Microfinance in Rural Haiti- A Case Study of Institutional Start‐Up & Microenterprise Development

MICROFINANCE IN RURAL HAITI: A CASE STUDY OF

INSTITUTIONAL START-UP & MICROENTERPRISE

DEVELOPMENT1

Michael J. Pisani

Central Michigan University

Abstract

HAPI-Kredi, a small not-for-profit microfinance institution (MFI), enteredinto the Haitian marketplace shortly after the devastating 2010 earthquake.HAPI-Kredi, with a mission to serve female entrepreneurs at the economicmargins, emerged as a complementary financial service to HAPI, a youngNGO with strong ties to the impoverished rural area of La Vallee, Haiti.This article highlights the challenges and opportunities of providing andgrowing microcredit in rural Haiti through a start-up MFI with two em-ployees and a loan portfolio approaching $10,0002 derived primarily fromchurch-centered charitable donations. Extensive interviews with 30 clientsof HAPI-Kredi conducted in May 2013 and in June 2014 provide businesscontext for the demand and potential impact of microcredit in the region.This article, through the lens of a case study, details the experience of oneMFI in La Vallee, Haiti situated in the poorest country in the WesternHemisphere.

1. Introduction & Haitian ContextOne June day in 2013, Wideline Dalice,3 the new director of HAPI-Kredi

sat sweltering in the second floor of HAPI’s new building pondering whatshe has gotten herself into. As a recent university graduate in accounting,Wideline could have stayed in the capital city of Port-au-Prince and foundwork with the scores of NGOs inundating post-earthquake Haiti. Instead,Wideline wanted to return to her home village of Mizak, some 55 milesand a long tortuous four hour car ride away, and make a difference.

When Wideline began work with HAPI-Kredi she had a single full-time staff member and loan officer, Toussaint Leone, to get her up tospeed. Toussaint, also a local of Mizak, began employment with the orga-nization in January 2013 and has tried ardently to make things right, butmany challenges face the fledgling microfinance institution (MFI) knownlocally as HAPI-Kredi (or HAPI-Credit in English). In its first two yearsof existence, HAPI-Kredi had gone through three directors and a financialscandal; Toussaint and Wideline were charged with turning things aroundwith the assistance of the organization’s founding partner in Michigan.

C⃝ 2015 Southeastern Council on Latin American Studies and Wiley Periodicals, Inc. 15

The Latin Americanist, September 2015

The offices of HAPI-Kredi consist of a single and nearly bare concreteroom with only a table, three wooden chairs, a printer, a single electricoutlet, and a window. June in Haiti is hot and humid, the beginning ofthe hurricane season. Near the window Wideline found a stack of foldersflapping in the breeze, these folders contain the details of the two dozenclients in which HAPI-Kredi had lent money. HAPI-Kredi, an offshoot ofthe non-governmental organization Haitian Artists for Peace International(HAPI), suffers from much of the problems that affect Haiti: corruption,poverty, lack of resources, and poor infrastructure.

Mizak is located in the La Vallee region of southeastern Haiti. Unlikemost of Haiti, this rural and mountainous area remains somewhat forestedand verdant where most families eke out an existence farming food sta-ples supplemented with market activity or day labor when available. Fewpeople in the area make it through high school and precious fewer stillgraduate from university. Wideline has beaten the odds, her universitytraining has landed her the director position of HAPI-Kredi making $250a month, in a country where most make barely a dollar or two a day.Nonetheless, by coming home, Wideline has forgone a higher salary withbetter resourced NGOs operating in Haiti. Toussaint too has done well.Toussaint graduated from the leading Catholic high school in the region,speaks and is literate in English, French, and Haitian Creole, and pos-sesses business acumen and charisma. His talents were quickly rewardedby HAPI-Kredi where his monthly salary nearly doubled (from a startingsalary of $125 a month) within his first year of employment.

While staffed with qualified personnel, HAPI-Kredi faced a crisis asWideline took over the directorship . . . HAPI-Kredi only served 26 mi-crobusiness clients. Microfinance generally entails the routine delivery ofrelatively small business loans (i.e., microcredit) to micro-entrepreneurs,at market rates, that are otherwise excluded from the regular bankingcommunity. Access to microfinance has been trumpeted as a key develop-mental tool to reduce poverty. At this time it was clear that HAPI-Kredicould not support the salaries of its staff on so few clients. Hence, Toussainthad been hard at work since January 2013 trying to rebuild the client baseafter the financial scandal. The first loan officer, Wilfred, made off withhalf of the money designed to capitalize HAPI-Kredi. While HAPI is uti-lizing the court system to recoup their losses, the Haitian courts are of littlerecourse as inefficiency and corruption are the norm. The action is morea public display to discredit the founding loan officer in the communityand separate him from HAPI-Kredi in the minds of the local population.An overview of the Haitian context follows.

1.1. Haitian Context-Brief Historical Overview

HAPI-Kredi is part of the trajectory of Haitian history. HAPI-Kredi’sfinancial founders are outsiders from the US pursuing development

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embedded within the local community. Outside influence has been ahallmark of the Haitian story.

Haiti is home for nearly 10 million people and since independence atthe turn of the 19th century has been challenged to deliver positive polit-ical or economic results. Haiti is located on the west side of the island ofHispaniola, the second largest island in the Greater Antilles situated in theCaribbean Sea just east of Cuba. The encounter between the hemispheresbegan when Columbus visited the island in 1492.4 Soon after Columbus’visit, the Spanish colonized the island of Hispaniola and in so doing devas-tated the indigenous Taino population. By the middle of the 16th century,the conquering Spanish had mostly moved on from western Hispaniolaafter the depletion of easy to find riches and the genocide of the island’snative population. The Spanish did leave behind a space devoid of mosthumans but abundant in feral pigs and cattle in which French Buccaneersa hundred years later would first feed themselves and crews of passingships.

In this void, French pirates secured the northwestern space of Hispan-iola as their own. The transition from buccaneer outpost to French colonyalso re-oriented the economy toward cash crops: cotton, indigo, coffee,and sugar. It was sugar that transformed Saint-Domingue with its slaveworkforce stolen from Africa. African slaves comprised a significant ma-jority (90%) of the colonial population and numbered more than 500,000by the end of the 18th century. Sugar generated great wealth, disparity,and inequality during the 1700s in Saint-Domingue.

The internal struggle to end slavery by the hands of slaves began in 1791and concluded with an independent Haiti in 1804. Haiti remains the onlysuccessful example of a slave revolt resulting in national independence—this success came at a relatively high price in destruction of people andproperty, limited access to international markets, and reparations (thatlasted about 100 years) transmitted to France. With independence, Haitiansquickly transformed their economy from plantation to small-scale stapleagriculture (Frankema & Mase, 2014).

On the political front, independence wrought continued political chaos.Early on governments empowered socio-economic elites (i.e., the rulingclass) through coup d’etats, civil war, conflict with the Dominican Repub-lic, political intrigue, corruption, and other political machinations includ-ing foreign military intervention. France gave way to the US as foreigninterloper in the 20th century. In 1915, US Marines landed and stayed for20 years ostensibly to bring order, but nefariously made the country safe forUS agricultural investment. This intervention was followed by the home-grown dictatorships of the Duvaliers (1957–1981) and subsequent failedattempts at democracy. US troops arrived again in 1994 giving way to UNpeacekeepers since 2004. The present Haitian Republic, while ostensiblydemocratic, is virtually absent in daily affairs.

In addition to Haiti’s already weak economic and political status, natu-ral disasters proved to be another contributing factor to Haitian instability.

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Dennis Ricardo Hidalgo


More recently, hurricanes and tropical storms have devastated the country.And in January 2010, a massive 7.0 earthquake killed more than 300,000people, displaced millions, and destroyed much of Haiti’s infrastructure.

