Haiti is one of the countries in the world that is hardest hit by natural disasters. In just the last twenty years, it has been battered by 70 hurricanes, floods and droughts, not to mention the earthquakes. "The risk of crops being destroyed and therefore loans not being repaid is so high that the microfinance institutions won't lend to farmers for more than a year," explains Yannick Saint-Paul, project manager at the AFD field office in Port-au-Prince, "They agree to grant crop loans to pay for the inputs for the yearly crop. But for a longer term commitment, they apply very high rates. That puts farmers off and stops them investing in renovating their irrigation systems, building new infrastructure, buying equipment or making the transition to less vulnerable agricultural models (agroforestry, etc.)."
Only a development bank can take the risk of lending at low rates to this kind of population. That's why AFD has just signed a funding agreement with the Fédération Nationale des Caisses Populaires d’Haïti (FECAPH) - Le Levier, a network of about thirty savings and credit unions. The contract provides for a €2 million line of credit to be set up with the Federation for four years, with the proviso that its members must only use the money to finance agricultural investments, with loan terms of over one year and interest rates that are much more affordable than now.
"We ask the local credit unions to pass on any cases that they think would be eligible for this type of loan," continues Yannick Saint-Paul, "We don't target any particular type of project, but it has to be with a view to some kind of development. For example, it could be a cooperative that needs to build a storage shed for its fruit."
Credit and technical assistance
As this is the first loan that FECAPH-Le Levier has taken out with a donor-funding organisation, the agreement also covers a €500,000 grant in the form of technical assistance to the project management. The aim is to reinforce its ability to manage such a line of credit rigorously with the lending going through a number of entities in a network.
"What's original about the project is the way the conditions of the assistance were defined upstream, before the partnership agreement was signed. And it was done in a very participatory way," emphasises Yannick Saint-Paul, "We organised a workshop with FECAPH-Le Levier last August, to talk about their needs in terms of assistance and what could be covered by this €500,000 grant. Among other things we are going to be supporting the credit unions to manage their agricultural investment portfolios efficiently: tracking the beneficiaries and their repayments, reporting to the Federation, etc."
This level of anticipation is quite unusual before a microfinance programme is set up. And yet this approach enabled us to shorten the time to launch for the activities, whilst enabling the project management and the credit unions to take more effective ownership of the project and get all the partners involved.