This is part two in a three part blog series exploring World Concern’s microcredit program in Haiti. If you missed part one, you can read it here. Please keep visiting the World Concern blog in the coming days for part three.
The majority of Haitians earn their livelihoods by operating a small enterprise but are left without an equitable option for receiving access to credit in order to grow their business. These enterprises are operated by people like Bellia, whom we met in part one of this blog series, and many other low-income and hardworking individuals.
“People get loans at the bank. But certainly the bank is not accessible to everyone. At the bank there are a lot of difficulties in giving a loan to someone. They will ask you what other bank loans you have and if you have a house,” explained Vilbert Douilly, World Concern’s microcredit program director in Haiti. These requirements mean the poor are denied the opportunity to access and utilize credit. This is why microcredit remains an important poverty reduction tool in Haiti.
World Concern in Haiti has been using microcredit to empower and strengthen the poor working in the informal sector since 1990. With the support of donors, 31 staff members are currently able to serve 5,000 clients in five departments throughout the country.
This is no small task. It requires a sound training program, an effective model, and a strong network of local partners. If you have ever wondered what the process of implementing a microcredit program looks like, then you should enjoy this next bit.
How Microcredit Works
Identifying new clients
World Concern’s new microcredit clients in Haiti must meet the following criteria:
- Possess a high level of need
- Unable to qualify for a loan from a traditional bank
- Currently operate an income generating activity (examples include selling food, household items, or clothes)
Since our goal is to reach those small business owners at the bottom of the economic ladder, it is important to take each of these three criteria into account when deciding whether or not to accept a new client. There is no rubric or measurement tool used when determining whether or not a person is in great need. These decisions are made on a situational basis and with the help of our local church and association partners and World Concern staff working in each community who know the individuals well.
Training
We want our clients to be encouraged and given all the resources they need to succeed. While a small loan can certainly help develop someone’s business, a high quality training can help develop the individual. This is an important investment and one that World Concern takes seriously. After all, we are interested in the transformation of the entire person not just their economic situation.
Each new client participates in three training sessions. The first is about nutrition and developing a balanced diet, the second teaches business skills, and the third focuses on using Biblical values in the marketplace. The training sessions provide our clients with practical skills they can use to improve their lives and businesses.
“The values we teach them include integrity because we are going to give them a loan,” said Mr. Douilly. “We can take verses and texts from the Bible to talk about the importance of integrity and morality.”
We have found that Biblical values can play an important role in improving clients understanding of scripture as well as how these values can help them operate a successful business.
Microcredit model
There is more than one way to implement a microcredit program. Each context has unique challenges that need to be considered. World Concern has developed three methods for providing loans to clients that are effective in Haiti. These methods are Individual, Solidarity groups, and Village Bank groups.
Although World Concern does offer loans to individuals, many of our clients join one of two groups; a Solidarity Group or a Village Bank Group. These group methods have been a part of the World Concern microcredit program since the beginning. A group receives one large loan and the loan is then divided among each client – sort of like a mini credit union.
Aside from simply sharing a loan, group members have the opportunity to support and encourage each other. The Solidarity and Village Bank groups help provide clients with a sense of community, which is important when trying to run your own small business.
“We meet every Thursday to share ideas and give advice,” said Bellia, a mother of two and member of a Solidarity Group.
Interest Rates
You can see from the infographic that interest rates are kept low enough that clients can afford to pay them, while still allowing the program to continue. The traditional banking system is simply not an option for the poor in Haiti who lack assets. Aside from banks, another form of accessing credit is through local loan sharks. But interest rates through a loan shark are astronomical and also not a viable option for the poor.
According to Jean Rico Louissaint, World Concern’s Microcredit Coordinator for the northwest department in Haiti, loan sharks charge borrowers at least five times the interest rate World Concern offers. High interest rates such as this only trap people in poverty and are hardly fair. Our program aims to provide a different solution; one that actually works for the poor, not against them.
Local Partners
Essential to our microcredit program is our network of local partners. These include churches and local associations. “The associations and local churches help us identify new clients, especially those that are vulnerable in the community,” explains Mr. Douilly. “The church knows that we give loans so they often ask us to present the microcredit program to their congregation. After this presentation they send us a list of people who are doing business in the church and are interested in receiving a loan.”
Many clients who come to World Concern through a local partner form a Village Bank group. The infographic above highlights this. This allows small business owners in the same area to take out a joint loan together and support each other.
Collaboration is an important aspect of any development program. We are very thankful for our local partners and their assistance in providing opportunity to small business owners throughout Haiti.
It is exciting to see how microcredit can help provide opportunity to people operating a small enterprise and otherwise have no feasible credit option.
In part three of this blog series we will look at what makes World Concern’s microcredit program unique and our vision for the future.