The present-day Haitian economy is based on agriculture, which isalso the main source of employment for two-thirds of the population. Re-mittances also play an important role where approximately one-third ofhouseholds receive a total annual remittance flow of $2 billion (Maldonado& Hayem, 2014). Haiti remains the poorest country in the Western Hemi-sphere where 80% of Haitians live in abject poverty (i.e., earnings less than$2 per day) and per capita income is $760. Somewhat paradoxically withinthis challenging economic environment, cellular phones have achieveda household penetration rate of nearly 90%, perhaps a tool that may beleveraged toward future development (Rodman, 2010). Corruption, highunemployment, political instability, and inefficient state enterprises areadditional barriers to the country’s well-needed development.

1.2. Haitian Context-Business Climate

In the last decade, NGOs have steadily replaced services once the re-sponsibility of the Haitian government. In essence, the Haitian governmenthas abdicated much of its work and authority to others or to none at all. Forthe most part, the physical infrastructure in Haiti—roads, energy, water—are in disrepair, absent, or non-existent. The condition is even worse inrural areas where only 12% of the arable land is irrigated (Haiti lies in therelative rain shadow of the Dominican Republic) and few “have little ifany electric power, feeder roads are in extremely poor condition [whereonly 5% have access to asphalt roads and 32.8% have access to dirt roads],and conservation and processing facilitates are lacking, which regularlyleads to sizeable postharvest losses” (Shamsie, 2012, p. 135, 148). Andwhere the government is present, corruption is rampant. TransparencyInternational groups Haiti5 with the ten worst corruption offenders, suchas Iraq, Afghanistan, North Korea, and Somalia. Fatton (2014, p. 6) arguesthat Haiti’s economy is conditioned by the global economic system andstructurally “confined to the outer periphery” as an economic dependencyof and development project for the developed world.

The World Bank offers complementary data with regard to the ease ofdoing business in Haiti. Haiti ranks nearly last, 173 out of 185 countries inthe ease of doing business in country. For example, it takes on average 105days and costs about three times per capita GDP to start a legal business inHaiti. Acquiring electricity takes 60 days and costs on average 4.6 times percapita income to get linked into the electricity grid, where available (WorldBank, 2013). Operating within the formal sector in Haiti is very difficult andcostly. In the rural areas and particularly for small businesses, operatingoutside of the purview of government or informally is standard in Haiti.Business is also challenged by the expectations of foreigners and the past.Girard (2010, p. 10, 13) argues that “Haitians expect foreign countries, not

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Haitians, to pull the country out of poverty” because of “the Haitian viewthat foreigners are to blame for Haiti’s troubles” and as such make “itdifficult to foster a sense of enterprise”.

Lastly, structural adjustment and free market policies since the 1980shas hastened the demise of the small farm sector in Haiti. As a result,roughly 60% of food consumption in Haiti comes from imported foodsthat literally eat up 80% of Haiti’s export earnings. Even so, 80% of Haitianhouseholds are food insecure where most households cannot satisfy theirfood needs and the country is nowhere near achieving food sovereignty(Shamsie, 2012).

It is within this challenging environment that the present study seeks toexamine a start-up MFI and the surrounding microenterprise landscape.The remainder of the article positions HAPI-Kredi within the related liter-ature and offers an examination and assessment of HAPI-Kredi throughfieldwork conducted to analyze both HAPI-Kredi and its associated mi-crobusiness clientele.

2. Literature Review – A Focus on the Haitian MicrobusinessEnvironment

This section highlights the related literature from three areas: microfi-nance institutions, microenterprises at the base of the pyramid, and Haiti.

2.1. Microfinance Institutions

Microfinance has emerged as a viable strategy for development overthe past 40 years. Microfinance today is promoted not only as a tool forpoverty reduction (De Soto, 2000; Lashley, 2004; Ortiz, 2001), but also asa means to economic dynamism for commercial banks and microfinanceinstitutions (Ledgerwood, 1999), microenterprises (Pisani & Yoskowitz,2004), and national economies (Pisani & Patrick, 2002). In essence, mi-crofinance has entered into the mainstream development dialog and isincreasingly touted as a tool for fighting poverty and hopelessness (Smith& Thurman, 2007). The presence of microcredit is substantial. According tothe Inter-American Development Bank, microfinance is available to about17% of the population in Latin America and the Caribbean (LAC). Over10 million people from LAC had microcredit loans totaling more than$12 billion.6 Recent evaluations and impact studies reinforce microcredit’sability, though not universally, to enhance business outcomes and livingstandards (Banerjee & Duflo, 2011; Karlan & Appel, 2011).

The operational approach of MFIs may range from simply offeringcredit (a minimalist MFI) to an integrated MFI offering social intermedi-ation (e.g., group formation and leadership training), enterprise develop-ment (e.g., training in marketing and bookkeeping), and social servicesdelivery (e.g., literacy training) to base of the pyramid (BOP) enterprises(Ledgerwood, 1999). Primary microfinance activities include: 1) smallloans, typically for working capital; 2) informal appraisal of borrowers and

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investments; 3) collateral substitutes, such as group guarantees or compul-sory savings; 4) access to repeat and larger loans, based on repayment per-formance; 5) streamlined loan disbursement and monitoring; and 6) securesavings products (Ledgerwood, 1999, p. 1). For the most part, the literaturesuggests that MFIs may be sustainable provided that they focus on loanrepayment, internal efficiency, and market growth (Otero & Rhyne, 1994).

Within Haiti, Hossein (2014, p. 55) found MFIs viewed “microfinanceas the vehicle through which the economically active poor, who are leftwithout easy access to financial services, can improve their quality of lifewhen they use finance as a tool to bring policy change with regards tofinancing”.

2.2. Microenterprises at the BOP

“Micro” is the key word in microenterprise, as Mead and Liedholm(1998) found that working proprietors or one-person businesses accountedfor over half of all microenterprise employment in the developing world.Extending the workplace to unpaid family members within workingproprietorships accounts for over 75% of all workers engaged in microen-terprise establishments (Mead & Liedholm, 1998; Portes & Hoffman,2003). London et al. (2014, p. 37) suggest BOP microenterprises “areorganizations that seek to be economically sustainable and contributeto alleviating poverty by creating new transactional linkages betweenformal and informal markets”. The operators of microenterprises arereferred to as microentrepreneurs (Portes & Hoffman, 2003). Thesemicroentrepreneurs are self-employed where entrepreneurship refersto own-account employment (Blanchflower & Oswald, 1998). Academicresearchers have classified microenterprises as business entities withtypically five or fewer employees, engaged in non-primary activities, andselling at least 50% of their output (Johnson, 1998; Mead & Liedholm, 1998).

The great majority of the self-employed in developing countries, partic-ularly in Latin America and in Haiti, work under conditions of anonymitywith relation to governmental and regulatory authorities and thus are con-sidered informal sector participants. In essence work “activities that avoidstate regulation” best describes informality (Itzigsohn, 2000, p. 11). Thishidden from government purview employment has been referred to asinformal employment (Hart, 1973, 1970). Yet informal work activity is notsaid to be criminal in the respect that the work itself could be undertakenwithin the legal bounds of government legislation (Portes & Schauffler,1993).

Elsewhere in the French Caribbean, Browne (2004) argues that infor-mal activity in Martinique serves the purpose of undermining the Frenchstate, a state that has enslaved the ancestors of the present population andthus deserves less than full cooperation of the current generation. Hence,informality is part of the historical process and culturally acceptable as anact of cunning, if no real harm is done (outside of the bureaucratic state).

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This cultural relativism may also be at work in Haiti, though most infor-mal microenterprises skirt government oversight because the governmentlacks compliance and enforcement capability.

2.3. Haiti

The need for and access to microcredit is great in Haiti as the commercialbanking sector has historically and actively discriminated against the poor(Hossein, 2014). While access to microcredit has been a challenge for mostHaitians, small scale credit from credit unions began as early as 1937 andmicrocredit more formally in 1981.7 This early start is a critical elementin the legitimacy of microfinance in Haiti as it is viewed as a domesticcreation given that there is a contemporary level of foreign participationin the sector (Hossein, 2014).

