In Haiti, Support Local Communities, Not Microcredit Agencies

The Chicago-based Goldin Institute has been in the forefront of providing research and consultative support to grassroots organizations around the world. They parther with local organizations such as Nijera Kori in Bangladesh — that have long-established connections to grassroots organizations and movements — in these efforts. Goldin’s Kasia Paprocki recently posted a cautionary note via a blog on HuffPost on some of the solutions being proffered in the rebuilding efforts after the earthquake in Haiti.

In her blog, “In Haiti, Support Local Communities, Not Microcredit Agencies“, Parocki writes:

A week after the January 12th earthquake, Whole Foods announced that they would match their customers’ generous contributions to relief efforts by themselves donating $1 million for microcredit in Haiti. Many others, including National Public Radio and the United States Government (see America.gov) have described opportunities for supporting Haitian microfinance in order to rebuild after the earthquake.

This response is hardly unique. In the aftermath of many natural disasters around the world in recent years, relief agencies have, encouraged by international donors, frequently diverted funds earmarked for recovery efforts into new microcredit programs. Thus, resources donated to help survivors rebuild their lives are instead lent to them, with the expectation that they will be repaid (with interest).

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.

Months after cyclone Sidr, the World Food Program reported that food, not microcredit loans, remained the most critical need for families affected by the disaster. Indeed, there are countless immediate and complex needs right now for rebuilding Haiti beyond microcredit. Responding to these needs should center on supporting and promoting a local response, empowering the actors already engaged in these communities to diagnose how to best rebuild their communities. In the words of Dr. Paul Farmer of Partners in Health, “aid should be coordinated and conceived in a way that shores up Haitian capacity to respond.” This approach is critical to not only ensuring an appropriate and adequate relief effort, but to supporting Haiti’s sustainable development through self-determination.

In the wake of the 2004 Indian Ocean Tsunami, reports on relief efforts in Sri Lanka (which was perhaps even more vulnerable and politically unstable than Haiti) contended that by failing to work with and through local civil society, international aid agencies may have actually undermined Sri Lanka’s ability to recover. Simon Harris, a consultant to many major international aid agencies who has many years of experience working in Sri Lanka wrote that “the activities of many international aid agencies may have had a negative impact on the prospects of peace by undermining community relationships, altering social dynamics and eroding local capacities.” Jane Ingram and her colleagues at Columbia University’s Earth Institute wrote that a failure to enlist local participation in relief efforts in Sri Lanka may have actually delayed the recovery process and increased the short and long-term vulnerability of affected populations.

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.