Promoting small and micro enterprise in Haiti, House hearing,, 28 APR. 2010, v+185P


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BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania
MELVIN L. WATT, North Carolina
BRAD SHERMAN, California
MICHAEL E. CAPUANO, Massachusetts
WM. LACY CLAY, Missouri
JOE BACA, California
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
GWEN MOORE, Wisconsin
PAUL W. HODES, New Hampshire
RON KLEIN, Florida
JOHN ADLER, New Jersey
JIM HIMES, Connecticut

EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
WALTER B. JONES, JR., North Carolina
GARY G. MILLER, California
J. GRESHAM BARRETT, South Carolina
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
PATRICK T. McHENRY, North Carolina
KEVIN McCARTHY, California

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel


GREGORY W. MEEKS, New York, Chairman

MELVIN L. WATT, North Carolina
GWEN MOORE, Wisconsin

GARY G. MILLER, California
EDWARD R. ROYCE, California


Hearing held on:
April 28, 2010 ................................................................ 1
April 28, 2010 ..................... ............................................... 29


Barrau, Olivier, Managing Director, Alternative Insurance Company ............... 6
Pierre, Mathias, President, GaMa Consulting s.a. .................................... ..... 4
Roodman, David, Research Fellow, Center for Global Development ................ 8
Sanbrailo, John, Executive Director, Pan American Development Foundation 10
Winter, Simon, Senior Vice President, Development, TechnoServe Inc. ........... 2

Prepared statements:
Bachus, Hon. Spencer ..................................................... ........................ 30
W aters, Hon. M axine ...................................................... .......................... 32
Barrau, Olivier ........................................................... ............................... 34
Pierre, M athias ........................................................... ............................. 44
Roodm an, David .......................................................... .............................. 59
Sanbrailo, John ........................................................... ............................. 65
W inter, Sim on ............................................................. ................................ 177


Wednesday, April 28, 2010
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:12 p.m., in room
2128, Rayburn House Office Building, Hon. Gregory Meeks [chair-
man of the subcommittee] presiding.
Members present: Representatives Meeks, Waters, Watt, and
Chairman MEEKS. This hearing of the Subcommittee on Inter-
national Monetary Policy and Trade will come to order. Without ob-
jection, all members' statements will be made a part of the record.
And I will start by making a brief opening statement.
I want to first start by apologizing for starting the hearing a few
minutes late. I am sitting on a conference committee on the Iranian
Sanctions Act, and that's all the way over on the Senate side. And
so I have been intricately involved there. That is the reason for us
being a little tardy today.
But I would like to thank-and I know he may be here shortly-
Representative Miller, the ranking member of this subcommittee,
for his help in planning this hearing, and to express my gratitude
for our ability to work in a truly bipartisan manner in seeking so-
lutions to the critical situation in Haiti.
This hearing is the third in a series of hearings on the situation
in Haiti. And in considering the situation in Haiti, we have tried
to consider the principal economic layers of the crisis. We started
with the sovereign issues of Haiti's unsustainable foreign debts,
and I was thrilled to see such bipartisan support for passage of the
Haiti Debt Relief bill in both the House and the Senate, which was
signed into law on Monday by President Barack Obama.
The last hearing we held, on March 16th, considered the macro-
economic plan for Haiti's private sector. Specifically, we discussed
the importance of including a specific plan and strategy to promote
Haiti's competitiveness in key sectors, and the critical importance
of incorporating a Haitian-led private sector recovery plan as a cen-
tral component of the global initiative to assist Haiti following the
devastating earthquake.
Today's hearing will focus on small and micro enterprises. The
vast majority of Haitians derive their income from informal micro
enterprises. As is the case in most developing countries, much of

private enterprise is informal, unstructured, agricultural in nature,
and provides little long-term security on which to build a pros-
perous, stable future.
Indeed, when we hear, as our witnesses will speak to, that no
more than 10 percent of the private sector is formalized in Haiti,
and that 10 percent or less of private enterprises contribute to the
nation's tax base, and that nearly 35 percent of the Haitian govern-
ment's budget is driven by the tax base, with the rest financed
from aid and donor budgets, it's hard to see a credible role for the
government or a path to locally-driven economic recovery.
When we think of the entrepreneurship here in America, we take
certain concepts for granted, including access to capital, proper reg-
ulation and oversight, delivery of government services, insurance,
banking services, access to markets, enforcement of contract law, a
deep and qualified talent pool, etc. But in Haiti, each of these can
be a major barrier to starting or growing a business.
What's more, as our witnesses spoke to at the last hearing, pro-
moting a culture of entrepreneurship in Haiti will also depend on
changing perceptions of the social role of the entrepreneurs and
companies and business leaders.
I look forward to the testimony of our witnesses, and hope to
take the findings from these hearings to work with my colleague,
Representative Miller, and others on this committee in a bipartisan
manner to promote Haiti's private sector and to help drive a vi-
brant economic recovery owned and driven by the hard-working,
ambitious, and resilient people of Haiti.
And I will now go to Mr. Watt.
Mr. WATT. Mr. Chairman, I came to hear the witnesses, and I
think I will pass on an opening statement. I appreciate the chair-
man calling the hearing; these are very important witnesses.
Thank you.
Chairman MEEKS. We will start with Simon Winter, the senior
vice president of development for TechnoServe Inc., who has a
knowledge of management strategy, leadership, strategy planning,
program development, and leading fund-raising and partnerships.
There are various other things that I could say about him, but I
want to get right to the testimony so we can get as much as we
can in, before we have votes.
Mr. Winter?
Mr. WINTER. Mr. Chairman, members of the subcommittee,
thank you for the opportunity to discuss creating economic recovery
in Haiti through private enterprise. In my written testimony, I
show how the promotion of small growing businesses and a culture
of entrepreneurship can make a vital contribution to putting Haiti
on the path to recovery and growth.
Haiti's history lacks a strong and vibrant small business sector.
It has been dominated by a handful of multi-national businesses
and a small local elite. Without direct intervention to promote eco-
nomic plurality at the grass roots of the economy, development ef-
forts will fail to alter the structure of the business sector, and re-
strain the potential for new, broader sources of growth to emerge.

Haiti does not have to wait for the macro policy and infrastruc-
ture environment to improve before seeing benefits from such
grassroots efforts. TechnoServe's current work with USAID in Haiti
started in July of 2009. We identify promising local businesses,
analyze their financial or business needs, facilitate negotiations
with financial institutions and business service providers, and mon-
itor the results.
We believe that the approaches we have used elsewhere are ap-
plicable in Haiti. Our recommendations are to include two key
types of interrelated programs in any new reconstruction recovery
and development programming for Haiti.
First, Haiti needs a much-strengthened culture of entrepreneur-
ship, which can be enhanced through the types of entrepreneurship
programs that TechnoServe has implemented successfully across
many countries.
Second, Haiti will benefit from strengthening programs, also
along the lines of those implemented elsewhere with positive socio-
economic impact by TechnoServe. In my written testimony, I pro-
vide examples from our work in Tanzania, Uganda, and Mozam-
bique: countries with similar ratings to Haiti on the World Bank's
Doing Business Project. They all demonstrate that, in such coun-
tries, entrepreneurial people can be identified, who can be trained
and mentored to establish small growing businesses that, over
time, can stand on their own feet.
The Tanzania business plan competition trained 110 entre-
preneurs over 6 months. It exposed them to experienced local busi-
ness leaders, local role model entrepreneurs, venture capitalists,
bankers, private investors, university professors, technical experts,
and other professionals from Tanzania's private sector.
Local financiers shift to considering small and medium enter-
prises as a viable customer base. Half of those entrepreneurs
trained are now using business support vouchers provided and ac-
cessing expansion capital. And the entrepreneurs form an alumni
network for mutual support, and become the kernel of a shift in the
local entrepreneurial culture.
Recently, research of 590 entrepreneurs from previous Central
American competitions demonstrates that participants in the train-
ing phases dramatically outperformed their peers who did not par-
ticipate. We are busy with such a competition in Haiti. We received
99 completed applications by February, of which 50 applications
were submitted after the January earthquake.
To ensure that Haiti's high-potential sectors receive the support
and attention they need to become the engines of economic recovery
and growth, it will not be enough to stimulate entrepreneurship
and hope that some good entrepreneurs arise in each sector.
Comprehensive sectoral programs are also required. The written
paper includes references to our work in cashew, poultry, and sa-
vory bananas in Africa.
In Mozambique, a country ranked 172 out of 182 in the UNDP's
2009 human development index, we ceased 7 years of active sup-
port for the cashew processing sector 2008 by when 40 percent of
nuts produced were processed locally, from zero 7 years earlier.
Five thousand jobs have been created, about half held by women.
In January 2009, we found that, since 2001, the aggregate positive

impact of the renewed cashew industry had been 11.5 million to
the entrepreneurs, and over 100,000 small-scale farmers.
Based on the establishment of a similar program to boost the
mango and passion fruit sectors in East Africa in 2009, Coca Cola
has selected TechnoServe to be their implementing partner for the
recently announced Haiti Hope project. This 5-year project seeks to
double the income of 25,000 Haitian mango farmers, and establish
local institutions and infrastructure to support the ongoing growth
and competitiveness of this sector, including value-added enter-
We believe that the Haiti Hope project can become a role model
for sectoral revitalization that can contribute to the long-term de-
velopment of Haiti. I believe that, out of the recent crisis, there is
a moment of discontinuity that will allow the U.S. Government and
other donors and philanthropists, as well as private sector inves-
tors, both local and international, to create a new beginning for
Thank you, Mr. Chairman, for the opportunity to speak to you.
I would be pleased to follow up with you and committee members,
or any of your staff.
[The prepared statement of Mr. Winter can be found on page 177
of the appendix.]
Chairman MEEKS. Thank you, and thank you for finishing right
on time. Our next witness is Mr. Mathias Pierre, who is the found-
er and CEO of GaMa Consulting. Mr. Pierre is a very successful
Haitian entrepreneur, who wants to make his all-too rare success
a far more common story in Haiti.
He is educated, an electrical engineer, and he founded his com-
pany-and it's an IT consulting firm that's based in Haiti-in 1998.
Mr. Pierre?

Mr. PIERRE. Thank you, Mr. Chairman. Mr. Chairman and hon-
orable members of the House subcommittee, thanks for providing
me the opportunity to talk to you about my views on the aid and
construction effort and the critical role that MSMEs should play in
the process.
I am an entrepreneur who started with nothing. When I think
of my past, and the current involvement in my country's private
sector, I believe that not only it is possible to change one's future,
but most importantly, I have learned that change can be learned.
We are not conditioned to change by our own genes. It is, instead,
necessary to define new ways to do things. And I believe, as a cor-
nerstone for rebuilding Haiti, we must instill change in the minds
of Haitian youth.
Though I do not come from a wealthy family, I was capable of
establishing a model of financial performance in applying certain
principles prescribed in my book, "The Power of a Dream." Today,
I am the president and general manager of GaMa, beneficiary of
the model award over 500 competing companies in the Caribbean.
In North America, I would be considered a very active business-
man. However, in Haiti, this type of participation is mostly viewed

as an exception to the rule. So, I would consider myself a relatively
rare species of businessman.
I am convinced that what I have accomplished is possibly only
because I actually did it. I believe that I can share my proven
know-how by working to the foundation, Working Space for the
Success of Being Haitian. With more than 500 university students,
my goal, I would like to see the students serve as models, inspiring
symbols to those who decide to get involved in sustainable develop-
Haiti is more emotional then rational. Haiti is a country where
emotion and perception plays an important role in the ways an in-
dividual acts, his attitude and behavior. Therefore, this is why
those who succeed are perceived as drivers of growth and seem to,
therefore, be destined to be depositories for wealth. Those who are
deprived of means are perceived and consider themselves of being
incapable of participating in the growth process.
Life is considered as a hostile heritage. One must make an ut-
most effort to survive, making it difficult to overcome the realities
of one's origin and social status. Compared to the United States,
where poor become rich in one generation, a typical Haitian destiny
is determined by his parents' status. I believe this is driven by an
environment of scarce resources and an economic model which is
not based on growth and wealth creation. This leads to a predatory
distribution of wealth that accentuates the divide between rich and
Ninety percent of Haiti's economy depends on the informal sec-
tor, because 90 percent of the private sector's jobs come from the
informal sector.
January 12th, consequences and opportunities-it is in this con-
text that January 12th occurred, completely changing our business
environment. Haiti's most important symbols have been destroyed,
and a country has been deeply hurt to its core. It has adversely im-
pacted most small entrepreneurs and small merchants in the infor-
mal sector: no insurance; destruction of physical assets and inven-
tory; lost revenues; and no access to credit and public facilitation.
The earthquake aftermath offers an opportunity for a new begin-
ning-most importantly, to put in place new elements to remod-
ernize the economy.
Intelligent and efficient injection of capital-according to the
USAID survey, $2.7 billion is needed for the economy to recover the
MSME sector after the $2 billion lost in 35 seconds. Tangible ac-
tivities must be undertaken that address the financial needs of the
productive sector.
I believe that this could be achieved by adopting the following fi-
nancial and non-financial measures: provide capital fund in three
current underserved segments in the private sector; establish an
MSMEs support and assistance fund; establish a growth capital for
small and medium businesses in the range of $100,000 and $1 mil-
lion size; establish a fund for the development of entrepreneurship;
make available to young entrepreneurs start-up funds for a busi-
ness; organize contests at the level of university and the technical
training school to obtain financial, fiscal, and legal assistance; fos-.
ter an entrepreneurial-

Chairman MEEKS. Can I ask you to start wrapping up? We're
just trying to make sure we get as many people to testify before
votes start. So if you would, wrap it up. Your statement will be in
the record. So, please, just summarize, and we will take-
Mr. PIERRE. Basically, it's to provide management skills to those
kids. And, at the end, I think by doing so, we can help Haiti and
the country and the young people, first, to help them to get started
and think differently about the private sector, because they are a
part of the private sector.
Mr. Chairman and honorable Members of Congress, in my clos-
ing, I would like to once again thank you for giving me the oppor-
tunity to express my views on the role of the MSME sector in the
rebuilding effort for a more prosperous and wealthy Haiti. Thank
[The prepared statement of Mr. Pierre can be found on page 44
of the appendix.]
Chairman MEEKS. Thank you. And I am going to go right-with-
out a real introduction; so I apologize, Mr. Barrau-to you. You are
the managing director of the Alternative Insurance Company, and
a promoter of innovative tools for economic growth in developing
I want to go directly to you to get your testimony. Thank you.
Mr. BARRAU. Thank you, Mr. Chairman, and Honorable Con-
gressmen. Thank you for providing me the opportunity to express
my views on the critical role that micro, small, and medium enter-
prises, MSMEs, and especially insurance, should play in the re-
building process of Haiti.
Following the biggest catastrophe that Haiti, and maybe the
world, has known, besides the suffering and loss of lives, I think
we have several opportunities in front of us, such as what ingredi-
ents were missing in the previous attempts to get Haiti on a dura-
ble path of economic and social development.
I would like to stress that the important missing link in the pros-
perity chain is risk management. This is well illustrated in a fa-
mous quote by Sir Winston Churchill, where he says, "If it was pos-
sible for me, I would write the word 'insurance' in each home and
on each man's forehead, since I am so convinced that insurance
can, at a moderate price, liberate families from irreparable catas-
Observers argue that there is a direct correlation between the
number of deaths following a catastrophe and insurance penetra-
tion rate in a society. A vivid example can be seen this year. Haiti
faced a 7.2 magnitude earthquake with over 250,000 deaths. And
Chile, a much more developed country-and maybe the richest na-
tion in South America-faced an 8.8 magnitude earthquake, which
is 500 times stronger, with less than 1,000 deaths, though twice as
many buildings were damaged.
Haiti's penetration rate is close to nil, and there is more informa-
tion about that in my written remarks. Answering how Haiti can
increase its insurance penetration rate will help answer some of
the questions above-or at least reduce the reliance on inter-

national aid. The only way to increase the penetration rate in Haiti
is through the MSME sector, which, according to a USAID study,
are the ones that suffered 65 percent of the losses on January 12th.
They were not insured.
Given the investments required to rebuild Haiti, we need to fa-
cilitate the role insurance has to play in this economy. By making
the MSME sector financially stronger, the social fabric of Haiti will
be transformed and benefit all. The government will have a bigger
fiscal plate and a vibrant economy. MSMEs and the private sector
will have bigger buying power and better social services and protec-
tion from the international community, reduced dependency on for-
eign aid, and a more stable Caribbean region.
It is important to support the traditional banking system also in
difficulty, but it's even more important to support other financial
actors, such as development banks and micro-finance institutions.
Traditional banking activity will not fulfill our hope that money
will trickle down within the pyramid, and the bottom will benefit.
Today, entrepreneurs who may have great ideas and do not qualify
for traditional banking, will never be able to emerge.
Our mea culpa should be to accept that we did not do a good job
at protecting the wealth that we Haitians were creating. Challenge
has to start from the top. The leadership of Haiti needs to lead the
way by protecting itself.
Mr. Chairman, Honorable Congressmen, the message should be
clear from the international community that its effort to rebuild
Haiti needs to be protected this time. The Haitian government has
to understand that risk management is important if Haiti is to
have a sustainable society and economy. Most, if not all, of the gov-
ernment's assets were not insured. More information also is in-
cluded regarding this in my remarks.
Low levels of social security and insurance access is the common
denominator that is found in all underdeveloped countries. Haiti is
no different. Faced with such a situation, populations are forced to
turn to unconventional risk management methods that are more
costly and always fall short of the expected results.
In my written remarks, I talk a lot about how poverty can be
considered as a transitory state that is linked directly to risk man-
agement. With private/public donor partnerships, innovative ideas
and mechanisms can be put in place so that insurance and social
security can be complementary and more inclusive, as explained in
my remarks.
How is the insurance industry following the earthquake, you may
ask. For the first time in its history, the insurance industry is in
financial difficulty. The reinsurance cover bought by local compa-
nies is not sufficient to cover the losses. There is a gap in the sys-
tem of approximately $40 million. It is crucial and very much time
sensitive that insurers who qualify find help to face their imme-
diate obligations. Without insurance coverage, credit to MSMEs
and entrepreneurs will continue to be prohibitive.
There is also an opportunity today to properly regulate and su-
pervise the insurance industry, so that it can meet the region, in
terms of prudential norms and transparency, but also set the foun-
dations for its growth.