Within the current Haitian banking landscape, three types of finan-cial institutions engage in microfinance—these are credit unions andcooperatives (regulated); some commercial banks (regulated) and NGOs(unregulated); and informal banks (unregulated).8 Perhaps as many as500,000 Haitians are actively receiving loans from 200 or more MFIs oper-ating in Haiti with the largest eight MFIs serving nearly 40% of this total(Paul et al., 2012; Mix Market, 2014). Hossein (2014) argues that as much as25% of Haitians are within reach of MFIs, however reach and participationdiffer as the nation contains two million small urban traders and vendorswho are typical prospective MFI clients. Shamsie (2012, p. 135) reportsthat 60% of Haitians live outside the city where “the majority of Haiti’sfarmers are resource-limited, residing in remote areas” and “farming takesplace, for the most part, in small plots of land [4.4 acres on average], andis carried out by small producers with little access to capital”.

For those with access to microfinance in Haiti, the vast majority (85%)utilize funds for commercial activities rather than for production or man-ufacturing (Barrau, 2010). And these microenterprises exist in a nationalenvironment where 90% of all economic activity (i.e., production andemployment) takes place within the informal sector (Pierre, 2010).Mauconduit et al. (2013) argue that female microentrepreneurs in Haitiface special challenges in obtaining business financing and often look toMFIs for assistance. Hence, women have been a primary recipient of mi-crofinance in Haiti and comprise perhaps as much as three-quarters ofMFI clientele (Oriza & Paul, 2014; Mauconduit et al., 2013).

Modern microcredit has achieved some success in Haiti in spite ofthe political, economic, climatological, topographical, and environmentalchallenges. Hossein argues that this is in part based upon cultural andMFI staffing. Specifically, Hossein (2014, p. 47) states that the “collectiveaspect of Haitian society facilitates microcredit solidarity lending model”,where “inaction and lip-service paid by political leaders to the needs ofpoor entrepreneurs has increased the necessity for informal banking sys-tems which have tapped African traditions of kombit (working together)

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to meet their livelihood needs”. Furthermore, Hossein argues that MFIsin Haiti hire staff that more closely resemble and come from, even if ageneration removed, the racial group (Black) and economic class (poor)of MFI clients in Haiti. Hossein (2014, p. 49) suggests these cultural andstaffing considerations result in “borrowers [that] trust microfinance asan institution and they also value the work of the people working insidethese institutions”.

3. Methodology & Local ContextIn May 2013 and June 2014, the author spent a total of 17 days with

HAPI-Kredi staff and clients. Extensive field interviews were conductedwith staff and clients; local day-markets in Mizak and Ridore (both inLa Vallee) and nearby communities were also visited. The staff interviewswere conducted at the office of HAPI-Kredi included a range of topics fromgeneral operations, mission, strategy, tactics, and technical considerations(e.g., operations manual development).9 Two HAPI board members (oneHaitian-based and one Michigan-Based) were also consulted as part ofthe research process with a greater focus on mission and operations. InMay 2013, twenty HAPI-Kredi clients were interviewed representing atthe time over 75% of current clients and nearly 40% of current and pastclients. These client interviews were followed up with another set of teninterviews conducted in June 2014. Most interviews were conducted at thehome or place of business of the client with the assistance of a translatorembedded in the local community.

Interviews followed a structured interview guide, adapted from pre-vious field research conducted in Central America (Pisani & Yoskowitz,2012, 2004), containing 85 questions focused in 3 sections: 1) the businessand one’s work in the business; 2) loan information; and 3) demo-graphics, both respondent and household. On average the interviewslasted between 1 and 2 hours and typically included a brief tour of themicrobusiness.

HAPI-Kredi serves Mizak, a primarily rural-based population of about15,000. Mizak is part of the larger district of La Vallee, with an area pop-ulation of about 35,000. The region is estimated to be 97% rural withhouseholds spread over a score of rural hamlets (IHSI, 2012). Like muchof Haiti, this region relies mostly on subsistence agriculture and smalloccasional markets. These markets and region are populated by perhapsas many as 1,800 microbusinesses; though both men and women possessmicroenterprises, the marketplaces are generally populated by a greaternumber of female microenterprises engaged in selling necessity foodstuffs(rice, beans, cooking oil, etc.).10 Infrastructure is poor (i.e., roads) or non-existent (i.e., municipal water). Schools exist, but are the domain of thosefamilies who can forgo the opportunity cost of children not working. Ontop of lost child labor are added the actual costs of school attendance in-cluding tuition, school uniforms, and school supplies. Literacy rates hoveraround 50% for the nation, perhaps lower for Mizak. There are signs of

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modernity in Mizak, however, where cellular phones and rural taxis (themotorcycle) abound.

While most residents own their self-built housing, food security is amajor concern. Most families are only able to provide one or two mealsa day for household members and very few households have more thana week’s supply of rice and beans, Haitian food staples. While economicactivity persists just above a subsistence level in Mizak, there are morerobust local markets nearby in Ridore or further away in Jacmel.

4. Results & DiscussionThis section reports findings in sub-sections, one focused upon HAPI-

Kredi, the microfinance institution, and the other focused on the inter-viewed microenterprises associated with HAPI-Kredi.

4.1. HAPI-Kredi- The Organization

This sub-section contains the following areas: organizational origins,organizational background, timeline, core product, employees and orga-nizational culture, financial situation, and competitors.

4.11. Organizational Origins of HAPI-Kredi

The actual creation of HAPI-Kredi came after the 2010 earthquake whenHAPI was provided a donation for food distribution in June 2010. HAPIrequested the donor to re-direct those funds to provide microloans becausethe earthquake destroyed many microbusinesses or left many without themeans to “restart” their lives. At the direction of the HAPI director inMichigan, the focus of the loans was to be directed toward the poor andextremely poor, primarily women, who demonstrated a viable business orbusiness idea.11 This target market is essentially un-bankable within Haiti’sformal banking sector and has few credit alternatives. Locally, womenare the “poto mitan” or mainstay of the family, providing daily food andthe means for children to go to school and exit crushing poverty. In essence,HAPI chose the dignity and productivity of “teaching her to fish” ratherthan contributing to a cycle of charitable dependency (“giving her a fish”)with HAPI-Kredi start-up.

4.12. Organizational Background of HAPI-Kredi

HAPI-Kredi is a very small budding microfinance institution focusedupon female empowerment. Its parent organization HAPI, foundedbi-nationally (based in La Vallee, Haiti and Michigan, United States) in2006, is dedicated to the principle of economic empowerment for ruralwomen in Mizak located in southeastern Haiti. HAPI12 engages localwomen in fair trade artisan production where most of their output—paintings, hats, purses, greeting cards, dolls, jewelry, journals, and

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knick-knacks—is sold in the United States. HAPI has since expanded toprovide nascent medical care through the introduction of baby wellnessprograms, including pre-natal care and a facility to give birth, witha nursing and physician station (health clinic13), and pharmaceuticalrepository (completed in early 2015), and engagement with youth througha weekly PeacePals program.14 Local computer training and English as asecond language classes began in 2014.

More broadly, HAPI engages the Mizak community through thepartnership with a local pastor and the involvement of the Methodistfaith-based community from West Michigan. HAPI is a recognizedministry available for charitable church giving, a major source of HAPIfunding, by the West Michigan Conference of the United MethodistChurch and the United Methodist Committee of Relief.15 So HAPI-Kredibegan with the goal of serving the “poorest of the poor” in a regionof Haiti in which the parent faith-affiliated NGO already operatedand received support—spiritually, financially, and solidarity/missionexchanges—locally and abroad.

