Latin America has been experiencing terrific economic growth over the last decade. However, progress in the Caribbean sub-region has been slower for several reasons. Natural disasters and low commodity prices have pushed Caribbean countries to seek financial reforms.
Recently, in an attempt to overcome poverty, countries such as Haiti, Jamaica, Suriname and Trinidad & Tobago have been implementing financial inclusion policies and regulations for innovations like digital financial services. These countries have all expressed a desire to develop policies on consumer protection, and they are also interested in digital financial services with a special emphasis on government payments, access to finance for MSMEs and policies that foster youth entrepreneurship.
According to data released by AFI, speaking of digital financial services, Haiti has been the front-runner in the region since 2010. But the tremendous earthquake that occurred in January of the same year, left the Caribbean country facing several challenges. Haiti’s experience has been particularly unique, and provides a window into the challenges and lessons of regulating in an emergency. Among all providers, Fonkoze self-built the reputation of Haiti’s largest microfinance institution. Let’s see how.
The Haitian Context
In 2010, Haiti experienced a terrible earthquake that left the country in ruins, with no infrastructure. Delivery of humanitarian aid was a puzzle for aid agencies. Although they settled down infrastructure to leverage the high coverage of telcos and offer mobile money services linked to a bank account, policymakers still had to deal with the lack of regulation for an innovation such as this. Moreover, Haiti’s banking law stated that only banks (duly licensed and supervised by the Central Bank) were authorized to take deposits from the public.
«Policymakers had to move quickly, and chose to allow “distance bank accounts. In other words, financial regulators opted for a bank-led model instead of a telco one, recognizing the importance of financial inclusion», said María Moreno Sánchez, Alliance for Financial Inclusion’s (AFI) Senior Policy Manager.
«The financial regulator ensured that financial institutions were ultimately responsible for this service. To deepen penetration of mobile money, financial institutions were allowed to use third parties (non-regulated) to provide services. Agents, super agents, POS terminals, ATMs, mobile phones and bank cards were all recognized as valid distribution channels», added Moreno.
How To Implement Financial Inclusion
Distant bank accounts (DBAs) were used for cash-in and cash-out, transfers (between traditional bank accounts and DBA to DBA), payments, wages, and loan disbursements and repayments. The humanitarian emergency pushed government and NGOs to become early adopters of donor-to-person payments and social program payments.
In 2013 the Banque Nationale de Crédit (BNC) launched Lajan Cash, Haiti’s first mobile wallet. Trought this tool, transactional services were also offered and e-commerce and utility bill payments were allowed. One year later, Unibank launched a new product to open distance bank accounts at any geographic location using a bank debit card. Identification is confirmed through IDs and fingerprinting. However, among providers Fonkoze came out as the leader in the Caribbean country.
About Fonkoze
Fonkozoe is Haiti’s largest microfinance institution. The name - Fonkoze - is an acronym for the Haitian Creole phrase "Fondasyon Kole Zepòl" meaning "Shoulder-to-Shoulder Foundation". Its mission is to empower Haitians, primarily women, to lift their families out of poverty through supporting them to build sustainable livelihoods.
Its microfinance programs and activities consist of: Solidarity group microcredit loans to expand a business; Business development loans to small micro-entrepreneurs, or small and growing businesses; Money transfer service; Currency exchange services and more. The institution claimed that it helped over 200.000 people to access basic financial services.
Mobile Banking
Fonkoze is now training women to help bring mobile banking to financially excluded households. Once trained, and working with Fonkoze in partnership with Haitian mobile wallet service providers, they’ll be “mobile wallet agents” to improve communities’ access to savings and other financial services. As they promote last-mile financial inclusion, the women also gain a supplemental source of income.
Not Only Financial Inclusion
However, Fonkoze is focusing its attention not only on microfinance. Fonkoze's development programs include Adult Education, Ultra-Poverty Alleviation and Boutik Santé, a health program designed to create a new business opportunity for Fonkoze's existing clients while also providing much-needed health products, services and education to rural communities throughout the country.
According to data released by the company, it helped 3,7 million people to receive medical help. It also won the 2021 European Microfinance Award for Inclusive Finance and Healthcare, receiving a € 100,000 prize for its community health initiative.
The “Boutik Santé” Program
With formally provided healthcare largely absent from hard-to-reach areas of the country, before they can get to a clinic rural, Haitians who are unwell often suffer acute symptoms from illnesses that could otherwise, have been treated with preventive health strategies and over-the-counter medicine.
Through its 38 local community health stores, Boutik Santé provides training, nursing supervision, support and provisioning for rural women community health entrepreneurs to administer basic health screening, make referrals and access treatment for sick children, women and men through registered health centers, conduct home visits, deliver community health education, and sell non-prescription health and nutrition products.
In the coming year, Fonkoze’s Boutik Santé team plans to keep local health stores well stocked with essential products despite the logistical problems involved in transporting supplies from Port-au-Prince. Plus, the startup is working to establish partnerships to increase the availability of family planning products and services and work with the Haitian Cervical Cancer Association to develop self-testing for women and improve cervical cancer identification and treatment rates.
The Lesson from Haiti
The Haitian experience highlights the huge potential of digital financial services policies in the region. It also represents optimism and opportunity in the midst of a tragedy. Now that digital financial services are being used to meet cash needs and channel funds to people in conflict and disaster zones in different parts of the world, it is helpful to look to the Caribbean for successes and lessons.
Haiti still faces challenges. An informal economy and lack of proper infrastructure limit the speedy expansion of agent networks (via agents), and security concerns limit the capacity and willingness of agents to accept higher numbers of deposits.
However, policymakers played a pivotal role in Haiti, not only in guaranteeing humanitarian assistance for Haitians, but also creating a path to development and adopting policies that address the country’s challenges. Implementing effective policies guaranteed consumer rights and facilitated innovation, which in the end created a favorable ecosystem for delivering financial services to the country’s people.
