Fonkoze operations during the crisis

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Fonkoze operations during the crisis

Post by Guysanto » Thu Feb 11, 2010 3:25 pm

A microlender was able to distribute cash in Haiti much more quickly than traditional banks. How microcredit can play a larger role in disaster recovery.

By Mac Margolis and Lucy Conger | Newsweek Web Exclusive
Feb 10, 2010

Hollywood couldn't have done it better. Late in the afternoon on Jan. 22, an armored car packed with $2 million in cash rolled out of J.P. Morgan Chase headquarters in downtown Miami, headed to the Homestead Air Force Base. Thirty-four bricks of bank notes packed into ordinary office supply boxes were loaded onto a C-17 transport plane redeployed from Langley, Va., and dispatched to Haiti, lighting up switchboards at the United Nations, the U.S. State Department, the Federal Reserve, and military rescue bases in Port-au-Prince.

Before dawn the next day, the stash was on a helicopter bound for 34 branches of microlender Fonkoze. While Port-au-Prince's nine commercial banks were in a shambles and Western Union was paralyzed, half of Fonkoze's 42 agencies were up and running in four days, and all but two of the rest within a week. The amounts were trifling: no more than a few dollars per client. But for tens of thousands of desperate Haitians, the nimble infusion of cash amid the chaos and ruin literally meant survival. For the legions of aid bureaucrats, charities, civic groups, and emergency organizations struggling to get a grip on the Western hemisphere's worst natural disaster in memory, Fonkoze's nationwide client base of 200,000 depositors (50,000 of whom are also borrowers) was a ready-made lifeline. Could microcredit be the new Red Cross? This is not exactly what the loan angels had in mind. Since at least 2006, when Muhammad Yunus won the Nobel Peace Prize for his pioneering work in extending credit to the poor, microfinance has been in the spotlight. The founder of the Grameen Bank, a Bangladesh-based credit outfit, Yunus believed in the transformative power of advancing as little as $10, $20, $30 at a time to people that commercial banks wouldn't allow through the door. Now, experts reckon there are 75 million microborrowers worldwide who hold $39 billion in loans, and enthusiasts speak of billions of the poor waiting to parlay pennies into enterprises and kickstart development in the most blighted countries.

Such ambitions have drawn flak: "I am unaware of any historical examples of nations that climbed out of poverty on the backs of small entrepreneurs financed by credit," U.S. circuit court justice and economic historian Richard A. Posner once commented. But microcredit initiatives have since bloomed in a thousand boardrooms, winning converts in the World Bank and the Inter-American Development Bank (IDB), and even luring major commercial banks, many of which now see the future of their industry in courting the "unbanked" multitudes.

But the Haitian earthquake illustrates a more pressing role for microfinance institutions: helping societies respond to shattering tragedies. Ironically, not so long ago many development experts assumed it was the microfinance institutions (MFIs) that would need saving in times of crisis. National calamity, they noted, falls hardest on the weak, depriving the poor of jobs and capital and so, they reasoned, automatically driving them into massive default. "If people could get no money, they couldn't repay. The whole sector was threatened," says Don Terry, a former IDB microfinance and remittances specialist.

In fact, the opposite has been the case. "Devastation typically paralyzes the big banks," says Terry. "Microfinance institutions are used to dealing at grassroots levels in a way that large commercial lenders cannot." In 1998, when Hurricane Mitch ravaged Nicaragua and Honduras, shuttering banks and destroying roads and bridges, microlender Fundación León 2000 stepped into the breach, putting its experience and vast rural customer network at the service of relief agencies. "Microfinance institutions were the only ones able to communicate," says Alberto Solano, the Grameen Foundation's regional CEO for the Americas.

MFIs swung into action again after the Asian tsunami in late 2004. Even as they buried the 200,000 dead and cared for the injured, rescue crews were faced with tens of thousands left homeless and desolate across Indonesia, India, Sri Lanka, and Thailand. For that, they needed not just cash but an organization structured to parse the needs at ground level and get money to scattered clients. Enter microcredit experts like Grameen, which helped raise disaster loans and channel the credit to stricken families through local microlenders.