Mr. Chairman, Honorable Congressmen, in closing, I thank you
very much for giving me the opportunity to express my views on
the role of the MSME sector, and especially the role the insurance
industry should play in building a more prosperous and wealthy
I am available for your questions, if you have. Thank you.
[The prepared statement of Mr. Barrau can be found on page 34
of the appendix.]
Chairman MEEKS. Thank you. Let me just briefly explain, just
so-I know you all don't know what's going on, but votes have been
called, and that's what members are doing. They are running out
and making votes, and I am trying to make some determinations
here, as to whether I adjourn, whether I miss a couple of votes and
make sure I get to the both of the two witnesses that we have left
and then get to the questions. And there are some members who
did want to come here, and they said they want to come after votes,
so we're trying to, you know, ascertain exactly what we're doing.
In the meanwhile, I am going to push forward, I think, and go
to Mr. David Roodman, who is the research fellow for the Center
for Global Development.
And I again apologize for not reading your full biography, but I
think it's more important to hear what you have to say.
Mr. ROODMAN. Thank you, Chairman Meeks. I am going to skip
the first half of my written testimony, which offers some general
principles for how to support Haiti's small and micro enterprises,
and just focus on micro finance and what to expect and what not
to expect of micro finance in Haiti.
And to convey my thinking, which has come out of both a book
and a blog that I am writing on micro finance, I would like to start
with a story.
A couple of years ago, I spent a good deal of time scrutinizing
what was then the leading study that told us that micro credit re-
duces poverty, especially when it was given to women. And to de-
cide whether I believed this crucial study, I decided to replicate it.
That means running all the original math on the original data. And
the math and the computer programming and this were really very
complex, and I found myself getting into the weeds and crunching
a lot of numbers. I would eventually conclude that I didn't believe
the study, which is not to say that I think micro credit doesn't help,
but that we couldn't answer the question with this data.
Now, while I was doing that, I had the privilege of visiting sev-
eral micro finance programs, including a couple in Egypt, which
were supported by USAID. And I will never forget the scene that
I saw in one of the bank branches in a very poor neighborhood of
Cairo. It was loan disbursement day, and there were hundreds of
women who had filled this lobby. And then the crowd sort of spilled
into the hallway and down the stairs and onto the streets, and they
had their kids, and they were clearly going to have to wait hours.
And they were all there to get their loans, and it seemed like a
very excited group. I got to speak to them briefly through a trans-

I thought about the irony of this situation. Should I tell these
women that, "I have been crunching numbers on my laptop back
in my hotel room, and actually, we are not quite so sure if you
should take those loans?" I mean, that would be absurd. There is
no way that I could tell them how to live their lives, lives I don't
really understand.
So, I reflected on this sort of conflict between the uncertainty of
the research on the impacts of micro finance and the vitality of the
scene that I saw, and I decided that I had to take both seriously.
And the realizations I came to by doing that, I think, are essential
for developing realistic expectations of what micro finance can do
in Haiti, and also for supporting micro finance wisely.
So, from the research side, I am convinced that we have, essen-
tially, no solid evidence that micro credit-which is the dominant
form of micro finance-reduces poverty, on average. That's a strong
statement. Let me give you a couple of reasons why I believe that.
First of all, while there are lots of success stories about micro fi-
nance-you know them well-there are also failure stories: women
who borrow and get in over their heads with high-interest debt,
women who can't pay back, so their borrowing peers in these credit
groups come and take their pots and pans or their tin roofs to sell
in order to repay the loans.
The other reason beside those stories that I think we need to
bring some skepticism about the impacts of micro finance is it's
really hard to tell whether people are better off because they're bor-
rowing, or they're borrowing because they're better off. And I could
say a lot more about that, but I won't. And so it's a very difficult
statistical problem.
The most credible way to pin down cause and effect, to find out
whether micro finance is really helping, is to randomize, the way
it is done with good drug trials to see whether drugs are safe for
people. If people who are randomly offered micro finance do better
than those who don't-are not randomly offered, that's pretty pow-
erful evidence that it's helping. And just last year, we got the first
randomized studies of micro finance-or I should say micro credit,
in particular.
And the two that we have of micro credit did find that micro
credit stimulates micro enterprise. More people start businesses,
and that's a good thing. But at least in the 15 to 18 months that
were studied, that did not translate into reduced poverty, in terms
of income or spending of households, number of children in school,
and so on. So, that's a fairly muted verdict, compared to what peo-
ple usually hear about micro finance.
But that said, micro finance has scored some impressive achieve-
ments, I think, and I want to-and I think our job is to help micro
finance play to its strengths. And I would list two.
The first is the ability of micro finance to build dynamic and
large institutions. The Grameen Bank, which won the Nobel Prize,
has thousands of employees. It serves millions of people. It's non-
profit, but it acts a lot like a business. It competes, it innovates,
it's improving services for very poor people. And it's hard to find
such aid-fostered business-like institutions in other areas of aid,
outside of finance. There is no Grameen Bank vaccination.

The other strength I see in micro finance is the ability it has to
give poor people-really, millions of poor people-more control over
their financial circumstances. If you live on $2 a day, you don't ac-
tually live on $2 a day. You live on $2 one day, $.50 the next, $2
the next. That's because you're selling vegetables at the corner, or
selling the rickshaw rides. Your income is unpredictable and vola-
tile. And when you live that way, you actually need financial serv-
ices more than we do. You need ways to put aside money on good
days and good seasons, and draw it down in bad. And all the kinds
of micro finance-micro credit, micro savings, micro insurance,
even transfers of money-can help people do that in different ways.
But in this light, micro credit starts to look a little bit dangerous,
because it can actually reduce people's control over their financial
circumstances in some cases. Think about that word, "bond." It's
easy to imagine-and we know it happens-that sometimes people
get in trouble with micro credit. It's hard to imagine people getting
in trouble by saving too much.
Now, Haiti has a vibrant micro finance sector that, in many
ways, embodies the strengths that I have just talked about. There
appear to be competitive, creative, growing institutions-
Chairman MEEKS. I need you to summarize.
Mr. ROODMAN. Yes, I'm close. There is more savings, they do
more savings than borrowing. So I would endorse efforts to bolster
Haiti's micro finance sector in this difficult time, and I detail how
to do that a little bit more in the testimony.
That said, it's important to keep in mind that micro finance cur-
rently in Haiti reaches about a quarter of a million people, which
is roughly about 2.5 percent of the population. That's a great
achievement, no doubt, but it's also something that ought to be
kept in perspective. If one of our goals in helping recovery is get-
ting cash to Haitians so that they can help themselves, so that they
can buy stuff in the local economy and support small businesses,
then I think we need to look at other potential avenues that may
exploit networks that have far greater reach, including the mobile
phone networks and the remittance networks.
If we could set up a mobile money system, as now has been set
up in Kenya, that would allow people to save through their phones,
then with a stroke of the pen, a donor like the U.S. Government
could increase the bank balances-essentially, the cash in people's
pockets, of every Haitian with a phone number, with the stroke of
the pen. Thank you.
[The prepared statement of Mr. Roodman can be found on page
59 of the appendix.]
Chairman MEEKS. Thank you.
Last and far from least, we have Mr. John Sanbrailo,. who is the
executive director of the Pan American Development Foundation.
Mr. SANBRAILO. Chairman Meeks, thank you very much for the
invitation today. I am honored to be here for the Pan American De-
velopment Foundation. Before beginning, I would particularly like
to recognize your leadership, and the numbers of times that you
have visited our projects in Colombia. Thank you very much. It has

been very motivating for our staff and for all of those that we work
with there.
We are here today to talk about Haiti. Again, I congratulate you
for taking the initiative here, and especially in having Haitians,
Haitian business leaders as witnesses, which is so critical. Our
foundation has been operating in Haiti for 30 years. We have been
one of the leading promoters of small and medium-sized enter-
prises, especially in agriculture and community-based enterprises.
I have also been involved in the design and development of these
programs for 40 years as a former director of USAID in El Sal-
vador, in Honduras, in Ecuador, and in Peru.
I would like to just briefly summarize key points that, from my
experience throughout the region, as well as the Pan American De-
velopment Foundation's experience in Haiti, are critical for the suc-
cess of small and micro enterprises that we believe are absolutely
critical in the reconstruction and recovery of the Haitian economy
in promoting sustainable development. I have seen this throughout
my career-I come at this a practitioner-from a number of dif-
ferent country perspectives.
The first point I would like to make, and further elaborate in our
written testimony, is we need to recognize the overriding impor-
tance of political leadership and stability. And we outline in our
testimony how absolutely essential this is for the development of
any enterprises, and micro and small enterprises are certainly part
of that.
The second point I would like to make, and that often gets lost
in a discussion of small and micro enterprises, is encouraging
sound macro economic and regulatory reforms. Often, there is a-
what I refer to as tunnel vision in looking at micro and small en-
terprises. They are not seen in the broader macros and regulatory
environment. And, from my experience throughout the region, it
has been those reforms that have made the difference between the
successes and the failures. Throughout my career, I have seen suc-
cesses and failures throughout Latin America and the Caribbean.
But those successes have always been within environments that
encourage and nurture small business development.
We have attached to our written testimony a study by the IMF
that compares the Dominican Republic and Haiti, and highlights
the critical importance that policy decisions have made in explain-
ing the divergence of overall economic growth.
I would also like to mention the importance of promoting owner-
ship and titling, the important work that 10 years ago the U.S.
Agency for International Development did in Haiti, in supporting
property ownership. That work should be restarted again.
The fourth point is to expand successful development models for
small business and micro enterprises. We are supporting one of
those in our program that is called Community-Driven Develop-
ment. It's a Haitian government program, and we helped the Hai-
tian government implement that program.
The fifth point is to recognize-that has been mentioned here a
number of times already-the importance of remittances and en-
gagement. More small business development will be done through
remittances. More homes will be repaired through remittances and
through international aid. And trying to come up with more inno-

vative, creative ways of leveraging those remittances is absolutely
Finally, I would say engage the private sector, as you are clearly
doing here. Involve the private sector. That is what our foundation,
the Pan American Development Foundation, is all about through-
out the region, and especially in Haiti.
I would also just conclude that there are successes throughout
the region. There are models from those successes. Not everything
in Haiti or throughout the region has been a failure. I just point
to the Dominican Republic, to El Salvador, to your leadership in
Colombia. And it's those models that could help Haiti quickly re-
cover from this terrible disaster. And there are important ongoing
Haitian models that can be rapidly scaled up and developed.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Sanbrailo can be found on page
65 of the appendix.]
Chairman MEEKS. Thank you. What we will do now is we will
have the subcommittee go into recess. There are several members
who have indicated they would like to come back after votes, if you
have the time, because they would like to ask you some questions.
So we will recess now, and come back right after the last vote.
Thank you.
Ms. WATERS. [presiding] I would like to thank you very much for
your patience. The subcommittee has been in recess while we took
some votes. The chairman is tied up for a while, but I think that
he will be back. Meanwhile, we will resume this particular hearing.
And, as I understand it, everyone had an opportunity to make
their statements. At this point in time, those members who are
present normally raise questions about the testimony and the sub-
ject matter.
I understand that much of this hearing focused on the potential
of micro credit to promote the development of small businesses and
micro enterprises. Dr. David Roodman's testimony, as I understand
it, reminded us that micro credit has its limits, as well as its bene-
fits. One of Mr. Roodman's suggestions was as follows: "Give
USAID and other agencies the flexibility to analyze and adapt to
the strengths and weaknesses of the Haitian economy, procuring
locally when possibly, eliminating bottlenecks where possible, deliv-
ering in kind where necessary."
And I think that the work that we have done, and the time that
we have spent in Haiti and with USAID, that we agree with this
suggestion. A small businessperson will accomplish nothing if that
person borrows money to set up a business and then cannot repay
the loan because he cannot sell his products or services.
So, I am going to try and share with you some comments and
questions relative to what I have discovered. On my last visit in
Haiti, I asked the contract officer to come to a meeting that I had
organized with local Haitians. I had about 130 persons there who-
some were in business, others were professionals, others wanted to
get into business.
The first thing that I encountered was they had no entry point.
The persons who attended the meetings could not get into the clus-
ter meetings. And I don't know if you're familiar with the cluster

meetings that go on in Haiti, and all of the subject areas, whether
it's health or education, what have you. They are held behind se-
cured gates and walls with some of the local NGOs-mostly local
NGOs-and others who provide services and talk about the future
of Haiti. So, they didn't have an entry point.
I also discovered that the Inter-American Development Bank was
in Port-au-Prince. And when I went over who had been invited, it
appeared that they had gotten a list from the government, but the
list included some of the same familiar names of business persons
in Haiti. I gave them a list and they did include 10 additional peo-
ple that we referred. And then the Inter-American Bank went over
to the DR, Dominican Republic, where they had another meeting,
and because we had not been-we were not aware of that, we did
not submit additional names, and it kind of was the same people
So, we're talking about Haitians doing business and micro credit.
We are talking about how to do that. When we invited the USAID
person to come to talk with the business persons, the would-be
business persons, they brought with them the criteria for basically
unsolicited proposals, not a lot about requests for-proposals that
were going out that needed responses.
But the first thing they said was they-anyone wishing to do
business with USAID needed to have 3 years of receipts from what-
ever businesses they had been involved in. Some of us thought that
was laughable, for a number of reasons. The Government of Haiti
had lost most of its records. They were lying in the streets around
the palace and the other government businesses. They didn't even
have their records. And many of the people in the room had lost
their homes.
And, number two, many of the people there, they were bilingual,
per se, but they were much more fluent in Creole. And all of the
information from USAID was in English. And then, the other kinds
of requirements were just not culturally sensitive.
And so, that's one of the problems about local Haitians, I believe,
attempting to do business. And I saw nothing that gave credit to
businesses, bigger businesses, coming into Haiti if they would joint
venture with local Haitians. And I asked about whether or not
there was a policy relative to that, and there was not.
So, now I suppose, here in this hearing, not only are we talking
about small businesses and their ability to do business, we are
talking about financing and credit. And I would like to ask if any
of you testified to or you know of how local Haitians wanting to do
business and needing to have access to capital, how is that
accessed, either through the Haitian economy or otherwise? Where
is it-where do they get the money?
[No response.]
Ms. WATERS. Anyone? Yes?
Mr. ROODMAN. Representative Waters, you have raised several
issues there, and I think you have made some excellent points.
I think I might focus on this theme of "do no harm" that I men-
tioned in my written testimony. I think it's easy to underestimate
the productive power of the Haitian economy. Mr. Pierre here was
telling me about how there are various, I think, private groups who
have set up IT consulting in Haiti, and provided free Internet serv-

ice, and this sort of thing. Meanwhile, he is running a business,
and there are other businesses that can do the same thing.
And so, when free services like that are brought in-or when rice
is brought in, that can also be produced locally-
Ms. WATERS. I'm sorry, but slow down just a little bit. When
what is brought in?
Mr. ROODMAN. Rice.
Ms. WATERS. Okay. Let's talk about rice.
Mr. ROODMAN. The idea-talk about-when outsiders bring in
goods or services that can be produced locally-
Ms. WATERS. Yes.
Mr. ROODMAN. -and give them away for free, that actually dam-
ages the Haitian economy.
Ms. WATERS. Absolutely.
Mr. ROODMAN. And so, the problem that I think you're pointing
to is that the way that the USAID and other public agencies sort
of constitutionally work, it's hard for them to procure locally, partly
because of concerns about accountability and proper use of funds.
And so, I see AID and the other agencies as sort of like bull-
dozers, you know. The Haitian economy is like this delicate eco-
system, and it has been damaged, but it's still alive. And the bull-
dozers come in, and they manage to build something, but they also
do a lot of damage along the way.
And Congress isn't driving the bulldozers, but it did design them,
to a large extent. And so the question is, can they be redesigned
so maybe they're not bulldozers any more? I don't know what they
are-they would be bicycles, or something else that can be operated
with much more finesse.
In my written testimony, I refer to some really interesting work
that is already being done by USAID, what they call market map-
ping, which looks at what the local economy is capable of producing
now, what are our bottlenecks, such as lack of warehousing, which,
if released, could improve the ability of the economy to supply even
And if you start to think about this, it leads to a different way
of thinking, where outsiders need to first figure out what the econ-
omy, Haitian economy, can produce, or could produce with a little
help, and try to fill in the gaps. But make sure not to step on local
And the nice thing-I don't pretend that this is an easy thing to
fix in how USAID operates, but it's something that would not re-
quire a large budgetary expenditure, so it's attractive in that way.
Ms. WATERS. Thank you very much. Some of us believe, and I be-
lieve, that USAID needs to come up with a whole new way of doing
business in Haiti that would take into consideration all of what you
said, and more.
But the problem for Members of Congress is this: We are public
policymakers, but we don't normally sit down and write the details
of an operation. So, what we really do need is we need those who
understand this to come up with some suggestions for us about
what USAID should be doing, in order to credibly do business in
Haiti with Haitians participating.
For example, someone said to me recently that they had prob-
lems with Haitians building-for example, if you have to build a

school-because they wouldn't keep up with the receipts, and they
could only be reimbursed if they kept up with the receipts.
Well, I think that's a poor excuse for not contracting with Hai-
tians, because there may be some technical assistance that you can
provide to talk about, "This is the way we do business, and here
is how I think we can make it easier for you. Let me show you how
we have learned that some business people keep their receipts,"
and help to set up a system by which people-I don't care if they
drop it in a bucket every time they pay for something, or they as-
sign a person to follow up with every expenditure, or what have
you. But it seems to me those are problems that could be solved.
So, what we need is we need ideas and suggestions about how
to do business in ways that would keep USAID and others from
having excuses about why they can't do business with local Hai-
The other thing is this-there are several other things. It's not
just USAID. Politics is a part of what goes on in that country, just
like it is in this country. And there are people who are identified
and selected, because the government is asked by USAID and other
American agencies, "Who do you identify to do business with?" And
so, that has to be dealt with.
There is a governance problem that we can-because we're
friends, and everybody wants to work with the sovereign countries
in ways that are respectful, I think we can talk about that. We
have to have some leadership to do that, and we have to think
about how to get that done so that we're not simply doing business
with the same old people, or just some selected people. So that's
another kind of problem of being able to, you know, have the busi-
ness opportunities spread out.
Right now, one of the things that is-they are wrestling with is
the over-humanitarian effort of passing out food, because it's kill-
ing the local market in Haiti, of people who make a living selling
food. I just had an eye-opener on something that I'm not sure
about, I'm still wrestling with, because I am worried about the
shelter, or lack of, for the coming season, and afraid of hurricanes,
etc. And I know that the tarps and some tenting is just insufficient.
It's not going to do the job. And I was thinking about what could
be done in the absence of being able to put housing online fast
And I thought about containers that could perhaps serve the pur-
pose. Because, as these big international shipping containers are
very well-constructed, a hurricane can't move them, etc., but some-
one said to me, "Well, first of all, it takes up space, and the govern-
ment now is supposed to be identifying the lots that are available
to build the housing on, and, secondly, it displaces potential labor,"
except they would have to be retrofitted, which is-you know,
which would create some labor, but they are thinking that building
the housing, of course, you know, from the ground is more labor-
intensive. But it's going to take a longer time. And what is the cost
of doing that in human suffering?
So, these kinds of things, I know, are complicated, and they have
to be raised. But who-which one of you would have an idea about
something that the USAID could do to foster and facilitate the abil-
ity to involve more Haitians in business and entrepreneurial oppor-

tunities? Who could help me with that? Mr. Roodman, you have al-
ready spoken. What about Mr. Sanbrailo?
Mr. SANBRAILO. Thank you very much. I speak here as the rep-
resentative of the Pan American Development Foundation, an
NGO, but I spent much of my career as a USAID director in a
number of very difficult assignments. And I would beg to disagree
that it's necessarily the rules in which AID operates. I think much
of the AID funds are actually spent for local procurement in Haiti
right now, as in most other countries.
I think the cases that are being referred to are largely food aid,
where there is only one example of rice, and the unfortunate case
of rice, and there are other cases like that. But most of the funds
are being actually spent in Haiti for local procurement for a num-
ber of programs.
Let me just address, specifically, your question. What can USAID
do? We have worked in Haiti for 30 years. We worked closely with
USAID, as well as with other donors: the World Bank; the Inter-
American Development Bank; and other agencies.
One of the biggest issues that I see with USAID and Haiti right
now is the mission there is tremendously understaffed. It does not
have the necessary people, particularly compared to the dimensions
of the disaster. I have been through natural disasters in El Sal-
vador, in Honduras, and in Peru as a director, and I compare the
missions that I directed at that time to one in Haiti, and you just
do not have sufficient staff.
AID also, over the years, has not been able to recruit senior peo-
ple, people with tremendous experience, to be able to deal with
multiple natural disasters. So I think it is people who are-that I
would say are the real constraint. People will make the rules work,
and address the issues that I think you are rightly pointing to.
There are all kinds of issues that Haitian groups and Haitians
have in dealing with U.S. foreign aid, as with other assistance. And
there is just no substitute to having a well-staffed, proactive-and
I want to underline "proactive"-aid mission that reaches out to
the Haitian community, and involves the Haitian community in the
design, development, and implementation of those programs.
Let me also just mention that we are implementing a home im-
provement program with AID funding, as well. And what is abso-
lutely critically important is to get Haitians back into homes that
can withstand heavy rains and the hurricanes through home re-
pair. I think we are going to be able to get more Haitians back into
homes through rapid repair, assuming the houses can be safely re-
paired, and we are putting together teams of engineers who can do
that, and we are confident that we are going to see alternatives.
Clearly, you need different types of options and alternatives to be
able to address the dramatic situation of shelter in Haiti right now,
but we feel this is one of those. Thank you very much.
Ms. WATERS. Thank you very much. Mr. Pierre, is it GaMa Con-
Mr. PIERRE. Yes, correct.
Ms. WATERS. What do you consult about?
Mr. PIERRE. That's a good question. Actually, this is a company
that was created-me and my partners, my wife-we were looking
for a name. And we come up with "Consulting," because we didn't

