Fonkoze Releases Annual Report
Fonkoze, Haiti's most successful micro-lending institution, has released its annual report. After a year of growth in 2009, the earthquake was a major blow to its operations. Ten Fonkoze branches were severely damaged or destroyed. Four hundred and fifty staff lost their homes and over 19,000 clients lost homes and/or businesses. Fonkoze responded by expanding support to earthquake affected clients, including the use of micro-insurance as a tool to help rebuild their livelihoods. Attached is both the annual report and an impact analysis. Below is a summary of their 2009 and 2010 activities.
Fonkoze 2009 Social Performance Report
For 15 years, Fonkoze has worked to fight rural poverty in Haiti by providing our clients, mostly women, with access to the financial and educational tools they need to realize lasting improvements in their lives. Since 2006, Fonkoze’s Social Performance Monitoring and Market Research (Social Impact) department has monitored Fonkoze’s progress toward achieving this mission. In 2009, this meant conducting interviews with over 1,200 clients, leading focus group discussions with over 800 clients, and carrying out exit interviews with approximately 360 former clients. Social Impact Monitors (SIMs) based in branches throughout Haiti interact directly with clients to collect social and economic data and anecdotal information that help Fonkoze managers refine our products and services to better suit the needs of the poor. The 2009 Social Performance Report aims to provide a reflective and transparent analysis of data captured throughout the year in order to take an honest look at Fonkoze’s institution‐wide social performance.
2009 was a critical year of stabilization and recovery for Fonkoze and our clients. At the close of 2008, a series of four tropical storms and hurricanes ravaged the livelihoods of 14,000 Fonkoze clients, leaving both the institution and those we serve in a weakened position. Our strong response to this crisis set the stage for recovery in 2009. Feeling the effects of the storms and the global economic crisis, Fonkoze made the strategic decision to slow growth of our primary loan product, Solidarity Credit, in order to focus on serving existing clients well. However, we expanded smaller yet strategically important credit and non‐financial programs designed to broaden our institutional reach, and as a result, in 2009 we addressed the most diverse range of client needs in our history.
Progress Along the Staircase out of Poverty: Fonkoze’s unwavering commitment to serving Haiti’s poor has driven us to develop our Staircase out of Poverty approach—a series of four complementary programs and products designed to meet clients wherever they are and accompany them on their journey out of poverty.
The First Step: Chemen Lavi Miyò (CLM), or Pathway to a Better Life, is an 18‐month non‐credit program designed to help the poorest of Fonkoze’s clients build the assets, skills, and confidence they need to begin the journey out of extreme poverty. The program completed its pilot phase in early 2009 with remarkable results: 95 percent of the participants successfully graduated from the program and 85 percent chose to move up the staircase into TiKredi. Clients also achieved significant decreases in poverty as measured by Fonkoze’s Poverty Scorecard, as well as a 43 percent increase in the number of CLM members sending “most or all” of their children to school, and a 50 percent increase in the number of members cultivating their own food. In 2009, Fonkoze improved the program through lessons learned in the pilot phase, and enrolled 250 new families into CLM.
The Second Step: TiKredi, Small Credit, caters to women who graduate from CLM, as well as to women who do not qualify for CLM, but are not yet prepared to manage a loan as large as US $75 (Solidarity Credit—the third step on the staircase). TiKredi participants are given smaller loan amounts over shorter periods, and are provided with intensive business and life skills training. After six months they are primed for graduation into Fonkoze’s core lending program, Kredi
Solidè (Solidarity Credit): New TiKredi clients interviewed in 2009 were 20 percent more likely than Solidarity clients to live on less than $1/day, and 44 percent more likely to suffer from chronic hunger. This year the program expanded to reach 2,620 clients in 13 of Fonkoze’s 41 branches. Enrollment in TiKredi is ongoing, and during the year over 1,000 clients completed the six‐month program and graduated into Solidarity Credit, celebrating the economic empowerment that this milestone represents.