Haiti has been the acid test. When serial hurricanes battered the country in 2008, drowning whole towns, killing nearly 800, and wiping out jobs and savings across the island, credit services were threatened with extinction. Instead of buckling, Fonkoze expanded. The bank managed cash-for-work payments during the clean-up, rescheduled outstanding loans, waived interest payments, and reached out to new clients. A year later, more than eight out of 10 of the bank's clients had repaid their loans. This experience proved critical when the earthquake struck. With Port-au-Prince in ruins, Haiti's banking sector went dark for nine days, choking off the vital flow of remittances ($1.87 billion a year) that Haitians receive from relatives abroad. Though badly shaken itself, Fonkoze, the island's largest microfinancier, kept working (from a borrowed van, in one instance), giving families access to cash for immediate needs as they waited for emergency rations of food, water, clothes, and medicine.

Microfinance is not likely to replace emergency rescue efforts, where immediate humanitarian assistance is crucial. "Giving grants might send the wrong message about microfinance, encouraging people not to pay back their loans," says Grameen's Solano. Others argue that microfinance could play a much wider role in first response to disasters. Because they tend to the poor, microlenders move in and out of dangerous areas, such as crime-ridden slums, where button-down lenders do not or will not go. Their vast client base also "creates a network that can locate people as the population migrates out of the destroyed capital and help distribute food, water, and tents," says Fonkoze's director, Anne Hastings. "If the technology were in place, [we] could transmit SMS messages and locate displaced people or evacuees and reunite families."

To the founders, microfinance means much more than donning rescue gear and mopping up after tragedies, manmade or not. But when calamity strikes, and the world's poorest people are in the way, no mission would seem more appropriate.

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HAITI - WOMEN'S MICRO-LENDING BANK BRINGS BIG CASH TO RESCUE

Post by Guysanto » Thu Feb 11, 2010 4:36 pm

Women News Network
http://womennewsnetwork.net/2010/02/01/ ... robank-890

February 1, 2010

HAITI - WOMEN'S MICRO-LENDING BANK BRINGS BIG CASH TO RESCUE

Able to quickly reach a well-developed network of women throughout the country, an alternative banking system performs while the Haitian economy is in shambles.

A micro-credit program and banking system for more than 200,000 women in Haiti has come to the rescue of the Haiti economy in the wake of the devastating earthquake. At a time when Haitian commercial banks remain closed, Fonkoze, the Haitian branch of the Grameen Bank of Bangladesh, mobilized over one weekend to get funds to its members in rural towns as well as Port-au-Prince.

Between 2 a.m. and 2 p.m., last Saturday, January 23, Fonkoze brought in two million dollars in cash from their U.S. bank and distributed it by helicopters to regional offices in the most remote parts of the country.

That got money flowing again. The cash came from Haitians working abroad who had sent funds called remittances to their relatives.

Also known as Haiti's "Alternative Bank for the Organized Poor," Fonkoze found a way to get money to its members through the 34 of its 41 branch offices still open after the earthquake. It had a lot of help in high places: the U.S. Secretary of State, top Treasury and Defense Department officials, the Federal Reserve, the Agency for International Development, the United Nations, the Inter-American Development Bank and more.

The operation read like a cloak-and-dagger saga. Anne Hastings, the CEO of Fonkoze Financial Services, was point person on shaping the unorthodox solution. It involved many conference calls to Washington, New York and Miami, as well as intricate strategies with managers on the ground in Haiti who would get the money to the women.

By Friday, January 22, the plan was ready. Remittances from U.S.-based Haitians deposited in Fonkoze's accounts at City National Bank of New Jersey were sent to JP Morgan Chase in Miami, converted into cash, and packed in office supply boxes. An armored vehicle then transferred the boxes to Homestead Air Force Base.

A C-17 plane, diverted from Langley Air Force Base, landed at Homestead at 3 a.m. Saturday, took on the camouflaged cargo of cash, and flew to Haiti, where the major airport at Port-au-Prince has been under U.S. military control since the earthquake.

Once there, Hastings and two other Fonkoze executives inspected the cash cargo and called the Pentagon to say so far, so good. Under a military escort, the Fonkoze vehicle loaded with the boxes of cash awaited the two helicopters that could fly the money to 10 designated drop-off locations.