4.13. HAPI-Kredi Timeline

Highlights for the years 2010–2014 appear in this sub-section. In thelate fall of 2010, HAPI-Kredi began with a very modest preliminary capi-tal endowment (under $5,000) but an ambitious agenda of providing mi-croloans. During this time period, the initial capitalization of HAPI-Krediwas made available and a local director was hired. The first director wascharged with finding suitable clients to provide $75 micro-loans at belowmarket interest rates (3% per month).16 The director’s salary was fullysubsidized by HAPI.

From 2011–2012, HAPI-Kredi and the first director were able to reach26 clients in the Mizak community. However, things did not go smoothly.Relatively few loans were made in the region and those that were madewent mostly to enterprises that were fully able to repay a business loanrather than to those who met the target market: poor women with a vi-able microbusiness or business plan. The parent organization continued tosubsidize the salary of the single director/loan officer of HAPI-Kredi andprovided tuition reimbursement (to study accounting). In return, the firstdirector absconded with or wasted about half of the start-up funds. Thisdeceit was uncovered in late 2012 and by early 2013 the first loan officerand director was terminated.

In January 2013, a new loan officer, Toussaint, was hired. Toussaint, aloyal member of the HAPI family (his mother is a long term member andartisan of HAPI), became the new loan officer for HAPI-Kredi and a tem-porary director, Emmanuel, was retained to straighten out the books fromJanuary through June. Emmanuel, a university graduate with prior expe-rience working for Fonkoze (a leading microfinance institution in Haiti),established a set of bookkeeping materials, including the first draft of an

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operations manual. With two people working in HAPI-Kredi, financialchecks were put into place including a third check with the bookkeeperfor the parent organization, HAPI. During this period of transition, Tou-ssaint met with all existing clients to discuss the personnel changes inHAPI-Kredi and, with Emmanuel, documented the status of old loans andcurrent loans. With the help of outside unpaid consultants, business work-shops were held in May 2013 to assist current and prospective clients buildtheir microbusinesses. Also by May, Toussaint and Emmanuel had a han-dle on HAPI-Kredi’s information and operations. Emmanuel, slow andmethodical, was honest but distant in the office and reluctant, perhapseven reticent to leave the office and enter the field to meet with clientsat their place of business or home. In June, Emmanuel left to undertakegraduate study in Canada.

Toussaint’s popularity in the local community restored credibility toHAPI-Kredi. His salary of $125 a month was a point of contention as thedirector earned twice what he earned. This disparity was rectified in late2013 with an increase in his monthly salary to $220. To supplement hissalary, Toussaint has a small window installation business on the sidethat more than doubles his monthly earnings. At this time, Toussaint feltit was his personal mission to help move forward HAPI-Kredi, in a way togive back to his local community. By June, HAPI-Kredi was stabilized andready to make new loans with an experienced loan officer (Toussaint) anda newly hired permanent director, Wideline Dalice (to replace Emmanuel).During the interview process, Wideline indicated that she was willingto go into the field to meet new and existing clients and make loans.17

Initially, Toussaint would train Wideline until she felt comfortable leadingHAPI-Kredi.

Toussaint set upon a path of quality client recruitment within theconstraints of the organization’s stated mission and available funds toloan. From the summer of 2013 to the summer of 2014, HAPI-Kredi added99 clients to its operational base. Also during this time, Toussaint hadtaken firm control of the reins of HAPI-Kredi with Wideline moving intomore of a financial oversight role—where she maintained appropriate,transparent, and timely record keeping. Transportation and mobilityconstraints were decreased with the donation of a new motorcycle in late2014.

New challenges arose in 2014. With the additional clients came a haltto new loans as the available capital for disbursement was tapped out.New infusions of capital were few and far between. Market saturationfor specific classes of microloans, such as funding market women sellinghousehold food products, became a concern. Lastly, leadership turnovervisited again upon HAPI-Kredi as Toussaint left amicably in late fall 2014to further develop his own business. In his place, Fabiola Benoit, longtime secretary with HAPI transitioned to become the new loan officer forHAPI-Kredi in October 2014.

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4.14. HAPI-Kredi’s Core Product

HAPI-Kredi produces a singular product at a below market interestrate18: a microloan. Microloans come from HAPI-Kredi in three sizes, $75,$125, and $250. All carry a monthly simple interest charge of 3%.19 Thelengths of the loans vary from three to five months. The loans utilizesocial collateral for repayment insurance whereby loans are provided togroups of three people, each guaranteeing each other’s loan. An additionalincentive to repay is a 15% loan holdback that is issued to the borrower asthe last loan repayment was made. Repayment intervals generally occuronce a month at the office of HAPI-Kredi.

For example, three market women form a group. These women knoweach other through family and business interactions and agree to work to-gether to access microcredit. This group would apply for individual loansof $75 each, with each person guaranteeing the repayment of all membersof the group. That is, if a member could not repay, it was incumbent uponthe other group members to repay for her. The penalty for non-repaymentwas exclusion from future loans for the entire group; however, temporaryrepayment delays incurred a small financial penalty (fine). The originaldisbursement is $75 minus the 15% holdback or $63.75. The individual $75loans are repaid in monthly or biweekly installments over a three monthperiod. In all, $81.75 is repaid by the end of the loan period if the loanis repaid in full (without penalties). With the last payment, the 15% loanholdback ($11.25) is disbursed. This loan holdback serves not only as amethod to incentivize complete loan repayment, but as a method of forcedsavings. Once the loan is fully repaid by the group, the group could befinished with HAPI-Kredi, access another round of $75 loans, or step upto $125 loans. The $250 loans are reserved for holdovers from the first twoyears of HAPI-Kredi operations for non-target market clients who havebeen excellent clients in order to maintain “the peace” in the communityafter the HAPI-Kredi embezzlement scandal.

4.15. HAPI-Kredi’s Employees & Company Culture

HAPI-Kredi has two fulltime positions: a loan officer and director.Wilfrid, Toussaint, and Fabiola have served as HAPI-Kredi’s loan officers.The principal duties of the loan officer are to attract new clients andservice existing clients. When Toussaint was employed with HAPI-Kredi,he served as the English language liaison between HAPI-Kredi and itspartners in Michigan. Fabiola is in the process of learning English, buthas little English proficiency. Wideline is the nominal director who spendsabout half of her time with HAPI-Kredi as a manager, record keeper, andoccasional loan officer. With the remainder of her time, Wideline servesas the primary accountant for HAPI.

As HAPI-Kredi is located in the building that houses HAPI, there ismuch interaction between the two. Additionally, the HAPI building islocated adjacent to the home compound of the Haitian general director

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and Haitian HAPI board member (who is one of eight board members20).So the HAPI building and personnel are secure during the day and a nightwatchman is on duty during the night.

HAPI-Kredi personnel are infused with a passion to serve others, par-ticularly poor women. This has not always been the case, initially HAPI-Kredi also served those who were able to repay, but were not part of theespoused mission. In part, this could be a legacy of helping social net-works (those with means and those without), rather than conforming tothe mission of serving poor women with a viable business or businessidea.

Nonetheless, the staff is gaining capacity in the microfinance field withon the ground experience and occasional volunteer consulting coordi-nated through the executive director of HAPI (based in Michigan). Trans-parency and checks and balances are now the organizational norm forHAPI-Kredi. Language barriers persist between many board members,volunteers, and HAPI staff. As of January 2015, only one HAPI affiliatepersonnel is English-language capable, the Haitian general director andHAPI board member, and nearly all organizational forms, data, reports,and manuals are produced in Haitian Creole which is inaccessible to theEnglish speaking board members, volunteers, and donors. The process oftranslation of necessary information to English is slow, but necessary forthe bi-national organization.

4.16. HAPI-Kredi’s Financial Situation

Early in its existence, HAPI-Kredi had been rocked by slow growth,competition, theft, loss, and mission drift. All of this came to a head at theend of 2012 and was partially addressed by terminations and new hires in2013. In June 2013, HAPI-Kredi had $10,000 on the books available to loanand 25 active clients across eight groups of three and one individual loan.Perhaps as many as ten previous micro-business loans, all made prior to2013, needed to be written off the books.