The Third Step: Kredi Solidè, or Solidarity Credit, is Fonkoze’s primary lending program and represented 90% of our clients in 2009. Kredi Solidè clients tend to have greater food security, better living conditions, and greater confidence compared to TiKredi clients. Incoming Solidarity clients were slightly poorer in 2009 than in 2008. Of the 286 new clients interviewed, approximately 53 percent of them were living on less than $1/day and 69 percent were living on less than $2/day. Seventy‐nine percent of these clients suffered from some form of food insecurity—either “food insecure without hunger” or “food insecure with hunger”—as categorized by our food security survey. Of the 402 continuing clients who were re‐interviewed in 2009 after one year of Fonkoze membership, we saw 2.3 percent move above the $1/day line and 2.2 percent move above the $2/day line. Among this cohort, we also found a 12 percent decrease in the percentage of clients living with chronic hunger. For 27 clients who were re‐interviewed after two years or more, we saw poverty decrease by more than five percent in both the $1/day and $2/day categories. Analysis of social indicators for the same cohort shows some notable improvements: a 22 percent increase in the number of clients who eat meat regularly; a 15 percent increase in the number of clients who get their water from a pipe or faucet; and a 15 percent increase in clients who have a high quality latrine. Food security in this client cohort increased to 68 percent—an improvement of 16 percent. Some of the most encouraging results came from progress demonstrated by Solidarity clients who participated in our Kredi Siklòn (Hurricane Loan) program. These clients suffered significant loss of business and personal assets in the 2008 storms. Social Impact re‐interviewed 308 Kredi Siklòn clients one year after they had received their new loans. These clients moved above the $1/day and $2/day poverty lines at the same rate as Solidarity clients who were not affected by the storms. Among Kredi Siklòn clients, we saw a decrease from 60 percent to 43 percent of those living with chronic hunger. These results show that Kredi Siklòn clients, on average, were successful at stabilizing their situation and did not slip deeper into poverty in 2009. In 2010, Fonkoze will focus on applying our lessons learned through the Kredi Siklòn program to support the stabilization and recovery of our 19,000 clients affected by the earthquake.
The Final Step: Business Development is Fonkoze’s only individual loan product and starts at US $1,300. It targets small and medium enterprises. These clients typically use their loans to invest in permanent shops that carry food, clothing, household supplies, cosmetics, or construction materials such as tin and cement. In 2009 this product grew to serve over 1,300 clients, a 30 percent increase from 2008. The programs and products that comprise Fonkoze’s Staircase out of Poverty are reinforced by other essential services—education, health, and micro‐insurance. In 2009, Fonkoze’s Education and Literacy program added 10 coordinators to its staff, expanded coverage into 20 Fonkoze branches, and reached over 13,000 clients with its basic literacy, business and life skills modules. Our Health program, Santé, piloted a campaign to fight malnutrition among the children of our clients. 410 children were screened, 106 of which were treated for malnutrition. Santé also distributed a two‐month supply of vitamins to 13,200 children and distributed 400,000 de‐worming pills to clients, children, and other community members. Our credit‐life insurance product covered 214 clients who passed away in 2009. This insurance product covers the outstanding amount of the client’s loan and pays a death benefit to the family of about US $128 to defray funeral costs and temporary loss of income.
Client Exit and Satisfaction: For the third year in a row, of those clients who left the program, one‐third of those interviewed did so less than one year into the program. Clients exited for many reasons in 2009, but business failure continued to be the primary cause. For the second year in a row, we found that exit clients were slightly poorer than the average continuing client. Possible factors behind this trend may include: clients did not fare well with debt; clients were actually poorer when they started; clients suffered setbacks caused by external shocks, personal emergency, or life change. Overall, even exit clients communicated high levels of satisfaction with Fonkoze. Over 91 percent of exit clients stated that Fonkoze helped their family “a lot” or “somewhat.” Clients reported being able to buy more and better food, send their children to school, pay for healthcare expenses, afford clothes and/or household goods, and make investments in animals or land. In focus group discussions, clients primarily praised Fonkoze for our education services, micro‐insurance product, and post‐disaster responses, such as Kredi Siklòn.
