Breaking the Cycle of Dependency through the Use of Remittances for Investments

  • Posted by Marina Vatav
  • September 24, 2012 4:58 PM EDT

Last year, Haitians living abroad sent over two billion dollars to Haiti, according to the Multilateral Investment Fund (MIF) study. For Haitians in the Diaspora this is a way to support their families and connect. Most transfers come from the US, Canada, and Dominican Republic.

According to the MIF remittances represented 28% of Haiti's GDP last year. Could the two billion dollars a year be used to create jobs, investments, and boost the economy?

A 2006 World Bank study shows that remittance recipients are predominantly young Haitians under the age of 40. Many of them have difficulty in finding jobs in Haiti and are totally dependent on the money sent by their relatives living abroad.

A Fonkoze program called Remittance For Business is trying to turn the situation around and educate the remittance receivers to be more financially savvy. They encourage them to think of ways to break the financial dependency cycle, learn to save, and start thinking about opening a business or invest in existing ventures.

The pilot program started in June in 10 cities throughout Haiti. It consists of a series of two-day seminars given by the well-known Haitian economist Kesner Pharel to remittance receivers. The participants learned about budgeting, managing a business, the finance of a business versus personal finance, ways to increase income, ways to access a loan, business debt, the limitations of the law, etc.

"Not all are ready to be investors or entrepreneurs. What they have to do is to start thinking about how they can get out from the cycle of dependency," says Katleen Felix, Project Director and Diaspora Liaison Officer, Fonkoze.

"We are telling them what they can do with 1000 dollars, what they can do with 100 dollars, so that they can start thinking about what can be done and how they can scale it up," continues Felix.

At the end of the training the participants had a chance to meet local entrepreneurs who shared their experiences.

From June until the end of August, 235 people have gone through this training. Three business analysts are following up with the program participants and helping them start revenue-generating activities. At the end of the year, an evaluation will be done to assess how effective this pilot program was in improving people's financial habits.

"We are hoping that some of them will be saving, some of them will invest in their own businesses or in someone else's business. These are the three main indicators for us," says Katleen Felix.

The Program has also listed some additional options offered by local businesses to those who want to start by creating a job for themselves.

- Eneji Pwop, a clean energy company that sells solar products, offered to job seekers to buy their products and resell, thus creating a distribution system that can benefit the company, and the new self-employed that will now be a part of an economic circle.

- Digicel, one of the most important telecommunication companies in Haiti, is offering their TchoTchoMobile model, Mobile banking, and their Pappadap model, selling phone credit, to help entrepreneurs reinforce their business by diversifying their products.

- Ti Pilon, in the area of Pétion-Ville, encourages the selling of Haitian coffee and snacks in the streets helping the local production, and creating jobs for the ones who choose this model.

"We'll see the results in December; we'll have the stats, and if it's making a difference, we will probably find a way to continue this program," says Katleen Felix.

Some members of the Diaspora who are business savvy have expressed their desire to help mentor people in Haiti who want to start a business. This is a new component that Katleen Felix is thinking of exploring in the future: create a nucleon of Diaspora mentors who could support some business initiatives in Haiti.

Remittance for Business program is funded by the Multilateral Investment Fund/Fomin (IDB), and is part of a larger Remittance program implemented by the IDB throughout the Caribbean and Latin America.

According to the MIF study, the remittances sent to the Caribbean and Latin America last year exceeded $61 billion, an increase of 6% over the previous year. The average transferred amount was $300.