Currently, HAPI-Kredi is not financially self-sufficient. The ultimate in-ternal financial goal for HAPI-Kredi is to achieve financial sustainability.The primary costs associated with HAPI-Kredi operations include staffsalaries ($350 monthly), operational costs ($100 yearly21), and overheadcharges (normally equaling 15% of loan profits, but can be as high as 85%depending upon the financial needs of HAPI). In addition, discussion isunderway to add services, such as literacy training and business work-shops for HAPI-Kredi clients.

Given this information, best estimates are that HAPI-Kredi must con-tinually service roughly 200 clients a year to achieve self-sufficiency orbreak even.22 Yet HAPI-Kredi is currently constrained to reach this oper-ational goal because its total loan portfolio (e.g., money available to lend)is $7,000, the amount reduced overtime by scandal and bad loans. Hence,growing the capital fund base available for loans (to at least $15,000) is

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imperative to the goal of financial sustainability. In this sense, demand formicrocredit from HAPI-Kredi outstrips the supply of loanable funds. Andseveral nearby communities, especially the market vendors at Ridore, arevirtually an untapped source of scores of new clients. The goal of eventualself-sufficiency may seem distant and elusive, perhaps even unobtainablewithout an infusion of new capital.

4.17. HAPI-Kredi Competitors

There are no formal banks in the Mizak area. The nearest large town,Jacmel (population 40,000), is about 20 minutes away from Mizak by mo-tor vehicle; Jacmel does have a basic financial infrastructure including aformal Haitian bank, Sogebank. However, the formal banking system isuninterested in funding small rural and informal microenterprises. HAPI-Kredi’s primary competitor in the region is Fonkoze, the largest nationalMFI in Haiti serving more than 50,000 borrowers. Fonkoze, establishedin 1994 is a full service MFI (Tucker & Tellis, 2005); it charges a monthlycompounded interest rate of 5%. A small credit union, Caisses Populaires,has a small microcredit operation in La Vallee and charges a monthlycompounded rate of 3% with no additional services provided. In Mizak,borrowing options to start and sustain business involves the 6Fs: founders,family, fans, friends, fools, and microfinance. And for microfinance inMizak, the choices are essentially Fonkoze, the premier MFI in the nation,and HAPI-Kredi, a Mizak-based struggling MFI.

4.2. HAPI-Kredi Clients and Microenterprise Development

Reported in this sub-section is a description of the client interviews re-volving around respondent demographics, microbusiness characteristics,and expanded case studies.

4.21. Respondent Demographics

Women comprise 90% of the 30 HAPI-Kredi clients interviewed(see Table 1). By design, HAPI-Kredi focuses mostly on female en-trepreneurs who come from impoverished households. The average agewas just over 50 years, though the ages ranged from 24 to 70. The re-spondents averaged just over 3 years of formal education collectively,however, half of the interviewees had no formal schooling at all, 10% hada high school education, and the remainder had between 1 and 9 yearsof schooling. All but one respondent live in a home they owned with anaverage of 6.3 people residing in the home. The sole non-home owner wasliving in a relative’s home in Mizak after her home in the capital city wasdestroyed in the 2010 earthquake.

It is not uncommon for Haitians to have relatives living abroad whosend financial help back to family in Haiti; among the interviewees 22.7%

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Table 1: Respondent Demographics (n = 30)

Variable Value

Gender (%)Female 90Male 10

Mean Age (range, median) 50.9 (24–70, 53.0)Mean Years of Education (range, median) 3.3 (0–14, 1.0)Mean Number of People in Household (range,

median)6.3 (3–13, 6.0)

Home Ownership – Yes (%) 96.7Receive Remittances

Yes (%) 22.7Mean Amount of Remittances per Year for

Remittance Receivers ($US)460

Quality of Life Indicators – FoodMean days of Rice on hand (range, median) 8.0 (0–30, 5.0)Mean days of Beans on hand (range, median) 11.2 (0–45, 2.5)Number of Meals Eaten over Last Two Days(before interview)

5–6 Meals (%) 22.73–4 Meals (%) 54.51–2 Meals (%) 13.60 Meals (%) 9.1

Mean Number of Days over the Last Month(before interview) Without Eating Food (range,median)

2.3 (0–20, 0.0)

Quality of Life Indicator – Health CareNo Resources to Buy Medicine of Go to theDoctor (%)

13.6

Only Go to Doctor in Case of Emergency (%) 54.5Occasionally Have Resources to BuyMedicine/Go to the Doctor (%)

9.1

Medicine/Go to the Doctor (%) Have EnoughResources to Buy

22.7

received family-origin remittances averaging $460 per year. This moneycushioned income shocks and permitted the families to send their childrento school. Two quality of life indicators—food and medical care—reveala high degree of food and health care insecurity. Just over three-quartersof the respondents ate 2 meals or less per day and average just over oneweek of food staples on hand. Food quality was measured by the con-sumption of specific protein-laden foods over the last seven day period.The respondents reported eating on average the following foods over this

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Table 2: Microbusiness Characteristics (n = 30)

Variable Value

Business Type (%)Basic Foods & Household Cooking Supplies 57.1Animal Husbandry (chickens, pigs) 3.3Agricultural Seeds 3.3Charcoal 3.3Clothing 6.6Cosmetics 6.6Fruit Re-seller 3.3Lumber 3.3Shoes 3.3Snacks/Food Stand 6.6Gasoline 3.3

Mean Age in Years of Microbusiness (range,median)

16.5 (1–40, 15.0)

Mean Weekly Business Income ($US) (range,median)

19.68 (0–60, 12.25)

Parental OccupationFather (%)

Self-Employed Farmer 75.9Other Self-Employed 17.2Unknown/Did Not Work 6.9

Mother (%)Self-Employed Farmer 37.9Self-Employed Merchant 55.2Unknown/Did Not Work 6.9

Loan Cycles – Average Loan Size ($US)Cycle 1 (n = 27) 85Cycle 2 (n = 16) 119Cycle 3 (n = 9) 142Cycle 4 (n = 4) 266Cycle 5 (n = 3) 292

period: beef or goat or pork, 1.7 times; chicken or turkey, 0.6 times; cheese,0.2 times; and fish, 0.6 times. Not only are most respondents not eatingsufficient amounts, but they are not eating much protein. Lastly, just underone-quarter of the interviewees were able to regularly access health care.

4.22. Microbusiness Characteristics

More than half of the interviewed microentrepreneurs owned a basicfoods and household cooking supplies business (see Table 2). Essentially,these small business concerns sold household food necessities such

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as rice, beans, cooking oil, sugar, flour, corn and differentiated themselvesby stall size and volume and additional secondary items sold such ascookware, coffee, bouillon cubes, spaghetti, detergent, vegetables (oftenhome-grown), and gasoline. Typically these microbusinesses sold fromtheir homes, or a separate roadside stall at their home, during non-marketdays and sold from the local markets on market days, which typicallyoccur on Wednesday and Saturday in Mizak and Friday in Ridore andDaed. Oftentimes, these small-scale merchants only sold at the marketwhat they (and helpers) were able to physically carry with them, somehowever had access to burros or motorcycles (via taxis) to assist them inbringing their goods to market. None had access to a vehicle, but somenon-interviewed sellers in the marketplace do.