2010 and Beyond: 2010 began with much promise. Haiti made it through 2009 with no major destabilizing events, allowing Fonkoze and our clients to make tremendous strides forward. However, at 4:53 p.m. on Tuesday, January 12th, a 7.0 magnitude earthquake violently shook the ground beneath Port‐au‐Prince and surrounding areas. These 35 seconds transformed our world as we knew it—taking the lives of over 200,000 of our neighbors, family members, and friends, ravaging homes and businesses, and ultimately sending shock waves throughout the country. Total damages and losses are estimated at a record‐breaking US $8 billion, or 120 percent of Haiti’s gross domestic product. Fonkoze’s infrastructure, staff, and clients suffered unprecedented loss from the earthquake as well. Ten of 41 Fonkoze branches collapsed or were destroyed, over 450 of our employees suffered severe damage to or complete loss of their homes, and five of our employees were killed. Our clients endured paralyzing losses, as over 19,000 of them saw their homes and/or businesses wiped away during the earthquake and in the days following. When the earthquake hit, Fonkoze was in the midst of developing a new micro‐insurance product designed to protect our clients’ personal and business assets in the case of natural disasters. Given the scale and magnitude of the earthquake, Fonkoze decided to launch the product immediately as a part of Kore Fanmi Fonkoze (Program to Reinforce the Fonkoze Family), a disaster relief and livelihoods recovery program that treats clients as if they had already been paying for a catastrophic micro‐insurance plan when the earthquake hit. In essence, Fonkoze turned this devastating disaster into an opportunity to test micro‐insurance as a tool to help clients stabilize and rebuild their livelihoods following natural disasters.
The micro‐insurance pilot provides earthquake victims with a one‐time indemnity payment of 5,000HTG (US $128), eliminates outstanding pre‐earthquake debt, and offers a new loan to restart their businesses if they are ready. Additionally, clients will participate in four educational trainings on disaster risk reduction and safe home construction. During these trainings, Fonkoze will incorporate lessons about insurance as an important tool to help mitigate the negative economic impact of future natural disasters on clients and their families. Fonkoze will use the lessons learned from this pilot to refine and roll out our permanent catastrophic micro‐insurance product. Other components of our recovery program include one‐time cash assistance for clients and employees serving as host families, as well as financial and technical support for permanent home construction for select clients. In essence, Fonkoze turned this devastating disaster into an opportunity to test micro‐ insurance as a tool to help clients stabilize and rebuild their livelihoods following natural disasters.
Beyond our earthquake recovery program, in 2010 we will prioritize other initiatives that diversify and strengthen our product and service offerings, with a focus on enhanced client protection and satisfaction. This will lead us to:
1) Scale up the first two programs on our staircase—CLM and TiKredi—to accommodate women who slipped deeper into poverty following the earthquake
2) Increase flexibility for well‐performing Solidarity clients by allowing them to access additional capital more quickly and easily through a “top‐up” on their existing loans
3) Launch a new online lending platform—Zafen.org—to connect investors from abroad with promising small and medium enterprises and community projects in Haiti
4) Establish a new in‐house training center to ensure Fonkoze employees—our greatest assets—are equipped with the tools and confidence they need to deliver high quality services to our clients
5) Integrate improved client protection policies and practices into our business operations by using the six core Client Protection Principles and tools developed by the Smart Campaign as our guide
6) Pilot a new hotline where clients and employees can receive timely responses to questions and complaints
Robust social performance monitoring will play an integral role in all of our 2010 initiatives, enabling Fonkoze to maintain a balanced picture of client progress. The Social Impact department plans to add three new SIMs in 2010, increasing geographic representation from five to seven of Haiti’s 10 departments. We will also complete conversion to a new social data management tool developed by the Grameen Foundation to help the department carry out timely and accurate analysis of client data. Fonkoze’s commitment to being an institution on which Haiti’s poor can rely remains stronger now than ever before. Social Impact will continue working to provide Fonkoze with the information it needs to support clients, so that they can face the future with confidence no matter what it holds.