know anything about business. And what-we do consulting in
computer and engineering, and-but we have a-today it's a type
of CompUSA type business in Haiti. I mean, we sell computers and
Internet and technology.
But if-I want to address one important point regarding your
question today. I think in order for the local people to be able to
sell to big entities like USAID or big businesses, they need to know
you. I mean you need to go from the informal to become formal.
And when you started, access to capital, it's a real challenge for all
young Haitian business-or all young Haitians who started a busi-
I remember what I go through in 10 years. It cost me, in the last
3 years, approximately $60,000 to $70,000, going from bank to
bank, to get the right finance in order to buy a building, because
I wanted to do something different than others-$60,000 in 3
Ms. WATERS. You're talking about U.S. banks?
Mr. PIERRE. Local banks in Haiti.
Ms. WATERS. Yes.
Mr. PIERRE. Because I couldn't get access to credit, even with the
bank that I was working for 10 years in the past. That's the situa-
tion of the access to capital.
But when I finally got access to credit, I was able, in 2 years,
to double the revenue of my business. And this is why, today, I
pointed out the idea of how to address the question of capital to
help business grow, and what a business can do for this country
when this business is growing. Because I was able also to go from
10 employees to 30 employees in that same period of time. And I
have been able to pay more taxes to the government, contribute
more to the government, and help the government come and find
more money to generate funds for education, health, and others,
provide services to the people.
And that is the idea behind everything I have been doing for the
past years. If I can create-to have 200 or 300 companies like mine
around the country, how this country would change. And what can
USAID do? I remember in the last meeting with Ambassador
Sanderson, and I remember she was asking the same question, ap-
proximately. "What can we do for Haiti?" I told her, "That's a good
thing to give us. That's a good thing, to come and help us."
I remember when I was a kid, every time I saw a new school or
a new hospital, I saw a government official. I saw a Haitian. And
I understood from that Haitians are able to do something. Today
when you open newspapers, you see on TV, you see USAID or for-
eign companies helping us. When you give me fish every single
day, you don't teach me how to fish, so what am I going to do? Just
go and ask you for more.
And that's what exactly Ambassador Sanderson was going
through. Every time she was in a plane, people was asking for a
visa, because they want to leave the country. There is no ownership
to the country. And that is one of the biggest problems Haiti is fac-
ing today. The poor people, they are trying to find any way to leave
their country: by plane; by boat; whatever they can do, they're
going to leave. The middle class comes to the United States to have
their kids, because they want the safe haven for their kids. And the

rich people, 1 hour and 45 minutes from Miami, make the money
in Haiti and enjoy it in the United States.
There is no country that we can change without people, their
own people, to have ownership of the country. By creating more
businesses, by providing capital to help young people get busi-
nesses out, by providing capital for the small businesses to grow,
for the medium-sized businesses to become bigger, this will help
the government because they will provide more revenue to the gov-
ernment. This will help the country. Thank you.
Ms. WATERS. Thank you. Mr. Driehaus is here. Would you like
to take 5 minutes for some questions, Mr. Driehaus?
Mr. DRIEHAUS. I apologize, Madam Chairwoman. I was in the
Chair over on the Floor, and so I didn't hear most of the testimony.
But just following up, Mr. Pierre, on what you were just saying,
I'm a former Peace Corps volunteer. I worked in West Africa. And
I'm familiar with many micro lending arrangements. How can we
empower Haitians to engage in small business development? And
can we pursue avenues such as peer lending, so that there is the
engagement, there is capital infusion coming from the outside, but
the management decisions are all being made internally by Hai-
tians for Haitians?
Are there models that we can learn, you know, from other areas
around the world, especially when it comes to micro lending and
small business development?
Mr. PIERRE. Actually, there is-we don't have institutions that
are helping in that sense. And we have only one institution trying
to help some businesses, but it's not enough. And when you go and
consider the micro enterprises in Haiti, they are all collapsed
today. I mean there is no money in these, they are collapsed.
What I suggest is a type of institution that can inject, on an an-
nual basis, capital in the micro enterprise in the form of loans, low
interest rate, not the micro credit interest rate today. This fund can
assist those businesses to get them financial training, get them in
the training process, and at the same time help them formalize.
Because the formalizations will get them to the point where they're
going to pay taxes and contribute to the tax base. Because in order
to get out of poverty, we need to enlarge the tax base.
Mr. DRIEHAUS. To what extent does the average Haitian have
faith in the system, in the financial sector, so that they are willing
to go to the financial institution for a loan, a traditional-type loan?
In so many places-and I'm not familiar with the financial sector
in Haiti-but in so many places, especially in developing countries,
there is a great reluctance to interact with financial entities, sim-
ply because they don't believe in the government, they don't believe
in those financial entities. And that's why pure lending arrange-
ments are often so much more effective, because they know who
they're dealing with.
To what extent is the formal financial sector in Haiti able to ac-
commodate? And to what extent is their trust between those same
Haitians that might be developing the small businesses and the fi-
nancial institutions?
Mr. PIERRE. Today, I would say there is no trust. The small busi-
nesses get their money-the micro gets their money from, basically,

the micro credit. And the micro credit is a high interest rate, but
the loans are very fast and they will get it there.
The medium businesses, it is really tough when you have to get
access to capital. And the traditional banking system is very reluc-
tant also to lend money, because of the whole credit issue, the old
credit system that's in place. So it's a real challenge today to access
credit in Haiti.
Mr. DRIEHAUS. I would open it up to any other members of the
panel, if you would like to talk about other arrangements that we
have learned from other developing countries that might be applied
to Haiti. Mr. Winter?
Mr. WINTER. Thank you. Yes. The USAID project that we are
currently part of, which started the middle of last year, and is
known as the Haiti Integrated Finance for Value Chains and En-
terprises program-or HIFIVE for short-is designed to tackle ex-
actly the issue that you're talking about.
There have been a lot of USAID projects over the years that have
stimulated the development of small businesses, particularly in
value chain contexts, value chains such as coffee, cocoa, mango,
tourism, handicrafts-all potentially competitive sectors for Haiti.
But the businesses, as Mr. Pierre says, struggle to get financed. So,
the project that we're part of is designed to address that gap by
supporting those businesses to develop stronger business plans and
stronger businesses, business operations and so on, to be able to ac-
cess that credit.
Now, you still have a problem, because the financial institutions
are not really motivated and excited about lending into this sector.
So I believe there is still significant space-if we go back to Con-
gresswoman Walters's point about what can AID do, or what can
the U.S. Government do, I think there is still space for some kind
of a funding mechanism or a guarantee mechanism that could work
alongside those formal financial institutions to sweeten the deals-
in other words, to provide perhaps, for example, seed financing or
first loss guarantees and so on, to encourage those institutions to
actually make those loans that they are currently very cautious
And I believe that if you can start to get that cycle working with
good quality businesses, then able to access finance, you will
change the model and you will change the mindset. Thank you
Mr. DRIEHAUS. Do you still run into an issue of trust, though,
when it comes to the individual seeking micro financing, especially,
being far less willing to go to a formal financial institution than
they might-more traditional means of financing?
Mr. WINTER. Yes, I'm talking more about the somewhat larger
businesses than the micro credit side of things. But I think the
trust issue is there. It doesn't matter what size the business, in a
sense. I think you have the trust constraint. And I think you break
that trust constraint by starting to get these institutions working,
starting to get them to actually deploy credit where it's needed, and
the evidence base then provoking a shift in culture, and a shift in
Mr. ROODMAN. The title of the hearing includes both micro and
small enterprises, so there is this distinction. For the micro enter-
prises, we are thinking of the subsistence, economic activities with-

in a family, probably. There are a growing number of pretty im-
pressive institutions in Haiti serving them: Fonkoze; SOGESOL;
and others. And maybe they're not yet close to meeting the de-
mand. But they are doing what I think you are talking about. They
are providing credit at the micro level, borrowing models and
adapting them from the rest of the world.
And, actually, they are doing-at this point, most of them-the
big ones have more savers than borrowers, which is a sign that
they are winning the trust of the Haitian people. So I think there
is good news there. But that is a separate question from whether-
probably the system is doing a worse job of delivering credit to
businesses a step up, the ones that can create jobs and grow.
Mr. SANBRAILO. I would just like to further expand on that last
point. There are institutions doing micro credit and small business
development in Haiti. Fonkoze is one of those, and doing some very
good work at a very small level, a small number of loans, a small
number of people being assisted.
I should-I think we ought to also emphasize that there are
two-the two leading banks in Haiti, Sogebank and Unibank, also
have specialized programs for micro credit and for small enter-
prises. And, at least prior to the earthquake, they were involved.
Those programs could be expanded with additional assistance.
Clearly, the earthquake has disrupted the banking system, seri-
ously disrupted, clearly, the entire economy. But there is something
to be built upon. There are institutions, not-for-profit institutions,
for-profit institutions that are attempting to expand credit in Haiti.
There are also, as I mentioned in our written testimony, examples
from the Dominican Republic, from El Salvador, and from other
Latin American and Caribbean countries, as well as from the rest
of the world, that are well known and can be used and are being
used in Haiti to do exactly, I think, what is being talked about
Clearly, what is needed is acceleration in the provision of funding
and technical assistance to be able to support those.
Ms. WATERS. Thank you very much-
Mr. PIERRE. I wanted to make a point-
Ms. WATERS. Yes.
Mr. PIERRE. -regarding that specific aspect. From numbers that
I get, we have approximately 800,000 micro credit, eventually.
There is approximately 200,000 recognized-or they have inventory
approximately 200,000. Only 60,000 receive money from micro
credit institutions. And when you look at the type of funds that we
see, the average for some of them is $100 and the other average
is $1,000. And the interest rate is going from 48 percent to 60 per-
cent a year.
We have to be-in order to take development-and that's my
point, and there is more in my statement regarding that-if we
think about a developed Haiti, we need to get to a point to say,
"Hey, are we going to develop this country with this type?" I don't
say we don't need the micro credit institutions, but we need dif-
ferent types of funds that help those businesses to grow. Because
these businesses are not paying taxes. They are the informal sec-

If they are the informal sector, then I contribute to the tax base.
And what we do need today, in order to have Haiti sustainable, we
need businesses that can grow, that can get access to fund with low
interest rate, and then receive financial, administrative, and fiscal
assistance. And for these businesses, when they're going to grow,
they can give the result that I have been giving with my business.
That's what we're thinking about.
And this has to be serious, and we have to consider different, ef-
fectively, size of businesses. The micro, the small, and the medium
size, different approach. Banks usually, in Haiti, said, "Hey, we are
not going to go for the medium-sized businesses, because they are
not profitable. They are not profitable." If you consider, like, my
business, for example, the amount of money that I am paying for
banks, compared to my profit, it's very high.
But this is the situation we have to address in Haiti. And I
think-and that's why exactly I go in my testimony-I-to provide
capital fund to three current underserved segments of the private
sector. Three segments-
Ms. WATERS. Thank you very much. I am going to kind of cut you
short at this point. The chairman came in. Mr. Chairman, we were
just breaking all the rules and having a conversation here, because
there are so few of us. And I was trying to solicit from this panel
ideas about where to get capital, learning more about what's hap-
pening in Haiti with the many capital opportunities.
But, Mr. Chairman, as I turn this over to you, we had some testi-
mony from Mr. Winter, the senior vice president of development for
TechnoServe, and he said something about funding opportunities
under HIFIVE. If you don't mind, I would like to know what that
is. Is there a source of money in USAID that we don't know about?
Please tell us.
Mr. WINTER. Thank you. No. The HIFIVE program is not a fund.
The HIFIVE program is a program to provide training, technical
assistance, and guidance to the enterprises that are being identi-
fied through other programs that are funded by AID that are con-
strained from accessing capital.
It's effectively a smart brokerage system, if you like, because it
is going to then take those entrepreneurs, introduce them to the
sources of capital that are available in Haiti right now, find out
why they can't be financed, and then put in place the business-
strengthening programs and advisory programs and consulting
support and training that is needed, then, to get those businesses
up to the point where the lenders and investors can then put the
money in.
Ms. WATERS. Mr. Chairman?
Chairman MEEKS. Thank you. Let me start right out with Mr.
Winter, because I was in the UN. They had the donor's conference,
etc., and they gave us some juice that was there that was from
fruits, we were told, from Haiti, and that was utilized by helping
farmers in Haiti.
I was wondering if you could tell me-and I think they used that
number, he was going to be trying to reach up to 25,000 farmers-
whether you could tell me what's happening with that program,
whether or not there is going to be value-created benefit to these
local farmers, and where we're at right now?

Mr. WINTER. Okay. Thank you, Mr. Chairman. Yes, that project,
which is called the Haiti Hope Project, is being supported by Coca
Cola, through the sales of the juice, the Haiti Hope juice being cur-
rently branded under Odwalla, as a mango limeade. The profits,
100 percent of the profits from that juice, are going to support the
funding of this program. We are also hoping the program will be
funded by the IDB, Inter-American Development Bank-there is a
proposal currently going through-and USAID. And we are at early
stages with AID right now.
What the program is going to do is take a comprehensive look
at what has already been achieved in the mango sector, and the-
as we have heard from many colleagues on the panel, there are
things happening, very positive things happening, on the ground.
Mangoes is a huge opportunity-it's the third largest export out of
Haiti on the agro side at the moment-but a tiny percentage of the
potential value of that sector is currently being created.
To give you some numbers, something between 200,000 and
400,000 tons a year of mangoes are produced in Haiti. Only 10,000
tons a year of those are exported. And well over 50 percent of the
rest rots before it ever gets to market. So there is huge value in
that sector that is not currently being realized for the farmers, and
potentially for entrepreneurs in Haiti.
The project design, which is currently being done on the ground
by a team in Haiti right now, is designed to unlock that value, to
help to train the farmers in improved agricultural practices, to help
organize those farmers so they can establish farming groups to ac-
cess imports, to access the output markets, to build collection cen-
ters so that they can aggregate those mangoes into-and package
them then for the market that would be farmer-owned businesses-
and there are some good models already, but there are very few of
them currently operating-and then to look at value-adding oppor-
tunities for processing those mangoes into juice and into other
products-dried mangoes, and so on. There is virtually no capacity
in that middle segment of the mango sector right now in Haiti.
Huge potential for it. And that would be a great entrepreneurial
opportunity for Haitian entrepreneurs. And that's what we want to
try and develop.
So, it's local markets and export markets, value-adding opportu-
nities-25,000 farmers is the initial target. We believe there are at
least 100,000 people-families in Haiti right now-who have access
to mangoes. The idea would be that you catalyze change in the en-
tire sector. But it also becomes, then, a role model for such develop-
ment in other sectors, as well. Thank you, Mr. Chairman.
Chairman MEEKS. Are you looking to develop capacity, especially
for the value-added? Because one of the ideas now, because of the
devastation in Port-au-Prince, is to create towns outside of Port-au-
Prince, and those kind of value-added benefits could create small
cities outside.
But, you also have to make sure you're creating capacity-build-
ing. Is there any kind-in regards to the project and capacity build-
ing so that you can create the jobs?
Mr. WINTER. Yes, Mr. Chairman. The preliminary design that's
unfolding at the moment would have six regional towns outside of
Port-au-Prince in the rural part of Haiti be the sites for those ini-

I _

tial aggregation points and the collection centers. So the idea would
be to create employment in those places, locations outside of Port-
au-Prince, as the first collection points, and potentially the proc-
essing centers, as well. So it is absolutely designed to do that.
We haven't consulted yet as widely as we want to on the design
of this. So, the team on the ground that is designing this program
has done a lot of consultation with the existing industry stake-
holders. But we do want to have a much broader consultative proc-
ess, to make sure this is really a Haitian-owned and Haitian-led
and Haitian-driven initiative.
I don't want to commit to anything at this point, because we do
really want the Haitian voice to be in there, and making sure that
they are making the decisions about the perfect locations for these
Chairman MEEKS. Thank you. Mr. Barrau, let me ask you quick-
ly, I was interested in your testimony, and there was something
that you said, and, quite frankly, sometimes we deal with the same
issue in the African-American community here, in the United
States, where you mentioned the importance of changing-under-
standing the culture of Haitians, of course, but you talked about
changing the mentality of "God will prevail." You talked about that
as it was related to financial planning and risk management in
Haiti, and that yet it seems that this is deeply ingrained in people,
you know, as opposed to getting financial literacy, etc. Can you
elaborate on that?
What do you think-how much of it is actual cultural-because
what happens, I have found here, some of it is cultural, but some
of it really is having the financial barriers. You can't get the door
open. You can't get in there, so you get frustrated because the op-
portunities doesn't seem to be there for you. Some people will say
it's cultural, but the fact of the matter is the system is lined up
against you so that you can't knock the doors down. What would
you say?
Mr. BARRAU. Thank you, Mr. Chairman. I think, with all the sur-
veys that we have done throughout the country and with-specifi-
cally for micro insurance products, we had to understand the peo-
ple, we had to understand the market that we were targeting. And
in the surveys we realized that Haitians use different types of vehi-
cles to manage risk. It's just that they couldn't find the proper tool,
which would be insurance, because it was not adapted to their
needs. It was not adapted to their culture, in how do you explain
the product to them. And also their cash flow, because they don't
have a constant cash flow. It comes in and out.
So, building products was a challenge, and taking all of these
points in order to develop a product was very challenging. And I
will take a couple of quick examples, is that out in the rural areas
each animal represents, at the end, in our understanding, a finan-
cial tool for that person. The chicken that the farmer has is like
their checkbook. If they have something that they need, it can be
easily sold. A little money takes care of that situation right away.
If he has a cow, the cow is the CD to him, which is only for big
emergencies that they could-they need to address that issue.
So, taking all of the way that they are thinking about risk man-
agement, the challenge was to find ways to find a product that

works better, so that they don't have to go to their savings or their
CDs or their checkbook. So that's why I was saying that culture is
important. And this needs to be really taken into consideration.
You cannot force on them the traditional products. They have to be
One of the biggest issues that helped us also make our products
viable is the fact that throughout the world-especially in South
Africa, for example, where funeral insurance is a very big product,
but they have a very, very low renewal rates. And in our survey,
the low-income populations couldn't understand that if they pay for
the insurance and nothing happens, that they don't give them back
the money that they paid.
So, by doing this, what we did was we told them-we made some
sort of a savings, where we told them, "You will get part of your
money back, but within 3 years." And it was okay for them and at
the same time okay for us because our renewal rate went fly off
the roof that no other countries could do. Because, for example,
South Africa is 40 percent renewal rate when we, ourselves, we got
to 89 percent renewal rate, just by listening to these people, what
their needs were, and how we developed the products.
So, finding ways to insure-which is extremely important-the
small to medium enterprises and the micro also, is important be-
cause it can be counterproductive. You know, micro credit, or credit
in general, can help somebody move forward in the ladder. But it
can be also counter-productive if it's not accompanied by the tool
that helped these people face their shocks.
Or, if you use micro finance to generate income, and that person
doesn't have a safety net, once they have a shock they will pull out
that money to face that shock, and that money will not be gener-
ating income any more. So micro insurance and micro credit, micro
finance, are together, they need to be together. Otherwise, it will
be counterproductive.
Chairman MEEKS. And my last question would be-I want to ask
Mr. Pierre one, too, but-the government didn't appear to have in-
surance, either, after the earthquake and some of the other storms.
Could you say anything on that?
Mr. BARRAU. That was the next step in my written remarks, is
that to change that culture we have to start from the top. No gov-
ernment buildings, no infrastructure, nothing was insured. There
are a couple of independent government-owned agencies, such as
the Central Bank and BNC, which have their own insurance prod-
ucts. But the government had nothing.
They benefitted from the CCRIF. The CCRIF is a program that
was put in place with the help of the World Bank to help nations
face short-term liquidity needs that they have following a disaster.
But that's to start rebuilding efforts. Haiti benefitted about $8 mil-
lion from this program, which is a very low amount of what is
needed. But, in reality, none of their properties for their operations
was insured. The parliament is down. The palace is down. The jus-
tice system is down. The public health hospital is down. None of
that was insured. And this is all going to be very, very costly to
put back together.