Five other microenterprises resold goods itinerantly, from their homes,and in the marketplace included clothing, shoes, charcoal, and cosmetics(one merchant sold both cosmetics and clothing [underwear]). Anothermicroentrepreneur set up a makeshift stall selling snacks to children nextto the lone public school compound in Mizak during school hours whileanother cooked fried foods in her food stand alongside of the primaryroad in and out of Mizak. One microentrepreneur specialized in sellinggasoline, primarily to motorcyclists (mostly taxis) in small containers suchas used plastic soda pop bottles, in a remote stretch of road adjacent to herhome. When she had chickens to sell, she would supplement her gasolinestand with fresh poultry. One microbusiness focused on the productionof pigs, chickens, and eggs sold from their home or sold wholesale tomarket vendors who would prepare the animals for home consumption,often in smaller ready to cook pieces. Another microbusiness specializedin reselling agricultural seed for planting season and another commis-sioned sawyers to saw lumber planks from hulking tree trunks for resale.Lastly, one microbusiness collected fruits from La Vallee and resold themat market in Port-au-Prince.

Most of the microentrepreneurs interviewed were experienced inrunning their business enterprise with an average business age of over 16years, though 4 businesses had not yet reached 3 years of operation, a notedwatershed of business stability and longevity (Amoros & Bosma, 2014).Self-reported weekly business income average $19.68 with a range of $0 to$60. Five (or 16.7% of) microentrepreneurs reported earning $1 or less perday in their business operations. The largest group, basic foods and house-hold cooking supplies, averaged weekly earnings of $26.15 (standarddeviation of $19.74). However, there was much dispersion in earnings with2 of 10 earning $1 a day or less, yet 7 in 10 earned $20 or more per week witha top performer earning $60 per week (another firm in this category hadweekly earnings of $12). Only one other business, the combined cosmeticsand underwear merchant, earned $60 weekly. The accumulated businessacumen of both of these relatively high earning individuals was clearlyevident in the interview and business operation. The entrepreneurswith the lowest earnings were involved in charcoal ($3 per week),

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cosmetics only (no sales in the previous week, hence no earnings), the snackseller adjacent to the school ($7 per week), and the fried food stand owner($5 per week). When business income is considered with the number ofpersons living in the home, per capita weekly business income rangesfrom $0 to $15.00 per person or $0 to $2.14 per person per day. Only3 microbusinesses return daily average per capita household earningsgreater than $1 to $2, these include two basic foods and household cookingsupply merchants and the cosmetics/underwear merchant.

Business acumen may also be passed down by generation. Hence,the interviews revealed the occupation of both the microentrepreneur’smother and father, if known. In both cases, respondents were able toidentify nearly all of their parental occupations as either a self-employedfarmer or other self-employment, 6.9% were unknown or did not work.Microentrepreneurs with self-employed parents (e.g., merchants) outsideof farming earned, on average, more than those self-employed in farming.This difference was statistically significant for mother’s occupation, butnot for the father’s occupation. Earnings for the microentrepreneurs in thepresent study with a self-employed mother outside of farming averaged$25.96 per week versus $10.50 for self-employed mothers in agriculture(ANOVA, F = 4.548, p = 0.047). As most microentrepreneurs in this studyare women, the passing down of business knowledge from mother todaughter helped create an environment that significantly enhanced busi-ness earnings.

Loan cycles too displayed a difference (though not significant) in earn-ings where those microenterprises in their first through third loan cyclesaveraged more than $23 per week in earnings and those enterprises in theirfourth and fifth loan cycle averaged $7 and $16 in earnings per week, re-spectively. Two enterprises yet to receive loans earned in between ($9.50)those in their fourth or fifth loan cycle. Longer termed clients may sufferfrom adverse selection under the previous director of HAPI-Kredi wholeft the organization after scandal. Three microentrepreneurs were eitherin arrears or default in their loan payments.

Generally, while these microbusinesses receive credit, they also are in aposition to provide credit. For their best customers, 65% of the microbusi-nesses offer credit, 35% do not. For those that do not offer credit, theirweekly business incomes surpass those that do, $21 versus $19, respec-tively. It seems that credit at the bottom of the pyramid for consumptionsuppresses earnings and that microenterprises that do not provide creditachieve higher performance (if not goodwill from clients who may be theirneighbors [a difficult and sometimes ostracizing decision in a culturallycollective society]).

No microenterprise interviewed operates in the formal sector. How-ever, on occasion, a handful of microentrepreneurs indicated that vagrantgovernment personnel would attempt to extort payments for the right tosell (e.g., a permit, agricultural certification for animals) in the marketplace.

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4.23. Case Studies

The following extended case studies provide a more intimate view ofthe microbusiness landscape in Mizak and highlight relatively successfulmicroenterprise cases.

4.23.1. Basic Foods and Household Supplies Vendor – Andrelie

Andrelie, 53 years-old with one week of schooling, sells from a mar-ket stall in the Mizak marketplace, something she has done for the past20 years. Andrelie typifies many of the current loans HAPI-Kredi has madein the La Vallee region. As of May 2013, her market stand has a potpourriof household goods for sale: flour, onions, corn, cooking oil, rice, sugar,soap, candy, animal feed, and gasoline (available in old soft drink bottles).When she has chickens, pigs, or goats to sell, she will bring those, butdoes not have any live animals to sell on the day she was interviewed. Allof these items are displayed on a couple of old plank boards and on theground. On the two market days in Mizak, Andrelie takes her goods forsale via donkey. Otherwise she sells from her home each day but Sunday.All in all, the value of her inventory hovers around $75 and when the mar-ket is not in session, her home doubles as a local convenience store. Shebegan her business with $12.50 in goods and has steadily built it up overthe past 20 years. At the market, she employs a helper and moves aboutone-third of her inventory on a weekly basis. Andrelie likes the prospectsfor her market sector saying, “People will always eat food.”

Andrelie serves about 20–25 regular customers, offering credit to her10 best clients.23 Like most microbusinesses in the region, she operatesinformally. She is happy with her business, though she becomes ener-gized when sales are good. Lately, more competitors have entered intothe marketplace squeezing sales volumes. In the past, Andrelie borrowedfrom Fonkoze (in rounds of $75, $125, $300), but switched to HAPI-Kredibecause of its lower costs to borrow and home base in Mizak. Andrelieis currently waiting for her second loan cycle with HAPI-Kredi, she hasalready paid off her first $75 loan. As an experienced borrower, Andrelieprefers an individual loan product, but understands the need for socialcollateral within the microfinance industry. Andrelie is stuck in a creditmarket constrained by social collateral where microentrepreneurs suchas her may have the wherewithal to navigate individual credit, but notthe institutional banking infrastructure to meet her needs outside of themicrofinance arena.

Andrelie is the primary breadwinner for a family of six and she is oneof the more successful vendors in the market, averaging $25 in profitsper week. Her husband is a self-employed farmer (like her parents) whoprovides in-kind food (corn and beans) support for the family. While theyall had not missed a day without a meal in the last month, in toto, theyaverage 1 to 2 meals a day as a family. On occasion, they are able to

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supplement their rice, bean and bread diet with beef one or two timesa week. Andrelie does not have any health insurance and only a verysmall emergency fund if there were a shock to the family. Fortunately, herhouse has a concrete floor allowing for a relatively more sanitary homeenvironment. No one in Andrelie’s immediate family has emigrated fromHaiti to the US to send back remittances.

4.23.2. Basic Foods and Household Supplies Vendor – Antoine

Like Andrelie, Antoine is a seasoned market seller in Mizak. She beganworking in the market fulltime at age 14 learning from her mother andhas continued to sell over the past 40 years. At the Mizak market twice perweek, Antoine sells food and supply staples (rice, cooking oil, sugar) andoffers garlic, spaghetti, yams, coffee, mangoes, bullion packets, other foodsupplies, detergent and beans and corn when harvested from home. Onmarket days, Antoine has her stall set up by 10am and remains until theend of the market day at 5pm. On Mondays, Tuesdays, Thursdays, andFridays, she sells from her home and takes Sunday off. All told, Antoinehas about 40 regular customers, 25 of whom receive credit. Antoine hasa daughter that helps her sell at the market and at home and she too islearning the business.

