Fonkoze is always learning.
That’s not to say that it doesn’t already know a lot. It does. Its success over its first twelve years is easy enough to see: From one branch and a handful of borrowers, to 30 branches, in all parts of Haiti, and almost 40,000 borrowers in its core micro credit program. And that doesn’t include thousands of clients like me who only use other services: like savings accounts, currency exchange, or money transfer.
Not only is Fonkoze serving more and more clients, it is also serving an increasing range of clients through an increasing range of programs. All of Fonkoze’s micro credit clients are poor, but its two newest credit programs are enabling it to reach clients who would previously have been much too poor to benefit from its services, clients so poor that they would be unable to manage a $25 loan.
In addition, the more one meets clients all over Haiti, the more one sees that it’s not just the organization that’s making progress. One hears story after story of women who started with little or nothing but are now run strong businesses, clients whose lives have improved in all sorts of ways.
And all this is happening in a country in which it’s hard to get things done.
But that doesn’t mean Fonkoze is or should be satisfied. Not only is the organization still far too small to serve the enormous number of Haitian families who need the help that micro credit can bring, but it recognizes the need to continually improve the support it offers the clients it already has.
For example, Fonkoze learned something last March. Its Director, Anne Hastings, was leading a guest from the Grameen Foundation on a visit to the Fonkoze branch in Ench. The Grameen Foundation is a spin-off of the Grameen Bank, the bank in Bangladesh that started the micro credit movement thirty years ago. The visitor, a man named Alam, met Fonkoze clients. He and Anne spoke to three that were of particular interest. The three were long-time Fonkoze members with perfect repayment records.
Anne and Alam discovered something striking: Though two of the three clients seemed to be doing quite well, having built houses, purchased real estate, and built up the size and quality of their businesses, the third seemed to have gotten nowhere. She had been a client as long as the other women had. She was borrowing similar amounts and, like them, she was continually repaying her debt. When Anne and Alam met her she was ready to make the final payment on her most recent loan. They found her sitting by a basket that held three onions and two potatoes. When they asked her where her merchandise was, she said that they were looking at it: three onions and two potatoes. She explained that she was about to make her final loan payment, so she had nothing left.
She had taken and repaid three or four years of credit after credit, and still lacked the capital to keep a reasonable inventory in front of her every day. Something wasn’t working.
Anne and Alam came to believe that Fonkoze’s emphasis had slipped away from where it needs to be. Its loan officers were thinking too much in terms of the size and quality of the portfolios they’re responsible for: They want, for very good reasons, to be able to say that they’re lending lots of money to clients whose delinquency rates are low. Anne and Alam became concerned that, in Fonkoze’s conversations with clients, it too focused on good reimbursement and good management of money within the business. As important as good reimbursement and good business practices are for Fonkoze clients, they are not the goal that Fonkoze sets for itself.
Fonkoze is not a commercial bank. It wasn’t founded by entrepreneurs looking to make a buck. Its mission is social: to serve its clients, to help them lift themselves out of poverty and gain a greater measure of control of their own lives. Though low delinquency rates and large amounts of lending can both be useful towards that end, neither is itself a goal.
Alam agreed to return to Haiti to lead workshops for Fonkoze clients and staff. The workshops would aim at clarifying Fonkoze’s goal and helping participants see what the key to achieving the goal is. According to Alam, the key is for clients to use their credit to accumulate assets. Putting more and more money in clients’ hands is not enough. Nor is it enough to help clients learn to run their businesses more profitably. Unless clients develop the discipline it takes to continually reinvest as much of their profit as possible back into their businesses, or into some sort of income-generating asset, so that more and more money is actually working for them, their lives may never change all that much.
So Alam and I spent two weeks traveling through Haiti, talking about asset accumulation. Not that I have any wisdom to share on the subject. All the micro credit experience is Alam’s. He’s been working in the field for 23 years. But Alam speaks no Creole. So I translated for him, ran his PowerPoint presentation, and led the participatory parts at each workshop.
Alam spends a certain amount of each meeting just talking about micro credit fundamentals. Micro credit is a thirty-year-old movement that aims to address poverty by lending poor women money to invest in small businesses. It works with borrowers who would not traditionally be viewed as credit worthy. And it works without asking borrowers to put up collateral and without reserving the right to take those who don’t pay to court.
Even without such remedies, borrowers repay their loans at a very high rate. They do so first and foremost because they are businesswomen who feel a strong need to have money in their hands. Many support themselves and their children without help from a partner or spouse. Repayment becomes a priority because they want to keep getting more loans.
They also repay because of the way the loans are structured. In the first place, loan amounts are small, and frequent installments are easy to manage. In the second place, loans are organized in a manner that makes it possible for struggling women to get help now and again. Groups of five friends enter the program together, agreeing to share responsibility to help one another pay back their loans. Installments are made at regular meetings of credit centers, collections of six-eight such groups, and if one of the women is short, the others pitch in to make up the difference. It’s a process designed to encouragement the development of a strong sense of solidarity among the women, but it also helps guarantee that repayment is prompt.
Alam spent much of the workshop driving home the importance of the solidarity among group and center members. He spoke both about ways in which Fonkoze staff can nurture that solidarity and about how Fonkoze can put it to good use. A lot of what he said must have been familiar to his listeners, many of whom have been with Fonkoze for years, but they seemed to appreciate hearing it reinforced.
The hardest part of his presentation, both for me as the translator and for those listening to him, was its main point: his explanation of how asset accumulation should work. He presented a chart showing the progress a Fonkoze client could make. The data in his chart assumed that, at the end of each loan period, an amount of capital equal to the loan amount stays in her business. According to Alam, a client who can manage her household and make her repayments out of the profit her business earns can reasonably expect to work her way out of poverty within five years. He insisted that, in Bangladesh and elsewhere, experience has shown that five years is a reasonable expectation for most micro credit clients.
This chart created long discussions most of the times we showed it. Many workshop participants insisted that Fonkoze clients would not be able to repay their loans and run their lives without using the capital – in idiomatic Creole the “//manman lajan//” or “mother money.” Alam tried to explain that this is like eating the hen that lays the eggs you sell, but many were adamant that the situation in Haiti, where a dollar-affected economy with low national production keeps living costs high, simply requires that borrowers at least nibble at that hen. And most said that they would have to take a very healthy bite.
It took some work just to help participants see that Alam was not insisting that they must run their lives and make their repayments out of their profit exclusively. The initial reaction to the chart was most often that it wouldn’t work. But once participants really understood what the chart was measuring – namely the rate at which capital would increase according to one assumption – it became possible to change tack and ask them to estimate what percentage of their loans they might reasonably expect to retain in their businesses after each credit cycle. Most estimates ranged between 10% and 50%. And we were able to follow up each estimate by showing how each would permit a woman’s capital investment to grow.
It will take a lot more work to make Alam’s lessons really sink in. It will take conversations, all across Haiti, where women think through the steps they each need to take to orient their businesses and, in fact, their lives towards achieving that sort of growth.
Figuring out how to organize those conversations will take some reflection, but the effort to think through the problem will be effort well spent. Nothing except asset accumulation can help Fonkoze clients escape from poverty. Helping clients clarify the point for themselves might be as important as almost anything Fonkoze’s education team could undertake.