So, again, a question of culture. We need to see things going. We
need to be doing much more risk management. And it has to start,
from the top. Government has to take the lead on this, I believe.
Chairman MEEKS. Mr. Pierre? But let me give you my question
also, and you can add on to what you say, because that will be my
last question. As we were trying to put together this hearing, we
were asking a number of individuals in Haiti to give us a success-
ful business person who really started from zero, who didn't come
from a family who had a lot of money, or anything of that nature.
And no matter who we went to, they always came up with your
But then, when we would ask for someone else, they were hard-
pressed to come up with anyone else, which seems to me to be part
of the fundamental flaw. And I don't know whether Ms. Waters has
said so yet, but at a number of hearings we have come where we
have seen entrepreneurial opportunities, especially given the crises
that are currently about to take place because of the rainy season,
where there are NGOs that are building homes that could have
been business people building homes, and other activities there
that could have some who has an entrepreneurial spirit put them
in business.
So, my question to you is, what do you think can do to help gen-
erate the entrepreneurial experiences of individual Haitians to take
the place of the NGOs, and how can we, from the USAID or others,
help make more people like you?
Mr. PIERRE. I think that is a good question. And I think also that
is what I have been fighting for.
In 2008-April 8, 2008-when I started my journey, when, after
the food riots there were-all my business was broken down. I had
insurance with AIC. That saved my business. And I understood
that day, when I was in the middle of the street with those young
people who were throwing rocks at my business, they were break-
ing a bourgeois business-that means a rich person's business.
They didn't recognize me as the business owner. And that's the
problem of the culture and attitude regarding private investment.
At a certain point, the young Haitian doesn't believe that he
could ever be a businessman. When they saw me sometimes they
identified me as a driver of my wife, or the driver of somebody. I
am not a businessman until they know. And if they know that I
am a businessman, then I become a bourgeois, I mean a rich per-
son coming from another world.
That is the whole thing we have to change. And that day I de-
cided to write a book about my life, and the powerful dream, and
the book that I have been going around the country and telling
young people, "If I did it, you can do it too."
I didn't have a chance to study in the United States or in Canada
or in France, anywhere else. I studied in Haiti, in the state univer-
sity. I studied engineering. And 6 years later, I decided to start a
business. I applied certain rules. And that is exactly, I am sug-
gesting to USAID, to any groups or any people who want to help
Haiti today.
Haiti has been in a circle of survival. Poverty, decapitalization,
international aid, and so on. Mistrust and the survival cycle con-
tinue. We are talking about what? We are talking about Haiti be-

coming a prosperous country. In order for Haiti to become sustain-
able, we need young Haitians to start to create businesses. By cre-
ating businesses, they have to start somewhere. First, it's a
mindset. We have to tell them they can. How to do that? It's
through role models. We need role models, and that's why the Pio-
neers of Prosperity contest was very important.
But now, today, I said there is a problem. I cannot be that model.
I need to create 200 young people, young businesses, who come out
and say they were in their neighborhood, they created it. And oth-
ers will follow. And I keep on saying President Obama today is the
result of a dream 45 years ago of Martin Luther King, Jr. People
see it as model. And I have been looking for a certain time. Black
Americans used to see themselves as basketball players. Now they
see that they can be President of the United States. It's through
role models, they visualize it. And this is what Haiti needs today.
We need to invest in those people.
How? We need to create a fund to-when they started, after they
receive the education, after they have the ideas, to get them to
start, and give them the proper training to avoid the steps that I
went through, because it has been a long process for me, 12 years,
to get to where I am. Now I need those kids to do it in 5 years,
because Haiti cannot wait any more.
Ms. WATERS. [presiding] Thank you very much, Mr. Chairman.
This hearing, Mr. Chairman, has been very good. Each time we do
this, we learn a little bit more. I think the testimony that I have
heard, or the questions that have been answered by all of the pan-
elists have been very helpful. I am particularly inspired and en-
lightened by Mr. Pierre's testimony, because he has such a positive
vision with so much hope for the possibilities of Haiti.
And, Mr. Chairman, I suggest that coming out of this committee
one of the things you may provide us with some leadership on is
this. We were at the donors conference in New York, where a num-
ber of countries stepped up to the plate. The United States, I think,
stepped up to the plate with $5.7 billion/$5.9 billion, in addition to
what we are already doing.
We, from this side, maybe with the bill that you initiated-and
I would certainly support that-could carve out, in our donations,
a loan guarantee fund or a loan fund. Because this access to capital
is at the basis of everything. And there is technical assistance,
there are creative and alternative ways to look at insurance. There
is the possibility of renovating some of the existing structures, to
make them livable. There are a lot of possibilities here.
But the basis of the progress is going to lie in the ability to get
some capital. And I see no reason why, if USAID has not stepped
up to the plate with a loan guarantee fund or a pure fund to be
managed in some way-it seems to me that what was suggested,
I think by Mr. Winter, had to do with getting the local banks, who
are very reluctant, even after they redo themselves after this earth-
quake, to lend money. And if they had a guarantee, I think they
would certainly-you know, you could do, you know, anything from
a 90 or an 80 percent loan guarantee, or you could do a 100 percent
loan guarantee, depending on what you structure.
And certainly, if we said to the Haitian banks that we would
guarantee a loan, help to develop the criteria with them, working

together, that may be a whole new way of infusing some capital
into Haiti for the entrepreneurs who have the ideas and the spirit.
And I want to tell you, the entrepreneurial spirit is in Haiti. We
went into camps where people were selling CDs and, of course, sell-
ing food.
And in all kind of ways, I was just amazed at the ways that peo-
ple had created this town inside the camps, and were selling things
and making money. One person had turned their camp into like al-
most a little movie theater, you know, with the DVDs and on and
on. So, the entrepreneurial spirit is there. We have to get some
money. We have to get some money there. And this may be one
way of looking at it.
Let's identify and carve out an amount of money, legislatively,
and say, "This money is to be used for this purpose." That may be
something we can do.
I thank you so very much, Mr. Chairman. If you do not have any-
thing else you wish to do, the Chair notes that some members may
have additional questions for this panel, which they may wish to
submit in writing. Without objection, the hearing record will re-
main open for 30 days for members to submit written questions to
these witnesses, and to place their responses in the record.
I thank you, Mr. Chairman, and this committee is adjourned.
[Whereupon, at 4:50 p.m., the hearing was adjourned.]


April 28, 2010

Opening Statement of Ranking Member Spencer Bachus
Financial Services Subcommittee Hearing On
"Promoting Small and Micro Enterprise in Haiti."
April 28,2010 2:00 p.m.

Mr. Chairman, thank you for convening this important hearing. Although
the world's attention has somewhat strayed from the tragedy in Haiti, you have not
allowed this Committee's focus to waiver. As Haitians struggle to recover from
the earthquake and begin anew, it's important that we discuss efforts to forgive
debt owed by Haiti, and how best to promote small and micro enterprises in Haiti.

Though we have not forgotten the still-urgent needs of Haitians during the
emergency response phase, our focus today is on how to achieve long-term
economic development in a country that has suffered so much devastation.
Unfortunately, foreign and U.S. aid alone cannot create the development needed to
fully assist the people of Haiti. If that funding alone were sufficient, Haiti today
would be a strong, prosperous nation. Chairman Meeks, you correctly
acknowledge the need for viable small and micro commercial enterprises to jump-
start and sustain development. The question is how best to support those entities.

When assessing that question, one thing is certain: We must not continue the
failed policies of the past. To be successful, we must have the "buy-in" of the
Haitian government, and also of its people.

The challenges to fostering the right entrepreneurial structure and economic
culture are great. For too long the government, intentionally or unintentionally,
has followed policies that stifle entrepreneurship. Instead of helping small
enterprises gain access to credit and markets, the government has imposed burdens
that push most business operations out of the private sector. Those failed policies


cannot continue, and ensuring that firms throughout the country receive access to
financial products must be a priority.

The government must also work to establish a better environment for small
and micro enterprises. To the extent that the U.S. can help, I am certain Haiti will
find no shortage of friends on this Committee, and I am confident we can facilitate
their goal of a sustainable economy.

Again, Mr. Chairman, thank you for your efforts on this important issue, and
I yield back the balance of my time.

Opening Statement of the

Honorable Maxine Waters, D-35b CA

Financial Services Subcommittee on International Monetary Policy and Trade

Hearing on "Promoting Small and Micro-Enterprise in Haiti"

Wednesday, April 28, 2010

2128 Rayburn House Office Building

2:00 p.m.

Thank you, Mr. Chairman, for organizing this hearing to discuss how we can
effectively promote the development of small and micro-enterprises in Haiti and ensure
that small business people in Haiti have opportunities to be involved in Haiti's
reconstruction and development.

I would also like to thank this committee for its support in passing H.R. 4573, the
Debt Relief for Earthquake Recovery in Haiti Act. The House agreed to the Senate
amendments to H.R. 4573 on April 14th, and the bill was signed by the President on April
26". I am very pleased that this bill is now public law. Debt relief is essential to Haiti's
future, and the immense debt burden would have severely impeded the country's
recovery efforts. However, we must keep in mind that Haiti will continue to depend
upon the support of the international community for both its immediate and long-term
development plans.

According to the U.S. Agency for International Development (USAID), 230,000
people were killed and 1.3 million people were displaced from their homes as a result of
the devastating earthquake on January 12,2010. While I applaud the ongoing efforts of
our government, military, and charitable organizations for the assistance they have
provided thus far, there is still a desperate need for clean water, food, shelter, and basic
sanitation. There is also a need to plan reconstruction and development efforts carefully

so that Haiti will be able to "build back better" and create a better future for its people.
These reconstruction and development efforts must create opportunities for small
business people in Haiti and allow them to be involved in building their own country.

I recently returned from my second trip to Haiti since the earthquake. While I
was there, I organized a meeting between a Contracting Officer from USAID and
approximately 150 Haitian small business people and individuals who wanted to start
small businesses. The Contracting Officer discussed USAID's contracting opportunities
and explained how Haitian small business people can apply for contracts.

During this meeting, it became clear that there are significant barriers for Haitian
small business people who want to bid on USAID contracts for development work in
their own country. For example, USAID's contracting opportunities are described in
English not in Creole or even in French. This effectively excludes Haitians who may
be capable of implementing projects on the ground in their own country but who never
learned a foreign language. USAID also requires potential contractors to comply with
significant technical, bureaucratic and accounting requirements, which may be
considered routine business practices by most American businesses, but which are
beyond the capacity of many Haitian businesses.

Therefore, Mr. Chairman, I am interested to hear from our panel of witnesses
about how we can reach out to Haitian small business people and involve them in the
development of their own country. I am especially interested to know if they have
suggestions regarding how the development policies of USAID and other international
agencies can be improved to provide opportunities for small businesses.

Thank you, and I yield back the balance of my time.

The Haiti Reconstruction Effort

Promoting Small and Micro Enterprise in Haiti

Testimony before the House Subcommittee

On International Monetary Policy and Trade


Olivier Barrau

Mr. Chairman and Honorable Members of the House Subcommittee on International
Monetary Policy and Trade,

Thank you for providing me the opportunity to talk to you about my views on the Haiti
Reconstruction Effort and on the critical role that micro, small and medium enterprises
(MSME)- and especially insurance should play in this process.

Following the biggest catastrophe that Haiti and maybe our world has known in terms of
casualties and deaths, I think we have several learning opportunities in front of us.

Given that Haiti cannot get back on its feet alone, I think the first place the International
community could start addressing how to help build back a better Haiti is by asking a few
fundamental questions:

What can we learn from this catastrophe?

What areas are of utmost importance in rebuilding this nation?

What ingredients were missing in the previous attempts to get Haiti on a sustainable path
of social and economic development?

Is insurance indispensable in building a stronger MSME sector?

I would like to take this opportunity to stress the point that one of the important missing
links in the Haitian prosperity chain is risk management. When we are thinking about
important issues in the socio-economic development of Haiti such as education, health care,
justice systems, energy, government capacity-building, the role of the private sector, and
finance there is a tendency to forget about the importance of risk management, and more
specifically insurance.


In his book "Against the Gods, a remarkable story of risk" Peter Bernstein, argues that the
notion of bringing risks under control is one of the central ideas that distinguish modem
times from the distant past. If we think about it, it is also one of many reasons behind the
difference between developed countries and those considered underdeveloped.

There are two great citations that I believe illustrate very well the importance of insurance:

"New York was not created by men but rather by insurers...without insurance, there would
not be any sky scrapers because no workers would accept to work at such heights risking a
deadly fall and leaving behind their family in misery. Without insurance, capitalist would
not invest millions of dollars to build such buildings that a simple cigarette bud would
reduce to ashes..." Henry Ford

"If it was possible for me, I would write the word insurance in each home and on each
man's forehead, since I am so convinced that insurance can, at a moderate price, liberate
families of irreparable catastrophes" Sir Winston Churchill

Observers argue that there is a direct correlation between the number of deaths following a
catastrophe and insurance penetration rate in a society. A vivid example can be seen this
year: Haiti faced a 7.2 magnitude earthquake with over 250,000 deaths and Chile, a much
more developed country, faced an 8.8 magnitude earthquake (which is 500 times stronger)
with less than a 1,000 deaths though twice as many buildings were damaged'.

By looking at the penetration rate of insurance, which is the premium volume generated by
a market as a percentage of GDP, and the density, which is the premium volume per capital,
it is quite clear that developed nations understood very quickly and very early in their
nation-building that insurance should play a major role in their strategy and therefore did
put in place the proper mechanisms to promote the industry.

In the US, the penetration rate is *-;9% with a density of just over 4,000.00 USD2. This can
also been seen in countries that have left the category of underdeveloped nations and are
considered today as "emerging economies". They have a penetration rate between 2 and
6%. Chile one of the richest nations in South America has a penetration rate of 4% with a
density of 344.00 USD.

In Haiti, however, the insurance penetration rate is close to 0.30% with a density of 3.4 USD
while our next door neighbor the Dominican Republic has reached a 1.5% rate with a

'http://www csmonitor com/World/Global-News/2010/0302/Chile-earthquake-factsChile --Haiti-in-numbers
' 009 en.pdf

density of 64.30 USD3, and this rate is growing steadily. Translated in dollar amounts, it
represents approximately $25 million and over $300 million dollars of premiums

By answering how Haiti can increase its insurance penetration rate we will surely help
answer some of the fundamental questions posed above, and reduce reliance on
international aid in case of future catastrophes.

Before exploring the possibilities on how to increase the penetration rate, allow me to take a
few minutes to talk about the context in Haiti:

Due to its geographic positioning, Haiti is constantly exposed to natural disasters. Over the
years, the socio and economic impact of weather-related risks have constantly increased
due to the degradation of the environment. Most recently, in 2007 Haiti was hit by tropical
storm Jeanne, and in 2008 alone, was hit by four storms in a three week period causing
damages estimated at 15% of GDP.

On the financial side, only 25% of the population uses the traditional banking system. Of
this group, over 80% of the activities are located in the area of the capital, Port-Au-Prince,
with only 20% usage in by populations in the provinces.

There are an estimated 63,000 borrowers and an estimated 2,000,000 depositors. Only 30%
of deposits return to the economic system in the form of credit.

On the micro finance level, which is estimated to be a potential market of at least a million
borrowing clients, this sector is estimated at only 245,000 borrowers and 700,000 depositors.
85% of loans contracted by micro and small entrepreneurs are used for commercial
activities rather than production or manufacturing which is much more durable in terms of
development 80% of Haiti's active and productive economy lies within the informal
economic sector, which is the population in the pyramid that is the most vulnerable to risks.
Following the earthquake, USAID through the project WINNER' conducted a survey on the
financial impact of several sectors of the economy and the results confirmed that out of an
estimated 383,367 companies, 383,134 are from the MSME sector and 65.11% of the losses
were suffered by this same sector. They were not insured.

Political instability has also resulted numerous times in the past 25 years in "manmade
disasters such as in riots, strikes, and civil commotion which constantly weakens
economic capacity of the actors and especially the MSME sector.

'htt://media 2009 en.pdf
3 Page

Given this hostile environment to the investments required to rebuild Haiti, we need to
strengthen, reinforce, support, supervise and facilitate the role insurance has to play in the
economy. This would be a clear message that entrepreneurship and MSMEs are important
in rebuilding Haiti, and risk transfer mechanisms are available to shore up investments.
There are a great number of potential entrepreneurs that are above the micro finance level
and bellow the traditional banking sector that needs to be supported with innovative
financial products.

With the interest to facilitate and reduce the cost of money to young entrepreneurs and to
give more businesses and Haitians access to insurance products, I would like to make two
suggestions if I may:

1- On one side improve and increase access to financial products for the middle class
and low income population to which are either attached or supported by insurance
2- On the other, build mechanisms of public-private-donor partnerships to give the
majority access to social security and insurance products that can help them face the
different shocks in their lives.

If those two suggestions are taken into consideration in the rebuilding effort of Haiti, the
result will not be anything less than reshaping and strengthening our social pyramid (see
diagram below) with a bigger and stronger middle class, more entrepreneurs and less
people living close to or below the poverty line.



We also need to reinforce, formalize, accompany and regulate the MSME sector. By making1
this sector financially stronger, the social fabric of Haiti will be transformed, thus
benefitting all involved:

Government: a bigger fiscal base and a vibrant economy;
Private sector: bigger buying power and better social services;
Diaspora and respective countries: reducing remittances estimated to be at
1.6 Billion USD as per IDB 2006 survey5;
International community: reducing dependency on foreign aid and a more stable
Caribbean region.

With a mature MSME sector, we are pulling upward the bottom of the pyramid which will
result in a diamond shape social structure with less people living below the poverty

1- Improving and increasing access to financial products to all Haitians:

Although it is necessary to support the traditional banking industry which is vital to the
economy, in order to increase credit activities as a "jump start" to the economy, it is even
more important to support other financial actors such as development banks and micro
finance institutions. Traditional banking activities will not fulfill our hope that money will
trickle down within the pyramid and the bottom will benefit.

We have seen and experienced the results of that approach before in other situations, not
only in Haiti but also in other parts of the world. Today, traditional banking products are
serving and are adapted to fit only the top of the pyramid's needs. Entrepreneurs who do
not qualify for traditional banking requirements will not be able to emerge. Meanwhile, if
we take a bottoms-up approach, all layers of the pyramid will benefit, including the top
which has products and services needed at the bottom.

While reinforcing the microfinance sector and giving the MSME sector access to financial
products, we are creating more wealth, less social tension, and a new hope to this ever
poorer Haitian population.

5'r '.- .,b .' .r n '. .. c r Page .1 I b"" P a. g -r.e r

S Besides the suffering and loss of dignity of the population, one of the major lessons learned
following the earthquake of January, is that we need to do a better job at protecting the
wealth that is being built in the MSME sector. Protecting that wealth means:

1) Access to insurance products and other social security mechanisms,
2) Capacity-building, regulation and supervision, education, for a strong insurance
industry but most importantly,
3). A change in culture.

The challenge is to switch from a "God will prevail" culture that is prevailing in Haiti to a
prevention culture. To be successful in that endeavor, we need to address two important

On one side, Communication and Education which is where the international community
can play a major role by supporting, and investing more in USAID projects such as HIFIVE6
which has several success stories.

On the other, the international community needs to be firm in lobbying to the Haitian
government that risk management is important. The Haitian Government needs to set the
tone. The leadership of Haiti needs to lead the way.

Besides a couple of independent government-owned entities such as the Central Bank, and
Banque Nationale de Credit, most if not all governments assets were not insured before the
earthquake. The only insurance cover the Government will benefit from is the Caribbean
Catastrophe Risk Insurance Facility (CCRIF)7. This facility was put together with the help of
the World Bank to help the smaller nations of CARICOM with limited budget capacity and
reserves face their immediate needs following a disaster. CCRIF, just as business
interruption insurance does, covers governments for short term liquidity needs to start
recovery efforts while maintaining government services. Haiti's payout will be just under
USD 8 million, which can be considered a drop in the bucket. The participation of Haiti to
the CCRIF programs was supported by a grant from the World Bank to pay the premium
for Haiti. The initiative was not taken by our government which is maybe the logical
explanation why the payout is so low.

http://www.microlinks.or/ev en.php?ID-42075 201&ID2=DO TOPIC

6 Page

Besides the direct physical loss, we can take for granted that any and all person, business c
government that does not have insurance protection is bound at some point or points
throughout their life to face an economic capacity degradation following realization of one
or more risks that they face. With the capacity to generate wealth weakened, future
generations will also face hardship.

-Source: M. Vat~ (Institut Thortas More)

When thinking about how the International community can be more effective in helping
third world countries lift themselves out of poverty, it is important to be thinking of

poverty as a transitory state that is directly related to risk management.
Insurance is a powerful tool to help those it serves whether a business, person or

government as a safety net so they can continue on their path to economic and social
prosperity. Today, not only are most Haitians in the affected areas totally de-capitalized
and becoming poorer, but worse, they lost the little that was left of their dignity and have
no hope. Our government also was not spared.

"There are numerous studies that show when asked about financial products; low income
populations prefer savings and insurance. For them it's a vital stake: it's about making up
for an absent social system which is very frequent in a number of countries from the south."
(pro Guspin etM. RTodesc, Point deonly ue: Miare most Haocrdit, outil fragile, Le Monde du 29 areas totally decapitaliz05)
Protecting the wealth that can be created in the rebuilding effort of the MSME sector is not

only a priority, it's a must.

71 Page

[- mi7 im'7


"Providing to the poor livelihoods without hedging against risks preventing their
sustainability, could be counter-productive"
Sources: E.Gassana la pauvret en Afriqre et e Cadre Stratgique de Riduction de la Pauvretd, A.G FANAF, 13.022007

2- Build mechanisms of public-private-donor partnerships to give access to the
majority to social security and insurance products:

A low Social security access level is the common denominator that is found in all
underdeveloped countries. Haiti is no different. Less than 3% of the population has access
to social security and less 200,000 people out of a population of 9.5 million have access to
health insurance products. Faced with such a situation the population is forced to turn to
unconventional risk management methods that are more costly such as loan sharks, taking
their kids out of school, selling their assets, depleting the little savings they have. These
methods always fall short of the expected results.
With innovative ideas and mechanisms, insurance and social security in underdeveloped
countries can be complementary and not antagonists. For example, since crop insurance is
very risky for traditional insurers and reinsurers, donor funds could be used to help insure
this sector while at the same time, identifying and including small farmers that were totally
absent from social security systems.