Antoine managed to obtain 6 years of schooling and understands theimportance of school where her two youngest children are still enrolled(ages 21 and 16). Antoine earns about $22.50 per week through her mi-crobusiness which supports a household of 5. Antoine is single and thesole breadwinner in her household; she is fortunate to have grown childrenworking in the United States who are able to send around $500 per year inremittances that is used to pay for her youngest two children to completeschool and as a buffer for potential shocks to the family (such as emer-gency medical care). Antoine’s household enjoys a relative high degree offood security for the region with 15 days of rice and 30 days of beans onhand. Additionally, Antoine is able to provide a higher quality diet forher household as they consume beef or chicken 5 times per week spreadover two meals per day. On occasion, Antoine is able to provide cheese, afood luxury, with her home meals. She also has access to a cellphone andprimitive solar electricity at home, but no running water.24

Antoine travels to the regional hub city of Jacmel on Sundays to buyher weekly inventory to resale in Mizak during the week. She uses her loanfrom HAPI-Kredi to buy in Jacmel and sell during the week—essentiallyHAPI-Kredi is her credit line to buy lower and resell higher. Antoineis in her fifth loan cycle with HAPI-Kredi. She switched to HAPI-Kredibecause of their lower interest rates as compared to Fonkoze where sheused to borrow money to increase her cash flow to buy and resale (andoffer credit to her customers). Antoine repays her loans on time, serves as asolidarity group leader, and expects to borrow again from HAPI-Kredi inthe future. Some forty years ago, she began business operations with $50;

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today her inventory has grown to nearly $90. Recent access to microfinancein the region has permitted growth in competitors; Antoine estimates thatthere are 40 other market stalls similar to hers and 5 nearby homes thatsell basic foods and household supplies out of their homes like she does.Antoine believes this increased competition has begun to squeeze profitsin this market segment. Antoine’s immediate plans are to fix a hole in herroof and better secure her storage room where she keeps her merchandisefrom spoilage and theft.

4.23.3. Clothing Vendor – Simone

It is a Monday and Simone sits comfortably at her house speakingabout her clothing resale microbusiness. If it were a Wednesday, Fridayor Saturday, Simone would have been selling at one of two local mar-kets: Mizak or Ridore. Only 35 years old, Simone has already worked 20years, the last 7 as a microentrepreneur selling mostly clothing (e.g., shirts,undergarments, socks, hair ties, perfumes, and lotions). Simone firstgained market experience buying and selling animals and started herclothing business with $50 in family savings. She demonstrates how allof her $140 inventory fits in 2 large plastic bags that she carries to marketon the back of a motorcycle taxi. Simone acquires her inventory throughastute purchases made in the capital of Port-au-Prince once every 3 weeksor so. Minimizing traveling expenses to $6 (or 5 days’ earnings), Simonetakes the bus early in the morning to the capital, packs her own lunch,makes targeted purchases, and returns late in the evening.

Simone works on average 6 days per week, half of which is spent at themarket. In Mizak, Simone has about 30 regular clients and about 50 morein Ridore. Of her 80 or so clients, 15 of her most trusted clients receivecredit from Simone. On a typical market day, she leaves her home by taxi(round trip cost is roughly $1) about 7am, sets up her market stand by8am and sells until about 4pm in the afternoon before returning home. Ona typical day, she may sell about $12.50 worth of clothing earning a littleover $3 after expenses (or about $9 for the week). Simone usually pricesher goods cost plus 20% to 30% depending upon market demand and onher two competitors. Other than travel and inventory restocking expenses,Simone pays her husband a nominal wage to help when needed. Whennot needed, Simone’s husband teaches at the local public national schoolwhere he receives an income of approximately $10 per week, and perhapsas important, he receives medical and pension benefits for the family ofseven.

Like her husband, Simone also went to school and she made it through14 years of formal education. Supplementing her formal education, Si-mone grew up in a family in which both her mother and father wereself-employed outside of agriculture. Simone’s father was a carpenterand Simone’s mother was a vegetable vendor. Undoubtedly, these self-employment experiences were handed down to Simone.

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At the time of the interview, Simone was waiting for the disbursementof her first HAPI-Kredi loan of $75. Simone is not new to microcredit; shehas previously taken out and repaid 7 loans over 5 years with Fonkozetotaling $250. Simone switched to HAPI-Kredi because of the lower in-terest charge and the smaller solidarity group loan guarantee model of3-members (versus a group of 5 with Fonkoze). Simone believes a 3 per-son group is more manageable where she can keep better track of her so-cial collateral responsibilities and assist her sister borrowers in improvingtheir own microbusinesses so as to avoid financial repayment obligationson behalf of non-performers within the group. Her only misgiving aboutHAPI-Kredi is its policy of holding back 15% of the original loan until thefull loan has been paid off. With her $75 from HAPI-Kredi, Simone wantsto add seasonal products to her clothing microbusiness, such as shoes forgraduation; cups, bowls, silverware and plastic flowers for Mother’s Day;and jeans, shoes, and slippers for Christmastime.

Overall, Simone’s household does not experience extreme poverty; theyall are able to eat at least twice daily, and enjoy beef, fish, or chicken at least4 times per week as well as cheese twice weekly. Additionally, Simone’sfamily has in stock 15 days of rice and 30 days of beans and is able to visitthe doctor for both emergency and health prevention needs. Simone hasaccess to a cellphone, a cement-floored home with a water cistern, but noelectricity. Though they do not receive remittances from abroad, havingboth parents earn an income, with the husband doing so in the formalsector, allows for greater financial, food, and medical security.

5. ConclusionFrom the examination of HAPI-Kredi, several insights emerge. Start-

up MFIs need more than good intentions to succeed. HAPI-Kredi beganwhen a single donor sought to assist the Haitian people after the dev-astating earthquake in 2010. The benefactor’s small donation to HAPIwas re-routed from emergency food aid to financial assistance for smallmicrobusinesses impacted by the earthquake in HAPI’s home district ofMizak. A short-term one time infusion of money was converted into along-term financial commitment via microcredit to microentrepreneurs inMizak. While noble, this commitment meant the creation of a new sub-entity within the parent organization that was established through a crisisrather than careful institutional planning. Mission drift is common withindevelopment NGOs who want to respond, act, and make an impact andHAPI is no different.

This lack of planning, however, resulted in a very tumultuousbeginning for HAPI-Kredi in which it is slowly emerging from severalyears later. For example, careful planning before business launch wouldmore clearly: establish mission, evaluate business viability (both for theinstitution and the target market), leverage learning from others, andidentify key personnel (able to communicate locally and internationally).Because of the absence of planning, HAPI-Kredi was not able from

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its start to determine who it should serve (e.g., misalignment betweenmission and action, market segment saturation avoidance), at what levelit would serve (e.g., insufficient loanable funds, auxiliary training, andappropriate personnel), and how long it could serve (e.g., scalabilityand sustainability). Furthermore, lack of initial financial controls andmonitoring led to scandal and lowest in the market loan rates createdpent up demand—both creating unplanned organizational pressures. Yet,HAPI-Kredi’s rapid client growth in 2013 and 2014 may be attributed tothe dynamism and skills of and attention to motivated staff, indicatingthe importance of aligning mission with key personnel.

In part as a result of this planning void, there is a current tension be-tween client retention and client graduation. HAPI-Kredi clients not onlydesire the lower rate of interest provided by HAPI-Kredi in the market-place (as operationalized by clients switching loan accounts from Fonkozeto HAPI-Kredi), but also display a customer loyalty to continue workingwith their home-based NGO for their microbusiness financing needs. Yet,the primary mission of HAPI-Kredi is to provide early and small scalefinancing for female-owned microbusinesses, not long term business fi-nancing that grows with the business.

