfinance institutions leading the rescue efforts in quake-affected Haiti. Here’s how she describes the whole scenario and its impact.

Feb 5, 2010: Any significant shift of disaster-relief funds for Haiti to support microcredit programs as a strategy for rebuilding after the earthquake would be a misguided and potentially destructive decision. Donors should concentrate relief efforts on developing the capacity of local organizations to rebuild Haiti and work toward the recovery of its citizens.

This interest in using microcredit as a disaster relief strategy is a response born out of a recent global infatuation with microcredit, though it is not grounded in evidence that this has been an effective means of helping survivors to cope with disaster. Donors and policy makers should closely examine the experience of Bangladesh after recent cyclones Sidr and Aila (which occurred in 2007 and 2009, respectively) before considering this kind of intervention in Haiti.

In Bangladesh, where the microcredit infrastructure is so robust that it penetrates the majority of villages throughout the country, numerous national media outlets reported after each cyclone that microcredit agencies resumed operations as soon as two weeks after the disaster, sending field workers to collect on loans made before the cyclone into rural communities that had been decimated by the storm. Reports were released of survivors returning to their villages to begin rebuilding, only to be forced to flee again due to threats from microcredit loan collectors. Despite having lost their homes, livestock, cropland, and other productive assets, villagers described being pressured to take additional loans in order to repay outstanding debts. After both cyclones, Bangladeshi government officials made repeated public pleas to NGOs and microcredit providers to delay debt collections on microcredit loans, even mandating after the first that microcredit providers write off loans of borrowers who had been killed in the storm.

This consequence can and must be avoided in Haiti. Local Haitian organizations are already emerging as critical to relief efforts. Identifying local partners should be a primary goal of all international relief agencies. One example of an organization that has taken this approach is Grassroots International, a Boston-based NGO that is supporting community-based, grassroots organizations in Haiti. Partners of Grassroots International are providing emergency relief while also engaging in long-term recovery and rebuilding efforts.

Ideally, any active, locally-based microcredit agencies with extant staff and infrastructure would be able to mobilize their resources on behalf of relief efforts, by helping those in their service area to gain access to food, water, shelter, and medical care. To their credit, Fonkoze, Haiti’s largest microcredit agency, has begun providing facilities for remittances and wire transfers from abroad through many of their branches throughout the country. To the extent that Fonkoze can assist the Haitian diaspora in the United States to channel funds for relief to their home communities, their continued operations are an asset. However, the immediate resumption of microcredit operations (as reported on Fonkoze’s website, “business continues as usual, including new loans being issued”) should be treated with caution.

If Haiti is to “build back better,” as former President Bill Clinton has said is possible, international donors and NGOs must support Haitians in developing their own capacity to respond. A significant shift of relief funds to support microfinance would undermine the building of crucial local infrastructure that is the key to achieving this vision.
(Kasia Paprocki is associated with the Goldin Institute since 2007. As part of her studies at Hampshire College, she designed an alternative microcredit model and spent six months in 2006 in Dhaka, Bangladesh working to implement this program. In Spring 2007, she returned to Bangladesh to direct research for the Improving Microcredit Project. She continues to work on analysis, outputs, and developing parallel projects around the world. In the year 2000, the mayors of Minneapolis and St. Paul, Minnesota awarded Kasia the Twin Cities’ International Citizen’s Award for her work against child labor. To see the full article click here )