In this sense, it is crucial that the International community, in its strategy to help Haiti,
support with both technical assistance and funds that can develop such initiatives: It is
crucial to help Haiti establish the building blocks of a strong insurance industry that can
really play both its social and financial role in the economy.

8 Page



Moving forward, if we agree that insurance should be a pillar in the Haitian socio-econom
life, the next question is what is the state of the Haitian insurance industry following the
earthquake and how can we strengthen it so it can play its role in the rebuilding effort by
continuing to assume risks?

Prior to the earthquake, although the industry had to face several challenges since the late
80's, including from riots on average every four years to natural disasters on average every
two years, the industry could have been considered as stable and profitable. We can also
consider that the industry, although not properly regulated, is being managed by trained
and responsible professionals. The sector has practiced self-regulation to keep up with
reinsurance requirements and international prudential norms.

Since the early nineties when all foreign companies pulled out of the market and the
emergence of local companies came about, and up until the earthquake, not one company
failed or went into bankruptcy. In the banking industry during that same period, the
Central Bank had to intervene in at least five cases of failed banks in order to prevent
systemic risks to the financial system.

Today, although the reinsurance world has been very proactive and respected its
engagement, the insurance industry is in financial difficulty as the reinsurance cover
bought by the local companies was not sufficient to cover the magnitude of the losses.
When it came to reinsurance needs, insurers had placed more focus on hurricanes and riots
and not enough on earthquakes.

According to the same WINNER8 survey done with the support of USAID, there is a gap in
the system of approximately USD 40to 60 million, and total assets in the system are very
limited as insurers, due to limited capital, have transferred most of the risks and premium
to reinsurers.

It is crucial and very much time-sensitive that the International Community assists local
insurers in putting together mechanisms that can help them face their immediate
obligations and cash liquidity crunch in the interest of preventing their failure and a
systemic risk of the financial sector, while at the same time, allowing them to continue to
assume risks. Unless insurers can continue to have the capacity to assume risks, credit will
not be supported by adequate risk transfer mechanisms and therefore the cost of money to
the MSME sector and entrepreneurs will continue to be prohibitive.

9 Page

c The positive results we are hoping for from the financial sector as part of the rebuilding
efforts of Haiti can be counterproductive if they are not managed properly from the

As of today, the insurance industry is poorly regulated, opaque and only has to satisfy
some fiscal aspects which are blocking its development.

There is an opportunity today to not only save the insurance industry, which is vital, but
also to properly regulate and supervise it so it can be up to par with the region in terms of
prudential norms and transparency, while setting the foundations that will promote its

The support of the International community to the insurance industry will result in a win-
win-win scenario where the Haitian government wins, civil society and private sector as a
whole wins, and the International community wins.

Mister Chairman, Honorable Congressman,

In closing, I would like to once again thank you for giving me the opportunity to express
my views on the role of the MSME sector and especially the insurance industry in the
rebuilding effort for a more prosperous and wealthy nation. It would be a pleasure to
answer any questions you may have.

Thank you

10 P age

President of GaMa Consulting s.a.
President of Foundation ETRE AYISYEN

April 28, 2010

lb" : ...,- ,-'-- '- ,,.

.- ... n







It is a pleasure and an honor for me to be here today in order to

present my testimony and insight on entrepreneurship in Haiti. I will, at first,

present what allows me to speak of entrepreneurship in my country. When I

think of my own past experience, and my current involvement in my country's

private sector, I believe that not only is it possible to change one's future but

most importantly, I have learned that change can be learned. Though we are

not conditioned to change by our origins, our social background or our

wealth, to change it is instead necessary to define new ways to do things and I

believe, as a cornerstone for rebuilding Haiti, we must instill a paradigm of

change in the minds of Haitian youth.

Research and conclusions from Michael Fairbank's OTF Group will
serve as a guide to understand the current reality faced by the entire Haitian

private sector. Information obtained from these documents will allow us to

understand the impact of the January 12, 2010 earthquake on the private
sector and what this unprecedented event represents for all of those who

would like to lead this country forward toward sustainable development both

on the national and international level. Recommendations on the means and

Pag. 2


perspectives to achieve sustainable development in Haiti are presented at the
end of this document.

Though I do not come from a wealthy family I was nonetheless capable of

establishing a level of financial performance by applying certain principles

described in my book, ((THE POWER OF A DREAM. ) Today, I am the

President and General Manager of GaMa Consulting S.A., beneficiary of the

e role model ) Pioneers of Prosperity Award over 500 competing companies

in the Caribbean. I am also the Vice President of the Western Department

Chamber of Commerce and Industry of Haiti, assistant treasurer of AMCHAM

(American Haitian Chamber of Commerce), President of AHTIC (Haitian

Association of Information and Communications Technologies ), to name a


In North America, I would be considered a very active businessman.

This would be viewed as an entirely normal situation when one takes into

account the existing facilities, the structures, the business environment in the

United States and Canada, and it would be understood that I could be so

involved and able to produce results.

However, in Haiti this type of participation is mostly viewed as an
exception to the rule, a relatively rare species. The absence of structures and

institutions compounded with a culture based on survival, creating mental
barriers makes he who frees himself of such obstacles an extraordinary


I am convinced that what I have accomplished is possible only because
I actually did it. I believe that I can share my proven "know how" and I am

Page 3


working through Foundation ETRE Ayisyen with more than 500 young
university students to share that knowledge. My accomplishments? I would
like to see them serve as models, inspiring symbols to those who decide to get

involved in (the private sector?) sustainable development. I sincerely hope
that, in a very near future, I will see the creation of two hundred small
businesses similar to what I have built, built by entrepreneurs who can serve
as a foundation for a new and better SME sector in Haiti


Haiti is a country where emotion and perception play an important
role in the ways an individual acts, his attitude and behavior. Therefore, this

is why those who succeed are perceived as drivers of growth, seemingly
destined as depositories of wealth. Those who are deprived of means are
perceived, and consider themselves to be incapable of participating to the
growth process. Life is considered as a hostile heritage, and one must make
enormous efforts to survive making it difficult to overcome the realities of

one's origins and social status. Compared to the United States, where poor
become rich (and rich become poor) in one generation, a typical Haitian's
destiny is determined by his parent's status.

I had all the reasons to fail. However, in taking the less travelled
road in Haiti, that of entrepreneurship, I have been able to refute this mental
attitude unknown in developed countries like the United States or Canada, for
example. I have proven by my experience that economic success can be

achieved in learning new ways to do things in a specific manner which are

applied by those who succeed. Better yet, I am also convinced that this

attitude can be shared with those who desire to advance and adhere to a

Page 4


positive vision to change their lives.

However, the Haitian reality is strongly modeled on a type of

entrepreneurship: Entrepreneurship as a means of survival. Many undertake

a small business activity. Habits are present; motivation is centered on a

defensive attitude instead of being aggressive and pro-active.

Entrepreneurship in its actual form is far from being a way to do business.

Young people are trained to be employees in an environment where the

unemployment rate is very high. When one takes the initiative to carry out

some sort of business activity in a hostile situation, it is done without a long

term vision and outside a true growth-driven entrepreneurial framework.


With the assistance of the OTF Group, the GTC (Competitiveness

Group) report revealed that large formal companies in the private sector

represent 5% of the Haitian economy, another 5% are formal SMEs and that

informal MSMEs comprise 90% of the economy. Therefore, only 10% of the

companies in the private sector contribute to the state's fiscal base. At the

same time, 90% of the private sector's jobs come from the informal sector.

Today, large companies contribute 20% of earned revenues;

MSMEs contribute 80% of earned revenues and are the largest employer. The

informal sector is mostly composed of micro, small and medium businesses

that do not have any assistance in terms of financial, fiscal and training tools.

This sector relies on Micro Credit since the companies do not fulfill the

traditional banks' requirements for financing.

Though the private sector has the capacity to be agile, rapidly

Page 5


adapting to the economy, it is also very sensitive to timing. Private sector
companies would rather appeal to a financial institution capable of financing
its business on its timeline, despite a high rate of interest, rather than

approaching an institution capable of offering a lesser rate with a longer
lending process.

It took me close to 8 years to obtain credit. Even after 7 years working

with my first bank, my company was still unable to obtain a good financing
plan. I had to change banks three times in 3 years. Each of these

transactions was costly and had a negative impact on my desire to obtain
financial assistance through a bank. My negotiations, during the past 2 years,
with the country's traditional banks have allowed me to have better loan

conditions; this better conditions along have allowed me to double my
turnover ... Access to credit still remains impossible for the greater majority

of MSMEs. This explains, for the most part, why today these MSMEs find

themselves in the informal sector....


It is in this context that January 12, 2010 occurred, completely

changing our business environment. Haiti's most important symbols have
been destroyed and the country has been deeply hurt within at ts core. The
National Palace, the Palace of Justice, Parliament, the/Palace of the
Ministries, la Direction Gendrale des Imp6ts (Tax Office, the media, the
financial system, trade, universities, schools and especially families are

stunned by the extent of a devastation never experienced before and, that,

today, we still have to understand.

Page 6


The earthquake's aftermath offers an opportunity for a new beginning.

This unfortunate event must be for us an opportunity to redefine the country.

Plans for sustainable development, an inclusive approach with the active

participation of young people in the definition of this new vision are

necessary. We also need tangible achievements which can serve as inspiring

models and allow each one of us to become an active participant in this

mandatory reconstruction.

When considering the reconstruction challenge, one must take into

account not only the reconstruction of the INDIVIDUAL BUSINESS but also the

products from each INDIVIDUAL HAITIAN. Today, those who have survived

this earthquake must adopt a new approach with actions that will

fundamentally change the structure of the Haitian economy:

Increase the tax base by fostering the formalization of MSMEs;
Encourage and assist in the development of the entrepreneurship culture in order
to create jobs and wealth;
Create an intelligent and efficient injection of capital.

These three elements serve as a guide when I think of the following

issues: recovery of the national economy, and a reconstruction based on

sustainable development with the active participation and involvement of

Haitian youth.

According to a survey conducted by USAID/WINNER, losses in the

SME sector amounted to $ 1.2 billion and $ 800 million amongst the micro

businesses. This study counts 800,000 MSMEs, (200 000) of which are micro

businesses registered on the financial institutions' databases, and only 60 000

Page 7



of which benefit from the assistance of micro credit institutions.


These informal sector businesses, as stated above, do not pay their
taxes, which represents an enormous loss in terms of state revenues. Should
these companies resume their activities, this would be an ideal moment for
them to become part of the formal sector and have access to credit in order
to facilitate their participation in the country's economy.

This will be achieved in making available to the informal sector
financing at a rate much lower than that offered today by micro credit
institutions, which ranges from 2% to 5% per month or rates varying up to
60% per year. These rates actually available on the market depend on the

type of loan and rapidity of the approval. The lower the amount and the
faster the disbursement, the higher the rate.

In the formalization process, training is a must. Specific training aimed
at establishing an entrepreneurial culture will allow the participant to become
rapidly operative.

Assistance at the financial, fiscal and administrative levels will facilitate
the transition from being an actor in the informal sector to becoming one in
the formal sector as well as having ownership of standards internationally
accepted in the global economy.

These businesses deprived of the means capable of allowing them to
fulfill the banks' requirements will have to be "coached" in order to gradually

learn how to work with the financial institutions.

Page 8


A benefit of integrating the informal sector into the formal sector,

would be to increase the state's tax base. Strengthening this segment of the
private sector would increase state revenues, and thus, the latter's capacity to

fulfill its major role towards the country's different institutions and by the
same token towards the citizens.

Earlier, I mentioned that perceptions and impressions have a great

influence on our daily lives. A major part of the Haitian businesses considers

itself excluded from the country's private sector. One of the objectives of

formalization is to change this perception. To make citizens more

accountable and more demanding towards the state since they actively

contribute to the increase of the fiscal base. As a result, a state more

< responsive ) to the needs of individuals because it collects more revenues

and is subject to more specific and justified demands.

The consequences derived from formalizing the private sector's

informal businesses are significant:

A new vision of the sector (more positive).
An increase of the fiscal base making the state more independent.
The emergence of proactive citizens.
A more efficient and responsive state.

Nonetheless, as a starting point it is important to note that the
operating mode of businesses is strongly rooted in a survival attitude with

very focus on a growth strategy. A period of survival (or fight against

poverty) begins by acknowledging that one has become poorer with the

decapitalization of one's businesses. The first attempt to remedy this

situation is to seek assistance. This occurs with the development of a state of

Page 9


assistance. This attitude creates a state of mistrust both nationally and
internationally which is based on doubting of one's capacity to deliver. The

fear of taking a risk because of the lack of trust creates, in the long term,
poverty and the cycle is closed. Any business initiative, arising from this

cycle, gravitates towards no risk at all, short term projects and no long term

vision. There exist many commercial businesses that have emerged despite

the system's weaknesses. There are much more commercial businesses than
service institutions creating wealth: A trade-based economy instead of an

economy based on production and job creation.

The private sector would like to break this vicious survival circle by

establishing a healthy cycle which would replace foreign assistance with
public/private investments. Investing in large infrastructure would reduce

the cost of services and the cost of establishing MSMEs. By reducing start-up

costs, it encourages their duplication. In increasing their number, we create
an environment of trust and incentives to invest at all levels of the economy

whether domestic or international. This is the way one advances towards


Formalization is a real challenge. It implies a reform of the fiscal and

customs systems. The state currently collects only 35% of its revenues from
taxes, duties and fees; the rest comes from external assistance. These 35%
come from the large taxpayers (5% of the economy) and formal SMEs (%5 of

the economy) which renders the state very conservative and not inclined to

take risks by reducing tax rate for SMEs.

Page 10


The increase of the fiscal base becomes a necessity to motivate the
State. Nevertheless, with the actual tax rates available on the market, it is

still difficult to pay taxes and this remains a challenge above and beyond the

complications of the badly managed tax system itself. One must address the

issue intelligently to achieve an institutional reform that will take into account

its different aspects.


The majority of Haiti's population is young. This situation must be

considered when carrying out any major activity. According to the Haitian

Institute of Statistics (IHSI) more than half of the country's population is less

than twenty-one (21) years old. Those of less than fifteen

(15) years of age represent 36,5 % of the population, the group aged 15 to 64
years represents 58,3 % while the population aged 65 and plus is only 5,1 %.

It is also necessary to note that in urban areas there are 86 males for 100

females; and in the rural sections, 98 males for 100 females. A very young

population with women having a slight advantage over men. It is imperative

that anyone thinking about the future should target this segment of the

population. This situation may offer a rather interesting opportunity since

youth by its very nature is daring and willing to prove its capacities.

In its roadmap, the private sector hopes to create one million jobs in
the next 5 years. Concerning certain sectors and more precisely the

agricultural value chain, it is clear that job creation implies young

entrepreneurs' participation, a group which represents 70% of Haiti's active

Page 1 1

S 55



It is also an opportunity for us to sensitize the citizens of Haiti that,

since everything has to be rebuilt, it will be accomplished much more
efficiently with the help of job creators rather than that of those seeking jobs.
It will be necessary to assist those who are already entrepreneurs by providing

them with practical training in order to make them feel more comfortable in a
formal environment, and increase their revenues with access to credit.

A partnership with the young business population based on cost-effective

activities should foster the spirit of entrepreneurship. Five possible activities

to further this agenda are presented below:

1. Orientation of youth toward key sectors.
2. Development of the country through personal growth and
3. Revalorizing the sense of service and duty amongst Haitian youth.
4. Promoting an alternative to foreign aid
5. Building an awareness of the necessity to develop our country for
everyone's benefit.

The inclusion of a new agenda at the academic level will give a new

impulse to the economy. The will to succeed through entrepreneurial
activities taught in school will ensure a better understanding of the business
world, will create a new generation of entrepreneurs, and will foster the
emergence of success stories in business as a new trend. Examples like mine
will, at the beginning, serve as a model and will become normal in the
Haitian private sector.

It is mandatory to start by creating success stories among the youth in

Page 12


order ensure the institutionalization of the entrepreneurial culture.


Almost exclusively, the Haitian financial and credit institutions rely on
guaranties given by small or large buildings. Today, these buildings have been

destroyed and so are the guarantees. From the large company to the family

owned business, many dreams have gone to dust... Investments in the real

estate sector have been long perceived as the realization of a lifelong dream.
At 4:53 p.m. on January 12th, all those dreams, these guarantees, all these

symbols of one's successes were erased. It is an undeniably heavy mental

blow for the nation's economy in its entirety. How can these families recover

and regain the lost capital? How can one reintegrate in the economy, small

businesses that took 10, 15 years to be established, now recuperate lost jobs

and, create new ones?

A recovery plan has been undertaken for the large companies and
formal businesses. This affords some sort of comfort to the financial sector

and this is an important factor. However, it will also contribute to

reactivating a system that, prior to the 12th of January, was already weak in
terms of capacities and, therefore, inappropriate. This conservative system,
inappropriate for the development of entrepreneurship, with a credit capacity
of only $ 800 million, meets only the needs of some large companies and a

small percentage of the MSME sector. A risk exists for the informal sector

that, in adapting itself to the formal business environment, it may disappear.

It will then become a "survivor" trading in the informal sector and

Page 13


institutionalizes the cycle of dependence on foreign aid ...

According to the USAID /WINNER survey, $2.7 billion are needed for
economic recovery for Haiti's private sector. Tangible activities must be
undertaken that address the financial needs of the productive sectors that are
today decapitalized. I believe that this could be achieved by adopting the
following measures:

1. Provide capital to three currently under-served segments of the
private sector:
a. Establish an MSME support and assistance fund: Inject, on
an annual basis, capital in the micro enterprises and in the
form of loans at very low rates. These funds will assist
businesses in the financial training process and provide the
means to formalize the sector.
b. Establish a growth capital for small and medium businesses
in the $100,000 millionn size (larger than micro-
enterprise, but smaller than big business)
c. Establish a fund for the development of entrepreneurship:
Make available to young entrepreneurs start-up funds for
their businesses. Organize contests at the level of universities
and technical training schools to obtain financial, fiscal and
legal assistance.
2. Foster an entrepreneurial culture: Support and build, as soon as
possible, the spirit of entrepreneurship in young Haitians.
Entrepreneurship with the goal of building a better Haiti must be
the dream of our youth.
3. Provide the management skills required to succeed as
entrepreneurs: capital and the desire to become an entrepreneur
are not sufficient to succeed in business. Aspiring entrepreneurs
must also have the basic business skills required to conceive, build
and operate competitive businesses. To deliver these skills, Haiti

Poge 14


must develop a robust Business Development Services (BDS)
And, to start the process, it is necessary to have, in parallel, a support

and follow-up system after these businesses have started. Finally, a more

equitable banking system will help these companies become success stories.


After several years of sacrifice and hard work, on April 8, 2008, during

the hunger riots, my small SME that I was fighting to make viable and

profitable was seriously damaged. I understood then that the private sector,

through its most representative members, had a key role to play in social

policy. Not only does the private sector creates jobs, pay dividends to its

investors, and participate in state revenues, it wants to make its country more

attractive to investors. And this very same private sector has the corporate

responsibility to take charge of the environment in which it operates.

Haiti needs a responsible and participatory business elite and middle

class. Through my personal experience, I am trying to duplicate the activities

that I myself pursued helping me build a successful company; by partnering

with the youth, and vowing to see that within 2 or 3 years a critical mass of

200 ( success stories ) will be created throughout the country, I can model

what a responsible private sector looks like. At this moment, when

everything must be rebuilt, I am taking this opportunity to be part of this

reconstruction effort in order to leave a legacy to my country.

Thank you

Page 15

^X Global

What (Not) to Expect ofMicrofinance in Haiti

Testimony for the House Financial Services Subcommittee on
International Monetary Policy and Trade

David Roodman
Research Fellow, Center for Global Development
April 28, 2010

Thank you Chairman Meeks, Ranking Member Miller, and other members of the subcommittee. I
appreciate the opportunity to appear before the subcommittee to discuss how the U.S. and
international institutions can support the private sector in Haiti following January's earthquake.

My testimony here will have two main parts: a quick list of ideas on the challenging terrain faced in
supporting Haiti's private sector; and a fuller discussion of what we should and should not expect of one
popular intervention: microfinance.

Ideas for supporting Haiti's private sector
* First, do no harm. Some aid efforts, both public and private, have imported into Haiti goods and
services that could be supplied locally, such as rice and IT consulting. Such practices stall the
recovery of Haiti's farmers and entrepreneurs, and donors should halt them. As Center for Global
Development president Nancy Birdsall testified on March 16, this may be a place where the
Congress has become part of the problem, by imposing strict procurement rules on U.S. aid
agencies. Put positively, this may also be a prime opportunity for Congress to help Haiti, by at least
granting an experimental, Haiti-specific waiver for some rules.

