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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
Issue 5 / September - October 2004 |
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News | "Shoulder to Shoulder" in Haiti Facilitating Remittances and the Case Study of Fonkoze Remittances help fight rural poverty in some of the poorest regions of the world. Migrant workers send home more than USD 100 billion each year; this is money their families use to pay for food, housing and education. This is twice the level of official development assistance paid by rich nations. In some countries, remittances surpass foreign direct investment and development assistance combined. In developing countries more than 90 per cent of remittances are used to cover household expenses. The amounts are often small, maybe USD 100 or USD 200 at a time, but they put money directly in the hands of rural poor people. Unfortunately, up to 20 per cent of the value of remittances can be lost in transfer costs. The creation and strengthening of financial institutions in rural areas will help reduce the cost of sending and receiving remittances – therefore providing more working capital to those who need it the most. The Lifeline of the Poor Many in Haiti would argue that the Haitian economy is held together by two forces - the women street vendors who are often referred to as the “backbone of the Haitian economy,” and the Haitians living abroad who send money home. Remittances come from the many working Haitians of the Diaspora, primarily in the United States and the Dominican Republic. While it is difficult to estimate the exact amount of remittances to Haiti due to poor statistical information and informal channels of exchange, estimates currently available suggest that in 1999 alone the total was USD 720 million. This represents 17% of Haiti’s Gross Domestic Product. IFAD selects Fonkoze, Haitian Non-profit bank for award The International Fund for Agricultural Development (IFAD) and the Consultative Group to Assist the Poor (CGAP) in December 2003, awarded Fonkoze, an alternative bank in Haiti that provides financial services to the rural poor, with the 2003 Rural Pro-Poor Innovation Award of USD $50,000 for its pioneering money transfer service in Haiti. The Award provides funding to microfinance institutions that have developed innovative methodologies to reach and have an impact on very poor clients in rural areas. Fonkoze will use the money to launch a large-scale public education campaign and to strengthen awareness of the remittance services of Home Town Associations of Haitian Migrants in the US and increase its client base. Fonkoze (‘shoulder-to-shoulder’ in Creole), a non-profit foundation, is formed of an economic alliance of peasant organizations, women’s collectives, cooperatives, credit unions, “ti machann” (women street vendor) groups, and religious communities, from all sections of the country. It is dedicated to the rebuilding of Haiti’s economy by empowering people and community organizations to engage in successful, income-producing economic activities. The Foundation provides a full range of financial and educational services necessary to help the poor women and men of Haiti participate successfully in the economy. With 18 branch offices nationwide, the Foundation reaches 25,000 clients and has a loan portfolio of USD 2.6 million. In 2003, FONKOSE processed a total of USD 5.5 million in remittance. Fonkoze is now positioned to spin off its financial services to form Haiti’s first micro-credit oriented commercial bank. The largest proportion of stock in this new institution would be held by the Foundation, but other stockholders from within Haiti and from abroad would be encouraged to invest. It has recently developed a partnership with the American commercial bank, City National Bank of New Jersey (CNB). This partnership has resulted in multiple benefits for both Fonkoze and CNB. IFAD has a long standing role in enhancing rural development in the Latin America and the Caribbean region through participatory projects. Through initiatives such as funding microfinance institutions and banks for the poor, IFAD has been working for over 25 years in empowering poor people in rural areas to overcome poverty. IFAD is therefore in a unique position to help the senders and recipients of remittances to increase their access to financial services and invest in employment and income generating projects. This case study
was submitted by IFAD. For more information please contact:
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