> Posted by Hannah Sherman and Jeffrey Riecke, Project Associate and Communications Specialist, CFI

fi2020_antilogo1In terms of financial inclusion, Haiti has much to be excited about. That might come as a surprise as it is considered to have among the worst environments for financial inclusion efforts, at least according to the Global Microscope. In the 2015 Microscope rankings, Haiti was at the very bottom of the list. Though this 2015 score reflected great progress compared to 2014. In fact, Haiti’s score improved year-on-year more than nearly any other country. This was due in large part to the development of a national financial inclusion strategy. However, Haiti’s path forward, including the implementation of this national strategy, is less than straightforward.

Haiti is still very poor. More than three-quarters of the population lives on less than $2 a day, and about two-thirds are unemployed. According to the Global Findex, in 2014 only 19 percent of Haitians aged 15 or above had access to a bank account, compared with 51 percent across all of Latin America and the Caribbean. Nine percent of the adult population had formal savings in 2014 (compared with 14 percent regionally), and 5 percent were formal borrowers (compared with 11 percent in the region). Small and medium-sized businesses and microenterprises make up the majority of the country’s jobs, and their access to finance is extremely limited.

But in recent years, Haiti has achieved impressive advances in its policy, regulation, and enabling infrastructure. About a year ago the Banque de la République d’Haïti (BRH, the central bank) passed the national financial inclusion strategy, which was supported by the World Bank and other international organizations. Among the strategy’s priority areas are financial education and consumer protection. In July of last year, USAID and Haiti’s Office of Economic Growth and Agricultural Development announced plans to work towards expanding financial access in support of this strategy. Their effort focuses on harnessing partnerships across stakeholder types to pilot and develop interventions.

A core component of the national strategy was the creation of the country’s first credit reporting system, the Bureau d’Information sur le Credit. The system is still in its early stages, but already banks and NBFIs are required to report borrowing activity, and authorities are deciding whether or not to include data on other payments like utility bills. The creation of the credit bureau was a collaborative effort between the BRH and the World Bank, which helped develop the appropriate legal and regulatory framework to establish the system, as well as with the IFC and the Inter-American Development Bank.

In recent years Haiti’s central bank has improved its supervision capacity and monitoring of systemic risks and financial stability. An anti-money laundering and terrorism financing (AML/CFT) law was issued in late 2013.

Mobile money presents a huge opportunity in Haiti, as 60 percent of the population owns a device. The country had a shaky start with e-money, but it appears to be moving towards solid footing. In 2010, the Gates Foundation and USAID launched a $10 million initiative to kick-start mobile money in the country. The initiative, called HIFIVE, initially included incentives for the country’s mobile network operators (MNOs) to acquire active subscribers. The two biggest MNOs in the country, Digicel and Voila, met the Gates Foundation’s targets, with nearly 1 million individuals signing up for and actively using the mobile money services. During this time the mobile money market was lauded by experts as among the fastest-growing in the world.

However, following the receipt of the Foundation’s monetary incentives for meeting their targets, the MNOs promoted their services less aggressively, the relatively inactive subscriber base made it difficult to support a widespread agent network, and the gains that had been achieved were largely undone. Today, only about 60,000 people, or 0.6 percent of the population, are active mobile money users. Shortcomings cited for this result include cautious regulators (stemming in part from the country’s history with corruption and drug money laundering), inadequate market infrastructure, poorly-designed incentives for participating providers, and unnecessarily tough client screening rules.

Today, the mobile money market appears to be (however slowly) moving in the right direction. Digicel’s TchoTcho service makes opening an account extremely easy – just by dialing a code on one’s cellphone, one can activate a wallet that can hold up to $80. In September Digicel enjoyed a significant ramp-up in transactions when it set-up new incentives for its street vendors to join their mobile money system. The HIFIVE project is targeting partnerships with textile factories and larger companies to use mobile wallets for their payroll. Mercy Corps, which delivered relief payments via e-money following the 2010 earthquake, is promoting neighborhood savings clubs to adopt mobile money accounts. Such highly-targeted client outreach approaches offer a cost-effective alternative to the mass marketing efforts of the market’s early days.

Complicating Haiti’s mobile money progress, and financial inclusion more broadly, is the dysfunction of the country’s political system. As has become headline news, last October, an inconclusive presidential election created political uncertainty and sparked protests, demonstrations, and escalating violence, including attacks on elections offices. Encouragingly, last month, the Haitian Parliament elected a new interim president, one week after the previous president stepped down with no successor in place. And a new round of elections is slated to be held in April, with the winner taking office in May. Regardless of who wins the elections, the political transition that results could cause  further delays.

The Global Microscope reports that the national financial inclusion strategy and other inclusion efforts in Haiti have been limited by the country’s ongoing political and economic instability. The national financial inclusion strategy is well-defined, but it has encountered challenges due to the need to pass important regulations for the non-traditional banking segment, a lack of coordination among participating government institutions, and the need to appoint a financial inclusion council. The banking system is considered sound, but microfinance institutions are largely unsupervised, and important legislation, including draft laws on microfinance, insurance, and financial cooperatives has been delayed for years. The lack of regulation and reporting standards for NGOs, co-ops, and MFIs is a growing risk, given that they provide most of the financing in Haiti. For mobile and electronic money, regulations are insufficient.

Suffice it to say that the path ahead to advance financial inclusion will be difficult, but if progress in recent years is any indication of what’s to come, we’re cautiously optimistic.

For more on financial inclusion in Haiti, read the Global Microscope.

Financial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.

Image credit: uusc4all

Have you read?

Pathway to a Better Life for Haiti’s Disabled

On the Anniversary of the Haitian Earthquake: Fonkoze and the ‘Super Poor’

Political Risk Is Keeping Microfinance CEOs Up at Night