Fonkoze's Jean-Guy Noel rode with the helicopters as they began deliveries before dawn. Seven hours later, all the cash had been delivered and the helicopters were back in Port-au-Prince. By early afternoon, the cash had been distributed to the 34 Fonkoze branches. Almost immediately, the Fonkoze managers began giving Fonkoze members cash from their relatives, a financial lifeline at a time when the formal banking system is in shambles and remittances sent through it from overseas Haitians remain locked up.

Jennifer Harris, a member of the policy staff of Secretary of State Hillary Clinton, in a memo to Pentagon officials released by Fonkoze, spelled out the implications of the combined State-Defense operation.

Fonkoze has by far the deepest reach into the country's rural poor, a remittance network that would take years to recreate from scratch. As people continue to migrate from Port-au-Prince, Fonkoze's branch network will become even more essential, she said. Perhaps most important, unlike the commercial banks, Fonkoze has re-opened many of its branches and has continued to pay out remittances using its cash on hand.”

In essence, she said, the unconventional operation may well have stabilized the banking system for the country's most vulnerable population.”

Fonkoze has been operating in Haiti for 15 years. Ninety-nine percent of its members are women. By midweek, it expects all but three of its branches to be open. In the heavily damaged capital city, Fonkoze managers set up shop at a makeshift office in the courtyard next to its damaged headquarters, as hundreds of Haitians lined up to get the money due them.

In addition to micro-lending programs, Fonkoze sponsors major literacy, health care and micro-insurance programs. Its remittances and savings accounts serve more than 200,000 people, making it a significant part of the country's financial system. Relatives of Fonkoze members working abroad use its conduits to send back money, amounting to $57.7 million last year.

It also serves as a vendor for three other remittance services that still operate after the earthquake: MoneyGram, CAM and Unitransfer. The process is a lifeline for a country where, in 2007, 79 percent of Haitians lived on less than $2 a day and 55 percent lived on half that.

Fonkoze's micro-lending program has four different levels. The first step is for the poorest of the poor and may involve home repairs and health care, as well as building the confidence of the women as they plan to start a micro-enterprise. Next the women may qualify for small loans, perhaps only $25, with a short repayment period, while they enroll in literacy classes. In Haiti, more than 50 percent of people are illiterate.

The third level is the core: a solidarity group in which friends take out loans together, then morph into credit centers of 30 to 40 women. These women can start out borrowing $75, but if they prosper they can borrow up to $1,300 for six months.

The fourth level focuses on business development. Some women in this group borrow up to $25,000 and are being nurtured to become part of the formal economy, creating jobs in rural areas where there are few employment opportunities.

It isn't the first time that a micro-lending network of mostly women has taken a lead role in helping rebuild a country's economy after a natural disaster. In Poland, after a devastating flood in the mid-1990s, the U.S.-backed Fundusz Mikro became the conduit for credit to small businesses, ultimately funneling more than $10 million to rebuild when the central government proved inept and also tone-deaf to the challenge.

Leigh Carter, Fonkoze USA fundraiser--who broke several vertebrae in her back getting out of the Fonkoze headquarters building during the earthquake and was airlifted out days later--is back at work in Washington. She says multinational economic and financial leaders already are talking to Fonkoze about ways to use their extensive network of micro-lending programs for programs to rebuild the Haitian economic base.

"People are coming to us saying 'you need to expand your capacity,'" she said. But first things first: the immediate priority had to be getting cash to its members, throughout Haiti, from their friends and relatives abroad, which in itself expands members ability to survive and rebuild.

Fonkoze has had strong success working with microfinance programs to improve lives of suffering women and their families. This program, Chemen Lavi Miyo, which means "Pathway to a Better Life" in Haitian Creole, is testing a new approach to helping those living in extreme poverty to transition into a sustainable way of life.

This highly structured and intensive program combines livelihoods and basic support with training and financial management so that at the end of just 18 months, participants will be equipped with the skills and a business plan to move themselves out of poverty. “"What we want to demonstrate," says Anne Hastings, director of the program, "is that there is a proven, replicable, methodology for accompanying people as they struggle to make their way out of these conditions into a decent standard of living."”

Fonkoze is now leading microfinance programs that empower women and will help rebuild Port-au-Prince since the devastating 10 January, 2010 earthquake that hit the capital and outlying areas.

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