* Any strategyfor supporting Haiti's private sector must recognize the great divide within it. Perhaps
half a dozen families, white and light-skinned, control much of Haiti's formal, legal private sector,
the part most analogous to what Westerners envision as "the private sector." Meanwhile, the vast
majority of Haitians get by in informal economic activities such as farming and petty trading. Though
the fates of the two economic groups are intertwined, efforts to help one should not be equated
with efforts to help the other. We should not underestimate the challenge of breaking down the
barrier, nor confuse it with efforts to meet the short-term survival needs of the majority.

* While outsiders strive to "build back better," locals will start to build back the same. For example,
Haitians will begin to rebuild their slum dwellings in the traditional patterns-if they haven't already.
This argues for giving cash to Haitians in order to empower them in the process of recovery and
stimulate the private sector.

I don't mean to draw a black-and-white distinction here: no part of Haiti will be built back quite the
same. Post-quake Haiti will blend pre-quake Haiti and new influences. The point is that, even
knowing they will often build back the same, we should trust Haitian people as least as much as we
trust Haitian and foreign government agencies when it comes to engineering efforts to recover.
Individual Haitians are generally better placed than we are to know and meet their needs. And the
U.S. government has sometimes failed when it tried to "build back better." After the Managua
earthquake of Christmas 1972, USAID built rows of earthquake-resistant huts far from centers of
economic activity. Instead of the people coming to the new homes, the homes came (piece by piece
while guards looked askance) to the people-that is, to where the people had lived and would
continue to live.' History is repeating itself in Port-au-Prince as we speak, though whether the U.S. is
involved this time I do not know.2

Thus for the sake of recovery-and recovery that leverages Haiti's private sector-there may be a
role for direct delivery of cash to Haitians. They will use the money as they see fit, spending it on
food and building materials, stimulating the private sector. The results will not be ideal, but neither
are those of donor-run projects. (Calls for a Marshall Plan for Haiti are ironic in this light since the
original Marshall Plan succeeded by largely helping Europe build back the same.)

* The cash-based strategy of helping Haitians help themselves faces several challenges. One is the
capacity of the damaged Haitian economy to supply what Haitions would demand (in the economic
sense) with that money. USAID has done some excellent "market mapping" to identify bottlenecks-
such as lack of small-scale warehousing-that could obstruct flows of rice, beans, and corrugated
iron sheeting.' This analysis is pointing to high-leverage opportunities to rejuvenate the economy.
And by identifying what the private sector can and cannot supply, it is providing crucial guidance for
"doing no harm" in the sense above.

* Another big challenge to cash delivery delivery. Several options for disseminating purchasing
power should be considered. One is traditional cash-for-work programs; some are underway now,
Another involves piggybacking on two formal systems that reach large numbers of Haitians:
remittance flows and mobile phones.

A third of Haitian families reportedly rely on money from members living abroad (remittances). 70-
90% of families have access to mobile phones, with numbers at the higher end in worst-affected
Port-au-Prince. Perhaps "top-ups" could be tacked on to those remittances through Western Union
and MoneyGram. Or if mobile phones could be turned into small savings accounts, as happened
most famously in Kenya, donors could with a stroke of the pen increase the balance of every Haitian

SStory from Stuart Rutherford, author of The Poor and their Money, and an ActionAid employee in Nicaragua after
the quake there.
SCarrie Kahn, Poor Planning Mars Haiti's Efforts to Move Survivors, All Things Considered, April 19, 2010,
3 Note from Haiti: Improving Relief Efforts through Market Mapping," April 7,2010, en.DhpolD-43044 201&ID2=DO TOPIC.

with a phone number.

What (Not) to Expect of Microfinance in Haiti
Nowadays it is impossible to talk about supporting the private sector in poor countries without talking
about microfinance. Recently, I have been writing a book and maintaining a blog dedicated to clear-eyed
analysis of the impacts of microfinance. A colleague recently paid me what I consider a high
compliment: he called my work critical but not cynical. I will explain both those adjectives.

Why I am not cynical
A couple of years ago I spent a good deal of time scrutinizing what was then the leading academic study
of the impacts of microcredit.' To decide whether I believed the conclusion that microcredit in
Bangladesh had helped families, especially when the loans were made to women, I decided to replicate
the study, applying the original statistical methods to the original data. The math and computer
programming were really complex. In time, with my coauthor Jonathan Morduch, I would conclude that
the study does not stack up. We're not saying microcredit doesn't help people, just that you cannot
judge the matter with the data in this study.s

Now, during this project I visited several microfinance programs, including two supported by USAID in
Egypt. I will never forget the scene I witnessed in one of Cairo's poorest neighborhoods. Hundreds of
women had thronged to a microcredit bank branch to get their new loans. Most had just repaid old
ones. The crowd-the women and their children-jammed the lobby and overflowed into the hallway
and staircase beyond, and down onto the street. They waited hours. I thought, "Should I tell these
women that on my laptop back at the hotel, I had been crunching numbers that suggested that 'we' are
not actually sure if microcredit is such a good thing?" Of course not! Who was I to tell them how to live?

I reflected on this paradox, this conflict between the uncertainty of the research and the vitality of the
scene. I took both seriously. I realized that several different ideas of "success" are in the air when people
talk about whether microfinance "works." Microfinance does better by some of these definitions than
others. This realization is the heart of my book.6

Why I am critical: Evidence lacking that microcredit reduces poverty
We have all heard microcredit success stories-about the woman who uses a loan to start a small
business making clothes or selling vegetables, about how she expands the business, hires people, and
gives her children a better life. There are many such stories, and I assume many are true.

But while there is some persuasive evidence that microfinance stimulates microenterprise, we have little
solid evidence that microcredit, the dominant form of microfinance, reduces poverty.

SMark M. Pitt and Shahidur R. Khandker. The Impact of Group-Based Credit on Poor Households in Bangladesh:
Does the Gender of Participants Matter? Journal of Political Economy 106(5): 958-96, 1998.
s David Roodman and Jonathan Morduch, The Impact of Microcredit on the Poor in Bangladesh: Revisiting the
Evidence, Working Paper 174, Center for Global Development, June 2009.
Draft chapters are on David Roodman's Open Book Microfinance Blog, book.

That is a strong statement Why am I convinced of it?

* There are 'failure stories" too in microfinance. In late 2007, for example, BusinessWeek told the
story of Eva Yanet Hernandez Caballero in Mexico, who got in over her head with high-priced
microcredit.7 Anthropologists who have spent time in villages in Bangladesh have told of women
whose pots and pans or tin roofs were taken by their neighbors and sold in order to repay loans for
which the neighbors would otherwise have been liable.' We know that in the United States loans
are sometimes a boon-responsible mortgages, college loans-and sometimes a bust. We should
not be surprised that the same is true for microcredit.

* It is extremely hard to determine cause and effect in households, villages, and slums. The challenge
of research is to sort through the diverse stories of failure and success, find patterns, and infer
causal connections. But if I show you a successful microcredit borrower with plump children and a
non-borrower unable to feed her children every day, you can imagine many ways to explain that
pattern. Maybe microcredit really made the difference for the first woman. Or maybe she was
better off to begin with, and felt more comfortable borrowing. Or maybe she lives in the less-poor
neighborhood that has attracted microcreditors. It is really hard even with fancy statistics to rule out
all the stories except for the one we want to hear, about microcredit reducing poverty.

By far the most credible way to pin down cause and effect is to randomize, just as is done in the best
drug trials in order to determine whether it is safe to put new pills in our bodies. If people who were
randomly offered microfinance do better than those who were not, that's compelling evidence that
microfinance helps. The first randomized studies of microfinance came out last year. The two of
microcredit found no impact after 15-18 months on poverty indicators such as household spending and
income, number of children in school, etc. But a small study of microsavings for market vendors in
Kenya did find such benefits-among women.

This muted verdict is a far cry from the popular perception of microcredit, and, I think, the perceptions
that have shaped lawmaking in the Congress.9

Help microfinance play to its strengths
Still, while microfinance does not live up to the hype, it has scored some impressive achievements by
the standards of foreign aid. The job of those supporting microfinance, including the Congress, is to stop
imposing unrealistic expectations on microfinance, and help microfinance play to its strengths. I would
list two strengths:

* An ability to build thriving, dynamic institutions. The famous Grameen Bank in Bangladesh employs

"Compartamos: From Nonprofit to Profit," BusinessWeek, December 13, 2007, 52/b4064045919628.htm.
' E.g., Aminur Rahman, Micro-credit Initiatives for Equitable and Sustainable Development: Who Pays? World
Development 27(1): 67-82, 1997; Lamia Karim, Demystifying Micro-Credit: The Grameen Bank, NGOs, and
Neoliberalism in Bangladesh. Cultural Dynamics 20(5): 5-29, 2008.
9 From Public Law 108-484, "Microenterprise Results and Accountability Act of 2004": "Microenterprise programs
have been successful and should continue to empower vulnerable women in the developing world."

*The ability of such institutions to give millions of poor people more control over their financial
destinies. An excellent book, Portfolios of the Poor, points out that if you live on $2/day, you don't
live on $2/day. You live on $3 one day, 50 cents the next, $2 the day after. With incomes so volatile,
poor people actually need financial services more than we do, so they can safely put aside money on
good days, or in good seasons, and draw it down in bad. Microfinance, including credit, savings, and
insurance, can give people an increment of leverage over their financial circumstances-not to
escape poverty, but to manage it better. The services are more interchangeable than is often
realized: to pay a doctor, you can draw down savings, take a loan, or, if you're lucky, use insurance.
However, among financial services, credit is not necessarily the best way to give people control over
their circumstances because sometimes it does the opposite. In contrast, it is hard to imagine
someone getting in trouble by saving too much.

For me, a compelling but achievable ideal for the microfinance project is of a growing collection of
microbanks, thriving businesses that deemphasize credit in favor of savings. Living examples include
microcreditors in Bangladesh and Indonesia, and some in which USAID has had a hand, as in Bolivia.

But a caution: The enthusiastic investment in microfinance from public and private players, billions of
dollars per year, is mostly going into microcredit, and so to an extent is undermining the strengths of
microfinance. It is causing some microfinance institutions to grow too fast, creating bubbles (a few
popped last year"o) and damaging microfinance institutions. Easy money is also dulling the impulse to do
microsavings. Why should a microfinance institution go through the trouble of administering thousands
or millions of small savings accounts, or lobbying for the right to do so, when easy money is on offer
from the World Bank? I have argued that we need an international information-sharing mechanism such
as credit bureau on microcreditors to track their borrowings and begin to institutionalize the idea that
there is such as thing as too much credit for microcredit."

Realistic Expectations of Microfinance in Haiti
Haiti has a vibrant microfinance industry. Leading institutions such as SFF and Fonkoze, actually have
more savers than borrowers.1 They appear to be good examples of microfinance playing to its
strengths. American donors, public and private, deserve credit for that.

But microfinance is unlikely to fundamentally recast Haiti's private sector. It may well stimulate
microenterprises, but these are by and large subsistence activities-selling vegetables, trading iron

'o Greg Chen, Stephen Rasmussen, and Xavier Reille. Growth and Vulnerabilities in Microfinance. Focus Note 61.
Washington, DC: CGAP, 2010.
S book/2010/03/we-need-a-public-c t-bureau-for-microcreditors.php.
u MixMarket,

sheeting-that operate informally, below the radar of the tax man. Microfinance helps people deal with
their circumstances more than rise above them.

Moreover, even counting all these savers, microfinance institutions in Haiti only reach perhaps 250,000
people, about 2.5% of the population. No doubt this number reflects years of dedication and hard work
by many people. No doubt it will grow. Still, penetration will remain low for years.

So if the goal is to deliver aid to the majority of quake victims, I would not look to microfinance alone.
Mobile phones and remittance networks have far more universal reach, and perhaps can be exploited to
spread aid wide and fast. And I would warn against proposals (if there are any) to rapidly scale up
,microcredit. That could inflate a credit bubble. And it could undermine the admirable discipline of
Haitian microfinance groups in taking savings.

Nevertheless, I would endorse efforts to support Haiti's microfinance institutions through this hard time.
We should not let the perfect be the enemy of the good-the good in this case being assistance that
helps hundreds of thousands of poor people cope with circumstances no one should have to experience.
Fortunately, such efforts are already underway. They may in time include recapitalizing the institutions;
assisting with transportation of cash; and supplying demand-driven technical advice, including from
employees at microfinance institutions that have survived disasters in other countries.

To close, I highlight four priorities for supporting Haiti's private sector:

* Protect the vitality of Haitis microfinance institutions, in part by not drowning them with finance
that must be shoveled out the door as microloans.

* Give USAID and other agencies the flexibility to analyze and adapt to the strengths and weaknesses
of the Haitian economy, procuring locally when possible, eliminating bottlenecks where possible,
delivering in kind where necessary.

* To help Haitians help themselves (through the private sector), seek innovative approaches to cash
delivery that exploit the money transfer and mobile phone networks, whose combined reach is vast.

* What Haitians want most is jobs; the best ways we have of generating those are buying more of
what workers in Haiti make and allowing more Haitians to come to the United States to work.

Testimony by
John Sanbrailo
Executive Director
Pan American Development Foundation (PADF)
The Committee on Financial Services
Subcommittee on International Monetary Policy and Trade

Hearing on:
Promoting Small and Micro Enterprises in Haiti
Wednesday, April 28, 2010

On behalf of the Pan American Development Foundation, I thank Subcommittee Chairman
Gregory Meeks, Ranking Member Gary Miller and other members for the opportunity to testify
on Haiti in the aftermath of the devastating earthquake of January 12 and the importance of
promoting Haitian small and micro-enterprises.

Before beginning I would like to recognize the exceptional leadership of Congressman Meeks in
supporting Plan Colombia and ensuring that it addressed the urgent needs of Afro-Colombians
and other vulnerable groups. Our Foundation greatly appreciates the number of field visits that
you have made to PADF projects in Colombia that are visibly helping to increase the incomes
and standard of living of thousands of disadvantaged people who have been overlooked by past

For nearly 30 years, PADF has been involved in projects that generate employment, promote
community-driven development, improve rural and urban livelihoods and protect human rights,
as well as disaster relief, recovery and reconstruction. We have worked with the Haitian people
and civil society to implement agro-forestry projects, to introduce new soil conservation
techniques, to strengthen local organizations and to facilitate conflict management and
development along the Haiti-Dominican Republic border. Haiti is one of our highest priority

PADF is an affiliate of the Organization of American States established in 1962 to encourage
involvement of the private sector in development programs and disaster assistance. In 2009 we
helped more than 5.6 million people in 18 countries in Latin America and the Caribbean. Starting
in the 1960s, the Foundation pioneered some of the first modem micro-enterprise programs and
provided capital and technical assistance to establish national foundations to stimulate their
growth and expansion.

Prior to joining PADF, I was a Senior Foreign Service Officer with the U.S. Agency for
International Development (USAID), serving as Mission Director in Ecuador, Peru, Honduras
and El Salvador. I led the development of numerous small and micro-enterprise programs,
especially following major natural disasters. As a result, I am particularly aware of the many
questions that this Subcommittee may have regarding Haiti, as well as the challenges USAID,
international agencies and the NGO community confront as they respond to the most urgent
needs, while simultaneously supporting longer-term sustainable economic and social

Based on PADF's longstanding work in Haiti, and my 40 years of international development
Experience, I would like to share with you some thoughts about lessons learned in promoting
small and micro-enterprises. I base them on my service in a number of countries, but especially
El Salvador that suffered widespread destruction from a protracted civil war and major
earthquakes in 1986, and again in 2001, that seriously impacted its capital city of San Salvador.
Because of highly effective Salvadorian leadership, coupled with strong consistent support from
the U.S. Congress and USAID, El Salvador was able to rapidly recover and use these tragedies to
not only "rebuild better" but to implement major economic and social reforms. El Salvador has
important lessons for Haiti, especially in using small and micro-enterprises to democratize its
economy, create new jobs and expand popular participation.

I might also add that in prior decades USAID and others supported programs that are particularly
relevant in guiding assistance to Haiti's reconstruction, especially for developing small and
micro-enterprises. They include initiatives in Central America as well as efforts to support the
Dominican Republic's development in the 1960s and 1970s. I urge the Subcommittee to collect

and analyze the important lessons learned from past programs for possible application in Haiti. I
will draw upon some of them in my testimony.

Before that, however, I would like to highlight the excellent initiative by the Haitian Private
Sector Economic Forum (PSEF) led by Dr. Reginald Boulos, in articulating a vision and
roadmap for Haiti's earthquake recovery and reconstruction. I am attaching Dr. Boulos'
presentation at the recent Haiti Donor's Conference in New York City and the PSEF document.
They provide an important framework for supporting small and micro enterprises and well
targeted initiatives to develop entrepreneurship with seed capital and management assistance.

As this Subcommittee knows, small and medium-sized businesses are the engines of job creation
and innovation in most countries, including the United States. Prior to the January 12"
earthquake, small and micro-enterprises accounted for as much as 90 percent of Haitian
employment and 70 -80 percent of the economy.

Nevertheless, this engine of growth has been constrained by decades of political instability and
an inability to address numerous policy and institutional weaknesses that have caused arrested
development and widespread expansion of the informal sector. As Dr. Boulos indicated to the
international donors, any strategy to reactivate the Haitian economy must be built on a vision of
creating a large middle class that improves its competitiveness through "the progressive
formalization of micro, small and medium enterprises to transform the employment and tax base
of the country". He goes on to describe the extreme poverty and lack of capital of most Haitian
enterprises that have been made even more dire by the earthquake.

The PSEF stresses that Haiti's path to rebuilding must include financing for small and medium
enterprises as key incubators of growth and employment. Indeed, the Forum cites studies that
estimate a need for up to $2 billion in financing and provides specific recommendations for
Haitian reconstruction.

The Pan American Development Foundation is particularly fortunate that Dr. Reginald Boulos is
one of its Trustees, along with other Haitian business leaders such as PADF Vice President,

Philippe Armand, and Trustee Gladys Coupet, a leading banker in Port-au-Prince. They provide
our Foundation with valuable inputs on measures that can be taken to encourage small businesses
and micro and community enterprises.

As a complement to the work done by the Haitian public and private sectors, allow me to
summarize additional issues that the Subcommittee may wish to consider in formulating a
comprehensive effort to encourage small and micro-enterprises. They are:

* Recognize the Overriding Importance of Political Leadership & Stability: In promoting
small and micro-enterprises, or any businesses for that matter, the overriding importance of a
stable business climate, with well-defined rules of the game, cannot be underestimated. The
Haitian people are renowned for their resiliency, creativity, imagination and
entrepreneurship. No one can travel in Haiti and not be amazed at how quickly micro and
small businesses have re-established themselves after the worst disaster in the history of our
hemisphere, including repeated hurricanes and civil strife that would challenge even the most
enterprising individuals anywhere in the world.

While much of the private sector in Port-au-Prince and surrounding areas has been seriously
disrupted and de-capitalized by the earthquake-and large infusions of well-targeted funding
are urgently needed-we should be encouraged by the enterprising nature of Haitians and the
potential economic and employment growth that can be generated if political leaders address
the most critical stabilization and reform measures. As has been so often stated, it will be
Haitian leaders who determine the country's destiny. The recent reconstruction plans
produced by both the public and private sectors are excellent first steps and should be used
by international donors in formulating new initiatives.

* Encourage Sound Macro-Economic & Regulatory Reforms: While much of the
discussion on promoting small and micro-enterprises often focus on innovative mechanisms
for providing credit, guarantees, technical assistance and training, these inputs should be seen
as necessary but not sufficient by themselves. Enterprises cannot flourish in a policy and
regulatory environment that discourage investment, restrict property ownership, lack

In his regard, I direct the Subcommittee's attention to an IMF Working Paper titled, "The
Growth in the Dominican Republic and Haiti: Why has the Grass Been Greener on One Side
of Hispaniola?" (2007) by Laura Jaramillo and Cemile Sancak. It shows that in 1960 both
countries had the same per capital GDP. During the past 50 years the Dominican Republic's
per capital GDP more than tripled whereas Haiti's remained stagnant. The authors of this
paper conclude that despite the similarities of these countries, economic policy decisions are
the key determinants explaining their growth divergence.