The study of the 30 microenterprises and the three case studies ex-hibit the presence of both necessity and opportunity entrepreneurship inMizak. According to Muhammad Yunus, founder of the Grameen Bankand Nobel laureate for his work in microfinance (2003, p. 207), “all humanbeings are potential entrepreneurs”. Yunus’ pronouncement reflects thecapacity of all to become entrepreneurs, but not why people become en-trepreneurs. Oftentimes in impoverished spaces like Mizak, entrepreneursemerge because of economic necessity and establish survival microenter-prises. Others, such as Simone, seize market opportunities and become en-trepreneurs by choice. Generally, opportunity entrepreneurs outperformnecessity entrepreneurs. From the case studies, we understand that ad-vancing and nurturing opportunity entrepreneurs may be derived frompassing along entrepreneurial knowhow from generation to generationand may be facilitated by microcredit and business training and sharing.

Beyond the scope of this present paper, future research may focus onthe bundling of HAPI products as a holistic approach to development(e.g., health care, literacy training, and microcredit), the role and extent ofgenerational entrepreneurship in facilitating necessity versus opportunityentrepreneurship, and comparative approaches to MFI start-up andsustainability.

In summary, HAPI-Kredi is a new microfinance organization in ruralHaiti in its early stages of development. Established out of the tragic earth-quake of 2010, HAPI-Kredi has sought to extend the overall footprint ofits parent organization, HAPI, in the community. HAPI-Kredi has beenslowed by many of the challenges associated with development in Haiti:poor infrastructure, lack of resources, and corruption. Within its first fouryears of existence, HAPI-Kredi still lacks financial viability and relies on

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a heavy subsidy from HAPI. Nevertheless, HAPI-Kredi has begun to pro-fessionalize its processes and has gained recent momentum. In early 2015,HAPI-Kredi serves over 130 clients, but is constrained by its capital stockin providing loans to all clients simultaneously and staff turnover. Withinits current context, HAPI-Kredi would need to add another 100 clientswith the same level of staffing to achieve sustainability in the future—apossible future even in the presence of local MFI competition. This drivetoward financial sustainability will challenge HAPI-Kredi as it seeks to doso while maintaining its espoused mission of helping poor women achievebusiness ownership and success through microcredit.

Within Mizak, there are many existing microbusinesses that benefitfrom microcredit. Successful female microentrepreneurs, illustrated in thecase studies, may serve as role models to others to improve their dailyexistence through small business ownership. HAPI-Kredi may assist ex-isting targeted microbusinesses and viable start-ups, particularly thosewho come from entrepreneurial families, while being wary of saturatingthe marketplace in particular business sectors. Additional training andworkshops may also assist in microbusiness development and businesscapacity building. Though the future does not appear overly rosy forHAPI-Kredi and its client base, it does appear to offer some hope with thedevelopment intervention of targeted microcredit to microbusiness at thebase of the pyramid.

Endnotes1 The author would like to thank HAPI and HAPI-Kredi for access, trans-lation, and assistance in completing this article, especially Reginal Zamorand Berline Pierre in Haiti and Valerie Mossman-Celestin in Michigan.Additionally, the author would like to thank the participants of the 2014annual conference of SECOLAS for their helpful insights as well as thecomments and suggestions of two anonymous reviewers.2 All monetary figures are reported in US dollars unless otherwise noted.3 All Haitian names used within this article are pseudonyms.4 This section relies heavily upon Philippe Girard’s Haiti: The TumultuousHistory- From Pearl of the Caribbean to Broken Nation (2010) and LaurentDubois’ Haiti: The Aftershock of History (2012).5 In 2012, Haiti ranked 165 of 174 countries as one of the most corruptgovernments (Transparency International, 2012).6 These statistics are derived from the Inter-American DevelopmentBank report, “Microfinance by the Numbers” (http://www.iadb.org/en/topics/microfinance/microfinance-by-the-numbers,2450.html, ac-cessed April 1, 2015).7 Informal financial circles such as grouped-based voluntary rotating sav-ings and credit associations (or tontines) have a much longer history— andare more a cultural legacy (Hossein, 2014; Paul et al., 2012)—and are be-yond the scope of this study. See Fritzner (2009) for a detailed discussion

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on tontines (and its variants, sol and sabotay) in Haiti. A tontine in Haiti issimilar to a tanda in Mexico.8 Paul et al. (2012) provides a good historical overview and a listing ofMFIs operating in Haiti. Mix Market also displays a contemporary listingof MFIs in Haiti. As Haiti has a large rural population, networks such asKonsey Nasyonal Finansman Popile (National People’s Funding Council) areimportant partners in rural finance and development.9 The author also provided no cost pro bono consultative advice focusedon the MFI.10 This estimate is based upon a 2013 survey of HAPI-Kredi clients con-ducted by the author where households averaged 6.3 persons or about5,550 households in La Vallee. Furthermore, it is estimated in this samesurvey that about one in three households fosters a microbusiness otherthan or complementary to subsistence agriculture. Hence, there are esti-mated to be about 1,835 microbusinesses in the area. If at least half of thisnumber is female-led microenterprises, then there are roughly 917 targetready firms for HAPI-Kredi, an MFI with a focus on micro-lending tofemale-led microbusinesses.11 To determine poverty, Schreiner (2010) argues that a simple five questionpoverty scorecard (and its total) can correctly identify the likelihood ofhouseholds in poverty in Haiti. These five questions are: 1) what is thedwelling’s floor made of? 2) does the household have a toilet or latrine? 3)do all children ages 6–17 go to school? 4) how many plots of agriculturalland, forest land, pasture land, or gardens does the household use? and 5)does the household own a television? (Schreiner, 2010, p. 124).12 HAPI’s Mission reads: Haitian Artisans for Peace International worksto break the cycle of poverty, maternal and infant mortality and brokenfamily systems by changing the trajectory of individuals, families andcommunities. Focusing on community health, holistic education and eco-nomic empowerment, HAPI embodies the love and mission of Jesus Christ(http://www.haitianartisans.com, accessed April 1, 2015).13 Planned for mid-2015 is a micro-insurance program based out of thehealth clinic. For a subscription fee of $1 per month per person, residentsof Mizak may access basic health care at the health clinic free of addi-tional charges. This micro-insurance plan is open to La Vallee inhabitantsincluding HAPI-Kredi clients.14 See the PeacePals website for more information on PeacePals athttp://wppspeacepals.org (accessed April 1, 2015).15 The West Michigan Conference and the United Methodist Committeeon Relief have screened and approved HAPI as a Methodist-designatedcharitable organization where member United Methodist churches maysend donations and receive credit for congregational giving. Moreinformation may be found at: http://westmichiganconference.org/pages/detail/1973 (accessed April 1, 2015).

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16 While the below market interest rate was not initiated as a market pene-tration strategy, prospective clients certainly took notice in comparison toother MFIs in the region.17 Socio-economic class is an important marker in Haiti increasing the socialdistance among people. In contrast to cultural norms, the willingness ofthe director to meet customers outside the office met an organizationalimperative.18 The commercial lending interest rate in Haiti is approximately 20% perannum for those participating in the formal banking sector. The leadingmicrofinance organization in the country, Fonkoze charges 5% or moreper month. Hence the standard rate for microcredit is approximately5% per month for microenterprises.19 At one time, the interest rate was a compounded interest rate, but waschanged for ease of explanation to clients and monitoring by staff.20 In all, there are eight board members; three are located in Michigan(including the overall director of HAPI), two in Haiti, and one each inIndiana, Texas, and Alaska.21 Though this cost will rise for 2015 with the addition of a motorcycle,perhaps $45 monthly or $540 annually.22 This is calculated as Costs (fixed and variable [$426]) divided by revenueper client ($2.25) over a month’s time (equaling 189.3 clients).23 In a region where business financing is profoundly deficient, the pro-vision of customer credit by Andrelie illustrates the wretched state ofconsumer financing in Haiti.24 Most homes in Mizak secure water from cisterns that collect rainwater.Many households have water filters to purify the water for safe usage,most of which were donated through HAPI.

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Microfinance in Rural Haiti- A Case Study of Institutional Start‐Up & Microenterprise Development

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