In my career, some of the most effective technical assistance for improving macroeconomic
policies has been provided by leading economists from Chile. As you move forward with
your deliberations, I urge that successful experiences implementing market-based policy and
regulatory reforms, such as in Chile, the Dominican Republic, El Salvador and Peru, be
examined for application in Haiti. They have had a proven track record of accelerating
sustainable and equitable economic growth that is essential for nurturing small and micro-

* Promote Property Ownership: Most small and micro-enterprises in Haiti operate in the
informal sector, which seriously limits their growth and employment potential, encourage tax
evasion and corruption. Likewise, much of the housing in Port-au-Prince and other urban
areas are built on public lands and do not have property titles, discouraging mortgage
financing and home improvements that are so important in other countries. As has been well
documented in a number of studies, including the USAID-funded work in Haiti of Hernando
De Soto in the late 1990s, lack of property ownership remains a major constraint to
investment and to sound development of small and micro-enterprises and homeownership.

*Expand Successful Models such as Community-Driven Development: In discussing
Haiti there is an unfortunate tendency among some to believe that most prior development
efforts in that country have failed and that the international community must start again with
a blank slate. This would be an error. While there have been failures in the past, we should
not allow the shock and trauma of the earthquake to blind us to a number of ongoing
successes that can quickly be scaled-up to produce immediate results.

In this regard, I would like to highlight the Haitian government's successful Community-
Driven Development program, funded by the World Bank, implemented by the Pan
. American Development Foundation and others in partnership with the Haitian Bureau of
Monetization. PADF has obtained important support for it from both the Haitian and
international private sector, including corporate donors such as Royal Caribbean
International. This program has created more than 500 productive community enterprises in
some of the poorest and most unstable areas of Haiti. It has rapidly generated new production
and employment, promoted entrepreneurship, provided residents with business training and
built social capital that is indispensable for nurturing a market economy and a more stable
democracy. It can quickly be expanded to reach an even larger population, addressing some
of the most immediate employment disruptions caused by the earthquake.

At the same time, we should recognize that there is not one preferred mechanism for
promoting small, micro and community enterprises. For a country as complex and
challenging as Haiti, multiple implementing mechanisms should be considered.
Organizations like FONKOZE, called "the Alternative Bank for the Organized Poor", and
other local and international NGOs, provide important financing mechanisms for micro and
small business enterprises that can be quickly expanded.

Measures should also be undertaken to further encourage private banks to expand their
lending to small and micro-enterprises, as Sogebank has been doing though its SOGESOL
offices, and Unibank, through its Micro-Credit National (MCN), and other similar actions.
The proposal to create a Haitian Enterprise Development Fund, similar to those implemented
in Eastern Europe, merits serious consideration. The OAS Young Americas Business Trust is
also providing important training for young Haitian entrepreneurs.

Local think-tanks, civil society associations, and business incubators should also be
encouraged to continue their work in the promotion of micro, small and medium businesses
as part of the economic recovery process. Groups like the Center for Free Enterprise and
Democracy (CLED), the Haitian Manufacturers Association, the Haitian-American Chamber
of Commerce (AmCham) have done work in these areas that could be built upon and

Experience from other countries show that there are multiple public and private instruments
for promoting small and micro-enterprises-it cannot be done by any one instrument alone.
To be effective, there should be an overall strategy that brings them together in a coherent,
systematic, coordinated fashion to avoid duplication and needless institutional rivalries.

In examining such proposals, it is not productive for any group to demonize the public,
private or nonprofit sectors. Our Foundation has developed a successful model for bringing
together the Haitian government, the private sector and local NGOs and community groups.
We believe that it is a proven mechanism for building public sector capacity while quickly
addressing the most urgent local needs and longer-term development.

Recognize the Importance of Remittances and Diaspora Engagement: Last year, Haiti
received more than $1.6 billion in remittances from Haitians living abroad. It is estimated
that during this decade Haiti will receive at least $20 billion, which is more than twice as
much as the total damages caused by the earthquake. More housing will be repaired and
rebuilt with remittances than with international aid. Many businesses will be developed with
remittances and thousands of Haitian families will educate their children and improve their

Unfortunately, only a small percentage is used for investments, while most remittances go to
sustain daily consumption. International agencies should be creative in supporting activities
that encourage remittance senders and recipients to invest in their futures through market-
based incentives. We urge the Subcommittee to support Diaspora engagement and consider
how the growing flow of remittances to Haiti can better promote small and micro-enterprises.
Our Foundation would welcome participating in such discussions since we have pioneered
community remittance programs with Diaspora groups, including Haitians.

*Engage the Private Sector as Partners: As the above examples indicate, the Haitian
government and international community should work closely with the Haitian private sector,
including Haitians living abroad, as well as foreign investors and not-for-profit organizations.

It is particularly encouraging that the recent donors meeting for the first time invited private
sector representatives like Dr. Boulos and representative from the Diaspora community into
formal presentations and discussions. As in other countries confronting similar
circumstances, these groups can play a key leadership role in promoting small and micro-

In addition, there are a number of significant opportunities to work with foreign investors
such as Royal Caribbean International that is interested in helping Haiti develop the tourism
potential of its north coast To make this happen, however, the Haitian government, with the
support of international donors, need to modernize and repair roads, bridges and other key
infrastructure and involve local communities in the planning and implementation of them.
These investments have tremendous potential to stimulate hundreds of new small and micro-
enterprises. There are excellent examples of how public-private partnerships can be used to
promote small and micro-enterprises.

I also want to recognize Congressman Meeks for his leadership in promoting the HOPE
legislation that is so important for future growth and employment in Haiti. This initiative can
play a key role in stimulating major new investments by foreign and local companies in the
garment and maquiladora industry that can rapidly create thousands of new jobs. Much of
this industry, which began to emerge in the 1980s, was forced to leave Haiti because of the
civil strife and insecurity during the 1990s and 2000s. Experiences from the Dominican
Republic, Honduras, El Salvador and other countries demonstrate that such industries can
stimulate many small businesses and micro-enterprises.

National and international NGOs are playing important roles in providing relief to millions of
earthquake victims and should continue to be an essential part in the country's reconstruction
and development. Clearly their actions should be undertaken in partnership with the Haitian
government in order to enhance its institutional capabilities. While all parties should
recognize that only the government can improve the country's overall policy-regulatory
environment, and facilitate key enabling infrastructure, it is the private sector that must play
an indispensable role in providing essential investments for Haiti's long-term reconstruction
and sustained development.

Mr. Chairman, although the earthquake caused massive suffering, and large segments of the
population continue to live in unacceptable conditions, the international community has an
opportunity to come together with Haitian leaders and communities to build a stronger and better
Haiti. All of those of goodwill-especially Haitian public and private sector leaders-must seize
this unique moment not just to rebuild what has been lost, but to construct a more equitable and
prosperous Haiti.

As I indicated, there are proven models being implemented in Haiti and in other countries that
can quickly be expanded and replicated to address this unprecedented crisis. They offer the most
effective way to benefit the largest number of Haitians in the fastest way possible, especially
through small and micro-enterprises.

Fifty years ago the Dominican Republic was also impacted by political instability and civil strife.
It was able to turn a crisis into an opportunity to build a much stronger and more democratic
society through effective leadership and policy reforms. Likewise, a century ago, Puerto Rico
was one of the least developed islands in the Caribbean and now it has the highest per capital
income in the region. With strong national leadership and international support, Haiti too can
realize similar progress.

As I conclude, I would like to recall that in 1776, when Adam Smith published his revolutionary
work, The Wealth ofNations, Haiti was the richest country in the Western Hemisphere. In the
21" century, Haiti does not have to remain the poorest country in our region.

Thank you,

Vision & Roadmap for Haiti, presentation to the Government of Haiti by Dr.
Reginald Boulos, March 23, 2010
Vision and Roadmap for Haiti, prepared by Haiti's Private Sector Economic Forum,
March 23, 2010
IMF Working Paper: "Growth in the Dominican Republic and Haiti: Why has the
Grass Been Greener on One Side of Hispaniola?" March 2007

Vision & Roadmap for Haiti
Dr. Reginald Boulos
to the
Government ofHaiti
at the
Private Sector Economic Forum
March 23, 2010

Monsieur le President de la R6publique,
Madame la Gouverneure G(nerale du Canada,
Monsieur le Secretaire general des Nations Unies,
Madame la Secretaire d'Etat Hillary Clinton,
Monsieur le Prdsident Clinton,
Mesdames et Messieurs les Ministres et Ambassadeurs,
Mesdames et Messieurs.

For the first time in the history of donor's conference for Haiti, the voices of several sectors in the country
are being heard and I wish to congratulate the organizers for this initiative.

For the first time also in the history of Haiti, a unified and inclusive private sector, organized around the
Private Sector Economic Forum (PSEF), has decided to break with the past and formulate a shared vision
and roadmap for the sustainable development of Haiti.

For the majority of stakeholders in Haiti, the country's private sector is defined mainly by a few large
companies. This analysis is problematic on 3 levels. First, it ignores the key role played by small and
medium enterprises, mostly women, as an engine of innovation and job creation. Secondly, it overlooks
the investment made over the last 15 years by international investors, such as Trilogy, Digicel, Coca Cola,
Royal Caribbean Cruise and others. Finally, its exclusive nature creates a tension with regard to
improvements in business climate, as most believe that this kind of initiative only favors a few
companies, not society as a whole.

SMEs account for 80-90 % ofjobs creation in Haiti and account for 70-80 % of the economy. Therefore,
an element of the competitiveness agenda in Haiti must be the progressive formalization of micro, small
and medium enterprises to transform the structure of employment and tax base of the country. The
situation of the Haitian private sector is akin to bankruptcy at the top and poverty at the bottom. 63% of
SMEs interviewed suggest that their profits have declined over the past three years based on the survey of
over 300 SMEs. Although overall economic conditions are a factor, informality also plays a role.

A recent study by the Winner group suggest that while the total needs for financing of the business
community exceed the 2.7 billion mark, 75 % of these needs i.e. 2 billion are for MSMEs. There is

therefore an urgent need for recapitalization with a blending of loans and grants to the informal sector
with the needed education, technical assistance and training to transform them into a formal structure
creating jobs, spurring entrepreneurial spirit, generating tax revenues for the state and profit for its

We are submitting today 4 Proposals to promote economic inclusion:
1. Allocate at least 50% of all funds and guarantees toformal SME and micro-enterprise
2. Encourage broad ownership of larger companies by (a) converting grants and investments into
employee equity and profit sharing, with a minimum 5% set-aside (b) offer equity shares to the
3. Implement SME and MSME set asides, especially in the housing and construction sectors to be
able to actively participate in Haiti's reconstruction
4. Support new entrepreneurs with seed capital and management assistance to unleash
entrepreneurship through the creation of(a) quasi-risk capital investment funds, (b) a Diaspora
investment fund, (c) incubators and (d) business development services centers

Our vision for the country includes at its core an expansion of the middle class, which can only be done
through the creation of tens of thousands of small and medium enterprises motivated by an
entrepreneurial spirit and benefiting from access to credit and the elimination of barriers to their
expansion. Any vision of a prosperous Haiti rests on an economy able to provide jobs, create wealth, and
ensure social security for all Haitians. But the Haitian economy must also be:
Regionally integrated.

By 2020, we commit to making Haiti a diversified and robust economy open to all, and renowned for
its environmental sustainability and modern government.

Five priority principles must guide all actions and decisions during reconstruction:
Leadership and mutual accountability;
Decentralization and equal growth;
Commitment to modernization;
Haitian-led effort:
Independence from international aid:

Achieving this social and economic growth requires a multitude of investments, both in terms of financial
and human capital. Five areas in particular deserve significant attention:


In the near-term, the construction of housing and infrastructure will create hundreds of thousands of jobs
for Haitians, but Haiti's long-term economic prosperity must rely on building a productive agriculture and
a skills-based economy in globally competitive sectors.
Developing this sector offers the opportunity for shared growth and wealth creation across Haiti. It is also
necessary from a food security perspective.
Rebuilding the country is dependent on not only providing immediate health services to earthquake
victims, but creating a strong national healthcare system that can ensure a healthy population.
It is of the utmost urgency to move Haitians into permanent housing, in order to prevent the creation of
slums with abject living conditions. Creating permanent housing is not just providing shelter but creating
an asset that leads directly to the creation of a long-term middle class upon which this vision rests.
Successful and effective reconstruction will require the legitimacy and support of the people. More
broadly, it will require a well-functioning civil society and set of institutions.

Building back a better Haiti will require significant investment in infrastructure. The core of this
infrastructure investment should be allocated to building the three new Economic Growth Poles in
addition to rebuilding and reviving Port-Au-Prince.
Forming a triangle between Labadie, Ouanaminthe and Port-au-Prince, the Northern Economic Growth
Pole will focus on Agriculture. Tourism and Garments, create more than 100.000 jobs. Investment
required is estimated at over $1.8B.
Investment required is estimated at over $300m. Successful agricultural development in this area can
ensure that the fertile lands of the Artibonite achieve their potential yields in production of staple crops
such as rice, maize and potatoes, and improve rural livelihoods.
The Southern Economic Growth Pole centered around Les Cayes and will support Agriculture. Tourism
and Garments. There is the potential to create more than 50.000 jobs and the initial investment is
estimated at over $1.1B to $1.4B (depending on transshipment port)

To spur private investment and job creation, 1.24 Bn investment in infrastructure is required. This is can
be public investment or on a PPP model including managed infrastructure or concessions. This should
include but not limited to:
2 Airports in Port au Prince and Cap Haitian and the upgrading of Cayes airport;
3 new industrial Parks;
300 kms of New Paved Roads
100 Kms of New Secondary road System
2 New energy plants;
Upgrade or build 3 new ports

Please note that these does not include the social investment in housing, schools and health infrastructures
that will be needed to make these pole successful and make the decentralization a reality.

Ladies and Gentlemen,

The devastation wrought in Haiti by the January 12,2010 earthquake is monumental.
However, even before the earthquake, the infusion of billions of dollars of foreign aid over recent years
had put Haiti into a "Survival Cycle" where the country is unable to support itself and provide core
services to, or economic opportunities for, its people. The challenge for Haiti is to use the reconstruction
process to break the Survival Cycle by creating a virtuous cycle of private investment and public-private

To succeed, we Haitians must form a New Social Compact:
1. The Creation of a large middle class, fulfilling the dream of a better quality of life
2. A responsible elite laying out and implementing a vision of development that benefits all Haitians
3. A business community which fulfill their fiscal obligations, has developed a sense of social
responsibility and understand that their main JOB is to create jobs
4. A strong moral leadership with a new culture of responsibility and accountability
5. A strengthening of our public institutions and political system for the effective management of
our resources

Ladies and Gentlemen,
We bring today our ideas, our dreams and our energy to support with our proposal the plan that
will be presented by our Prime Minister. I am please to be here with a very strong delegation of
our enlarged and redefined private sector to say to the world: Haiti will be build back and better.

Thank You.



Prepared by.
Private Sector Economic Forum


March 23,2010


About this document

This document is a Consultative Draft to be used for discussion purposes only.

It represents planning efforts led by the Private Sector Economic Forum, with support from Dalberg
Global Development Advisors. It includes a broad consultation with more than 150 representatives
from the business community, industry associations, regional chambers of commerce, and think tanks,
as well as, government, donor agencies and multilateral institutions. The recommendations here within
are aligned and consistent with those of the Presidential Commission on Competitiveness. Further
information on the Forum members and the consultations can be found in the Annex.

The intent of this Vision and Roadmap is to contribute a representative perspective from the private
sector on the Government of Haiti's plan for the reconstruction and development of the country More
broadly, this is an affirmation and commitment of the pnvate sector to contribute to building a new
social compact between government, civil society and the private sector.



Introductory memo

March 23, 2010

For the first time in the history of Haiti, a unified and inclusive private sector, organized around the
Private Sector Economic Forum (PSEF) has decided to break with the past and formulate a shared vision
and roadmap for the sustainable development of Haiti Under the leadership of President Pr4val and
the management of Prime Minister Bellerive. we re-affirm our commitment to working to create an
equitable, fair and opportunityladen society for all Haitians Our vision for the country includes an
expansion of the middle class, recognizing that this can only take place through the creation of tens of
thousands of SMEs motivated by an entrepreneurial spirit and benefiting from access to credit and the
elimination of impediments to their expansion. Our vision also encompasses the provision of quality
social services and social security, to ensure dignity for all Haitians.

We support the efforts of the Haitian government to provide the country with a modern and efficient
fiscal administration combined with more transparent and rigorous management of state revenues.
This is a necessary precondition for meeting our objectives to increase fiscal revenues from 9% in 2009
to 15% over the next S years. We propose to create a New Social Compact that involves government,
civil society, and the private sector ranging from the large businesses to the informal traders and
smallholder farmers throughout the country In a partnership built on respect and mutual trust This
partnership will have to include, without any discrimination, Haitians living abroad. The New Social
Compact will have at its core the strengthening of democracy and free enterprise, and a commitment to
individual freedom, both political and economic

We seek to create a prosperous Haiti. based on an economy that Is diversified, environmentally
conscious, competitive, and vibrant enough to bring back Haitians living abroad as well as attract
Foreign Direct Investment to Haiti. Above all, this economy must be agricultural and decentralized,
spreading across the various economic development poles identified outside Port-au-Prince. Social and
economic growth must include all regions of Haiti in order to reduce the extreme poverty in rural Haiti,
and allow for effective reconstruction of Port-au-Prince Growth must also address all sectors and
classes of people To achieve this, the Haitian economy must benefit from the support of the Haitian
government across the 5 clusters identified by the Presidential Commission for Competitiveness, namely
(t) fruits and vegetables, (ii) animal husbandry, (iii) tourism, (iv) housing and urban development and (v)
garments. Significant expansion across these sectors will allow for the creation of hundreds of
thousands of new jobs and ensure shared economic prosperity in Haiti. In turn, a stronger and
formalized private sector will contribute to strengthening government's capacity and ability to deliver
public services.

While thanking the international community for its tremendous solidarity in these difficult moments for
the Haitian people, we also extend the wish that it continue to support us in a spirit of capacity building


and creation of opportunity for all Haitians. Haiti must aim to rebuild in a manner such that the new
Haiti is less reliant on the donor community for financing and support. Every plan put forward by the
international aid community should have an exit strategy or sustainability component.

To succeed we recognize that we must also:

1. Recognize past mistakes and accept that January 12 was at once a natural disaster and a disaster
caused by mankind a
2. Insist on and contribute to transparent and efficient governance which uproots corruption and
establishes a level playing field
3. Accept that it is the responsibility of all citizens and particularly the business community to
fulfill our fiscal obligations and replace a culture of fiscal evasion with a culture of responsibility
and strong moral leadership
4. Fully commit to the creation of a large middle class, which will allow us to fulfill the dream ol a
better quality of lile for all Haitians
5. Understand that strengthening our public institutions and political system is necessary for the
effective management of our resources and ultimately reducing our dependence on foreign aid
Only at this price can we achieve the mutual accountability, respect and dignity necessary lor the
creation of a stable, prosperous and free society.

In the spirit of these commitments, the Private Sector Economic Forum will take a first bold step by
making fiscal compliance a condition of participation for all member organizations.

Yours sincerely,

Reginald Boulos
On behalf of the Private Sector Economic Forum




1. Introduction ................................................... ............. .................... ....................................
2. Vision 2020........................................... .................................. ............. .................................1
2.1. Short-term: Provide basic services and spur business activity .................... ......................... 2
2.2. Medium-term: Create decentralized and competitive growth poles.... ................................. .. 3
2.3. Long-term: Expand economic opportunity to build a vibrant mid llass............................... 3
3. Principles ....................................................... .................. ..... ............ ................ 5
4. Pillars of Vision 2020 ....................................................... ............. 6
4.1. Pillar 1: Jobs and shared economic opportunity................ ..............................6
4 1.1. Drive near-term employment for Haitians in construction. .... ..............................7
4.1.2. Create new competitive economic growth polesru prior sectors................................ 8
4.1.3. Involve private sector in provisio ctu ........................................
4.1.4. Build and formalize micro, small an medium eMSMEs)...................................12
4.1.5. Establish dear and und puted land ownehip. ...'............................. .................... 14
4.2. Pillar II: Agriculture and the ronment ............. ..................................................... 15
4.2.1. Kick-start domestiioductii integrating into humanitarian projects............................ 16
4.2.2. Increase food secu on................................... ................................... 17
4.2.3. Boostexport agri o 4 iy testing around specific value chains................................ 18
4.2.4. I provefrrestatin an oil protection efforts......................................... ................. 19
4.2 In se ancrea tves for renewable energy sources.........................................20
,Il: .....u.tlo...................... .................... 22.
4.% illar III: Hea an ucation.........................................................................................................22
4.3. iEnpance p vion of immediate health services to high-need populations.......................... 22
4.3.2. Moe from one-off relief efforts to stronger healthcare systems............................................23
4.3.3. Provi&mmediate and longer-term access for all students..........................................25
4.3.4. Improve the quality and oversight of the education system.............................. .............. 26
4.3.5. Prepare students for economic opportunity.............................................. 26
4.4. Pillar IV: Housing and economic security......................................................... ..................... 27
4.4.1. Build permanent housing........................................................................................... 27
4.4.2. Redraw the map of Haiti with housing matching job creation............................................. 28



4.4.3. Build a functioning mortgage market for the middle class...............................................29
4.4.4. Create ownership opportunities for the poor................................ .............................. 29

4.5. Pillar V: Governance and institutional capacity...................................................................... 31

4.5.1. Commit to elections and political stability...................................................................... 31

4.5.2. Expand the fiscal revenue base.................................................. ..................................... 32

4.5.3. Build a modern government and increase administrative capacity......................................... 32

4 5 4. Create opportunities for sustained public-private dialogue and collaboration .....................33
4.5 5. Govern the reconstruction responsibly and effectively... ........................................ ..33

5. Roadm ap .............. .. ..... ... ... .......... ........... .... ....... ............ .. ..... 35

5 1. Integrated projects in proposed economic growth poles ........... ................. .... ..35
5.1.1. Northern Economic Growth Pole ..... ..... ...... .......... ........... .... 35

5.1.2 Artibon.te Valley and Saint Marc Peninsula Economic Growth Pole............. 37

5.1.3. Southern Economic Growth Pole .......... ............. .. ........ ....38

5 2 Sequencing of initiatives and investments .............. ...... ......................... ..........39
5.2.1. Three months.. ... ............ ....... ..................... ..... ........................ 39

5.2.2. Si m onths......... .. ... ..... .. ........ .... .. ........ .. ............. .. ........... 41

5 2 3 Twelve months... ... ... ..... ........ .............. .............. ..... .........41

Annex 1: List of organizations consulted. ........ .................................. ....58

Annex 2' Speech by Mr. Francois Guillaume Jr, Executive Director of Haitian-American Chamber of
Commerce of Florida at Erats Generous due Secteur Pnve.. .. ............ ............43

Annex 3: Speech by Mrs. Yanick Merile; President of the Federation of Small and Medium Enterprises at
ttats Generoux du Secteur Prive... .. .................... .......................... ........ ....... ...... .. ... .45

Annex 4; Speech by Mr. Reginald Boulos, Coordinator of Private Sector Economic Forum, at Erats
Generous du Secteur Prive........... .. ...................... ........ 48

Annex 5: Closing speech by H E, President Rene Preval at Elats Generoux du Secteur Prive............. 53


1. Introduction

The devastation wrought in Haiti by the January 12, 2010 earthquake is monumental. Estimates indicate
that over 200,000 people have lost their lives, and hundreds of thousands more are injured and
homeless. Three million people have been directly affected, and the country's infrastructure, institutions
and economy are crippled. The prospects for long-term recovery and development have been set back
drastically. Yet, the opportunity has now arisen to help the nation build back better.

We, members of the Private Sector Economic Forum and the private sector more broadly, are
committed to partnering with the Haitian government and to committing our own resources for the
development of the country. Our vision for the country extends to the creation of a New Social
Compact for all Haitians where business from the large businesses to the informal traders and
smallholder farmers throughout the country the public sector, civil society and the international
community are acting in concert, with mutual trust and accountability, in the best interest of all
Haitians. To achieve this requires the private sector's commitment to full tax compliance and the
government's commitment to meeting minimum service levels and managing budgets, decision-making
and funding in full transparency. The private sector is determined to adhere to its fiscal obligations
within this New Social Compact.

2. Vision 2020

The earthquake has set us on the beginning of a new path. The opportunity exists for all Haitians to
benefit from transformative change creating private-sector led, robust economic growth, accessible
high-quality social services, and a well-functioning, high-performing government. This change must be
driven with a respect for the dignity of every Haitian.

Our vision for the country includes at its core an expansion of the middle class, which can only be done
through the creation of tens of thousands of small and medium enterprises motivated by an
entrepreneurial spirit and benefiting from access to credit and the elimination of barriers to their

Any vision of a prosperous Haiti rests on an economy able to provide jobs, create wealth, and ensure
social security for all Haitians. But the Haitian economy must also be:
Diversified, with an agricultural base and opportunities across tourism, light manufacturing and
eventually a business process outsourcing industry;
Green, ensuring all future actions repair, restore and protect Haiti's ecosystem;
Competitive, with a level playing field working closely with a fully-functioning modern
government; and,


Vibrant, with GDP growing at over 5% per annum and attracting Foreign Direct Investment (FDI)
as well as Haitian Diaspora investment and return;
Regionally integrated, with relations in place with the Dominican Republic, Caricom, Central
America and the United States that allow Haiti to prosper.

By 2020, we commit to making Haiti a diversified and robust economy open to all, and renowned for
its environmental sustainability and modem government.

Recognizing that this journey will be long and challenging, the following sections detail the priority
actions in the short (18 months), medium (3 years) and longer term (5 years) to achieve the vision of a
new Haiti. In summary, they include:
Short-term: Provide basic services and spur business activity
*Medium-term: Create decentralized and competitive growth poles
Long-term: Expand economic opportunity to build a vibrant middle class

2.1. Short-term: Provide basic services and spur business activity

In the coming 18 months, Haiti's first priority must be recovery, providing basic services of health,
nutrition, education and shelter to all Haitians and sustaining the Haitian economy in the face of
immediate challenges.

Haiti in the short-term must be one of well-coordinated donor and humanitarian efforts, where basic
services are provided quickly and a sense of normalcy is returned as soon as possible: children are back
in school, food and healthcare are being provided, and reconstruction is well underway. This
reconstruction should be inclusive of Haitians, employing as many local workers as possible, and using
local supply chains. An environment has to be created where Haitian businesses can survive this loss of
assets and customers, through provision of stopgap loans to cover ongoing debt obligations and well-
policed national borders to stop an influx of smuggling.

By the end of the 18 month recovery period:
500,000 Haitians will be employed primarily in construction and agriculture with minimum wage
levels achieved
100,000 permanent housing units will be created
30% of humanitarian aid products will be made in Haiti
The informal sector will be 85% of the economy, from 95% today
A guarantee fund will have been created to provide short-term stopgap loans to Haitian SMEs,
reaching 75% of businesses in need of capital
Social investments will be made alongside investments in economic development



2.2. Medium-term: Create decentralized and competitive growth poles

As the nation begins to rebuild and reconstruct, the fundamentals for a new, decentralized economy
need to be established, both to provide more economic opportunity for Haitians, and to ease the
overcrowding of Port-au-Prince that contributed to the magnitude of the disaster.

The Presidential Commission on Competitiveness has identified high priority sectors based on their
ability to create jobs and value for the Haitian economy. The private sector should commit to investing
in these sectors and to assuming some degree of risk; the government should create economic
development zones to facilitate the functioning of the sectors and offer corresponding incentives, as
well as ensure that trade agreements and monetary policy favor the development of these sectors.

The competitive growth poles should include the following, in addition to a restored Port-au-Prince:
1. In the North, between Cap Haitien and Ouanaminthe, to support tourism, garments and
2. Around Gonaives and La Pierre to link the Artibonite valley and support agriculture and tourism;
3. In the South to support agriculture, garments and tourism.
By the end of the 2-3 year reconstruction period,
750,000 Haitians will be employed in construction, agriculture, tourism, and garments with
minimum wage levels achieved
Three new economic economic growth poles will be created, with basic services provided across
the poles
1 million Haitians will be settled in 250,000 new permanent housing units, primarily in new
growth poles and agricultural areas
The fiscal revenue base will represent 12% of GDP from its current 9%
A well-managed social security system will be established

2.3. Long-term: Expand economic opportunity to build a vibrant middle class

The earthquake has given Haiti the chance to build a better society for all a new Haiti. Haiti in the
long-term succeeds only with a robust middle class functioning as part of a transformed society, where a
culture of entrepreneurship co-exists with a modern, well-functioning government.

In five years,
1 million new jobs created with minimum wage levels achieved
The Haitian government will have passed necessary legal and administrative reforms to rank in
the top 75 in the World Bank Doing Business rankings
SMEs in the formal sector will represent 50% of the economy
The fiscal revenue base will represent 15% of GDP
Universal access to primary education will be achieved



Social security system in place to insure increased access to healthcare
10% of land on the Haitian territory will be forested
500 million of FDI will have been attracted, and 1 million total jobs created in agriculture,
tourism, garments and related service sectors



3. Principles

Difficult tradeoffs will doubtless need to be made in the reconstruction of Haiti, but how we approach
the coming period will determine whether or not we can truly transform our country's social, political
and economic fabric for the better. The earthquake and dealing with its immediate aftermath has
created a new and previously unparalleled solidarity in Haiti across all people, and across the
government, private sector and international community. If we fail to adhere to a set of basic principles
during the immediate reconstruction period, we will all have squandered a once in a lifetime
opportunity to set the country on a new path of social and economic growth.

Five priority principles must guide all actions and decisions during reconstruction:

Leadership and mutual accountability: Strong leadership from, and partnership between, the
private, civil and public sectors is required for the country to move forward. Transparency and
sustained dialogue are needed to hold each sector to mutual accountability.

Decentralization and equal growth: Social and economic growth must include all regions of
Haiti in order to reduce the extreme poverty in rural Haiti, and allow for effective reconstruction
of Port-au-Prince. Growth must also address all sectors and classes of people.

Commitment to modernization: Efforts to rebuild the Haitian state must propel us into the 21"
century. The private and public sectors must be committed to change and comfortable leaving
previous ways of doing business and governing behind. Private delivery of public services can
play a significant role in helping the government to increase the quality of its services.

Haitian-led: Recovery and reconstruction programs must respond to the real needs of Haitians
on-the-ground and should be directed by Haitian leadership. Aid programs must reinforce state
agencies and not weaken them.

Independence from Internationalaid: Haiti must aim to rebuild in a manner such that the new
Haiti is less reliant on the donor community for financing and support. Every plan put forward
by the international aid community should have an exit strategy or sustainability component.

We must all hold ourselves accountable for adhering to these principles.


4. Pillars of Vision 2020

Achieving this social and economic growth requires a multitude of investments, both in terms of
financial and human capital. Five areas in particular deserve significant attention: (i) Jobs and shared
economic opportunity, (ii) Agriculture and the environment, (iii) Health and education, (iv) Housing and
economic security, and (v) Governance and institutional capacity.

4.1. Pillar I: Jobs and shared economic opportunity

In the near-term, the construction of housing and infrastructure will create hundreds of thousands of
jobs for Haitians, but Haiti's long-term economic prosperity must rely on building a productive
agriculture and a skills-based economy in globally competitive sectors.

Given the need to create jobs immediately, aid efforts must ensure that they are strengthening and not
displacing the Haitian workforce and Haitian businesses. We have been overwhelmed by the generosity
and compassion that individuals, corporations and governments outside of Haiti have demonstrated in
the aftermath of the earthquake. We now critically need them to be our partners in rebuilding the
private sector in Haiti by ensuring that aid efforts include Haitian manufacturers in their supply chains;
by requiring minimum levels of Haitian employment in construction projects; and, by supporting efforts
such as 'Plus One for Haiti' to source imports from our country.

More broadly, we support the work of the Presidential Commission on Competitiveness, which has
identified the following portfolio of priority sectors: (i) fruits and vegetables, (ii) animal husbandry, (iii)
tourism, (iv) housing and urban development and (v) garments. Significant expansion across these
sectors will allow for the creation of hundreds of thousands of new jobs and ensure shared economic
prosperity in Haiti. Across the board, the development of these sectors will require not simply an
expansion in the number of jobs provided, but also an upscaling of activities in Haiti in order to capture
higher value. As infrastructure investments are made to support these initially prioritized clusters, new
opportunities can also be developed. For example, various light manufacturing options can be
successfully developed in Haiti once investments in industrial parks and related energy and port
investments come online. A stronger and formalized private sector will contribute to strengthening
government's capacity and ability to deliver public services.

Outcomes for this Pillar target priorities in job creation, formalization of the economy and
decentralization of competitive economic growth poles. Job creation must be inclusive, and particularly
attune to ensuring opportunities to the disabled and handicapped among the Haitian population. Social
compliance more generally should be re-enforced across the Haitian private sector.


Outcome 18 months 3 years 5 years
Jobs created 500,000 primarily in 750,000 in construction, -1 million, with 300,000
construction and agriculture, tourism, in fruits & tubers,
agriculture and garments 400,000 in animal
husbandry, 120,000 in
garments, 75,000 in
construction and 17,000
in tourism
Informal sector as 85% of economy 75% of economy 50% of economy
percent of economy
(Baseline: 95%)
Population settlement 500,000 migrated and 750,000 million workers 1 million workers and
and decentralization settled from Port-au- and families settled in families settled in
Prince permanent housing, permanent housing
primarily in new growth primarily in new growth
poles and agricultural poles and agricultural
areas areas

4.1.1. Drive near-term employment for Haitians in construction. Major construction projects are
needed in the near term, both to rebuild Port-au-Prince and to develop new economic growth poles
across the country. The construction of housing and infrastructure must balance multiple needs:
responding to the urgency of the situation, creating business and employment opportunities for
Haitians, building for quality, and ensuring provision for maintenance. International construction
companies will bring the needed expertise but should be required to employ Haitians, contract local
suppliers and be held accountable for reliable construction methods.

To this end, we outline the following initiatives:
1. Create financial, land and import duty incentives to spur mid-level housing development and
initiate decentralized low-income housing developments (More detail in Pillar 4 below).
2. Update the construction code (More detail in Pillar 4 below).
3. Mandate a minimum of 70% employment be Haitians, and target 25% of subcontracted business
from Haitian suppliers for any construction or infrastructure projects.
4. Devise and implement an automatic linkage between financial resources made available for
infrastructure projects and those made available for maintenance.
5. Prioritize modern construction techniques for major roads and infrastructure and mandate
labor-intensive techniques for feeder roads, in order to create the maximum jobs in the short
term without holding back reconstruction.

Target indicators:
Jobs created in housing and infrastructure


Projects initiated and procured
Percent of employment and budget to Haitians meeting 70% mandate and 20% target

4.1.2. Create new competitive economic growth poles around priority sectors. The
development of priority sectors for Haiti must take place through a decentralized economy combined
with strong central management of trade policies through the Ministry of Commerce and Industry.
While there are many opportunities for economic development, the next 3-5 years should be focused on
four economic growth poles, including a reconstructed Port-au-Prince. These include:

1. North: Agriculture, Garments and Tourism. Located between Cap Haitien and Ouanaminthe
with an industrial park located in Fort Liberte. The following investments would be required:
a. Public investment in an Industrial Park located on government land around Fort Liberte,
with appropriate economic zoning. The Industrial Park should be privately managed
through contract and ultimately, privatized. Private sector commitment to relocating
and creating jobs in industrial parks prior to public investment will help catalyze these
b. Deep-water port at Fort Liberte with license and capability to handle containers. The
Fort Liberte location, vis-a-vis Cap Haitien, is favorable given available land for storage,
staging and growth, as well as distance from city inhabitants and tourism.
c. Wholesale market located near Fort Liberte Port for triage of produce between export
and domestic markets, with related investments in processing and supply chain
(collection, transportation, and information networks)
d. Energy investment near industrial park
e. International airport in Cap Haitien to serve both tourists and cargo, particularly back-
haul of perishable agriculture on passenger flights. The airport should have a runway
of 3,000 meters to allow long haul flights to take off.
f. Road between Labadie and the UNESCO World Heritage Sites within the National
History Park (Citadel, Sans Souci and Ramiers). Roads to be completed by EU and
French government and with feeder roads to be built into agricultural areas.
g. Development of the National History Park with modem facilities In order to
accommodate large numbers of visitors while regenerating natural resources.

2. Artibonite Valley (the breadbasket of Haiti): Agriculture and Tourism. The following investments
would be required:
a. Feeder roads into agriculture producing regions to link with primary roads to Port-Au-
Prince and Cap-Haitian / Fort Liberte.
b. Container port in Gonaives, as well as coastal cabotage landing points to increase access
to rural cargo loading and unloading.
c. Expansion of current 2-lane road from Port-au-Prince to Saint Marc to a 4-lane road
while bypassing certain villages and shorelines to reduce transportation time.
d. Watershed restoration project to prevent soil erosion and flooding. Significant
investments in farmer productivity, as well as storage and collection facilities.



e. Tourism investments on the Saint Marc Peninsula and nearby islands.

3. South: Agriculture, Garments and Tourism. Located around Les Cayes. The following
investments would be required:
a. Watershed restoration project to prevent soil erosion and flooding.
b. Feeder roads into cocoa, coffee and banana producing regions to connect to Port-Au-
Prince in the near-term, and to serve a local port in the medium-term.
c. Deep-water port in Baie du Mesle with license and capability to handle containers. A
regional feeder port should be built, but a trans-shipment port should be explored
with international shipping companies subject to technical and economic feasibility -
given potentially favorable location and water depth. The Canal du Vent, which
separates the island of Cuba from Haiti, could also be explored as an alternative
location for trans-shipment, due to the passage of 34% of international traffic through
the canal. A trans-shipment port would reduce shipping costs given increased
outbound, and also create additional jobs, but requires both sufficient scale and
significant capital investment.
d. Smaller coastal cabotage landing points should also be established.
e. An international airport near Les Cayes with an extension of the current runway from
1,000 to 3,000m.
f. Wholesale market located in Les Cayes for triage of produce between export and
domestic markets, with related investments in processing and supply chain (collection,
transportation, and information networks)
g. A tourist resort zone between Aquin and Cote de Fer, with 20km of continuous first-
class beaches, as well as tourism investments in Port Salut, lie a Vaches and
h. Public investment in an Industrial Park focused on garment assembly located near Les
Cayes, with appropriate economic zoning. The Industrial Park should be privately
managed through contract and ultimately, privatized.
i. Energy investment near industrial park
j. Development of a leading agriculture program at the University of Notre Dame's
agricultural engineering facilities in Redon.

4. Port-au-Prince: Garment and other Light Manufacturing. The following investments will be
a. Rebuilding and improvement of existing Industrial Parks, completion of 2-3 private
investments in proposed new Parks and support to additional investment, including
foreign direct investment, for Parks on existing land sites.
b. Urban planning and restoration of Port-au-Prince and surrounding areas.
c. Rebuilding of international airport.
d. Rebuilding of port infrastructure and managed contract for public port.


e. Wholesale market located near Port-au-Prince Port for triage of produce between
export and domestic markets, with related investments in processing and supply chain
(collection, transportation, and information networks)

Preliminary estimates of major infrastructure investments for the new economic growth poles are in
Section 5: Roadmap. The specific infrastructure investments highlighted are directional and subject to
feasibility studies which address technical and environmental considerations.

In order to make these economic growth poles successful, we outline the following initiatives:
1. Create Regional Development Boards around each of the new economic growth poles to
develop detailed and integrated plans and oversee the rapid execution of the projects. These
boards must include representation from government, private investors, local businesses and
donors as well as participation of NGOs and have a direct linkage to the senior-most level at the
Haiti Development Authority. We suggest that just one multi-lateral and/or bi-lateral donor
should take the lead on each pole to reduce complexity in coordination across multiple donors.
These Regional Development Boards will be a critical component for a dynamic planning process
with ongoing private sector participation.
2. Invest public funds in Industrial Parks in both the North and South economic development
zones, with private management through contract. Given the risk and timing associated with
garment tenants, public funding is necessary to catalyze investment in the new economic
development zones. These industrial parks should be privatized either on a specific timetable.
or on operating metric triggers.
3. Create flexible labor laws, including immediately legalizing the 3x8 work shift to allow increased
competitiveness in the garment industry and rapid expansion of capacity for job creation, to be
expanded to all public and private sector activities.
4. Integrate public plans for provision of housing and basic services around these new zones and
place increased security at strategic locations, particularly to support the proposed expanded
work shift. Amend requirements to allow housing within zones.
5. Create managed contracts for the critical infrastructure associated with these economic zones,
(Noted below in Section 4.1.3) and establish minimum service level guarantees by the
government for housing, water and sanitation, as well as other basic services.
6. Revise and ensure proper application of the investment code, adopt turn-key legislation, and
provide or support land concessions, to immediately attract Foreign Direct Investment in
Industrial Parks. This will require a strong and structured Centre de Facilitation des
Investissements (CFI) able to adequately support foreign investors.
7. Lobby to move from Hope II to Hope III with 250M m3 import allowance and additional 15
years, in order to attract the appropriate firms.
8. Develop urbanization plan overlaid with natural disaster risk map in order to help investors and
funders better select locations and evaluate risk.
9. Create targeted programs involving disabled and handicapped in the economy.
10. Ensure ICT solutions are available at competitive rates. In the short-term, this will require legal
reform and the modernization of CONATEL. In the medium, new enterprises will need to be