EVALUATION OF DCA GUARANTEES TO MICRO-CREDIT CAPITAL AND SOGESOL, HAITI DCAFINALREPORT Haiti Evaluation – AUGUST 2013 i EVALUATION OF DCA GUARANTEES TO MICRO-CREDIT CAPITAL AND SOGESOL, HAITI FINAL REPORT – AUGUST 2013 Cover image: Small loans help women entrepreneurs in Haiti. Madame Fanfan was able to purchase a stall in a prime location in a Haitian market thanks to receiving a loan and has diversified her wares beyond rice to include flour, coffee, oil and other products. She has also opened a small restaurant and plans to open an even bigger restaurant to serve the visitors who come to her community since a new airport was built nearby. Photo: USAID DISCLAIMER This publication was produced for review by the U.S. Agency for International Development. The author’s views expressed in this publication do not necessarily reflect the views of the U.S. Agency for International Development or the U.S. Government. CONTENTS CONTENTS ........................................................................................................................................................................ i ACKNOWLEDGEMENTS ............................................................................................................................................. iii ACRONYMS ...................................................................................................................................................................... iv EXECUTIVE SUMMARY .................................................................................................................................................. v INTRODUCTION ............................................................................................................................................................ 1 Brief Historical Background of MSMEs ............................................................................................... 1 Project Background ............................................................................................................................. 2 Evaluation Purpose and Questions...................................................................................................... 5 Evaluation Methodology and Limitations............................................................................................. 6 Data Analysis ....................................................................................................................................... 9 PROJECT FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.......................................................... 10 Input Questions ................................................................................................................................ 10 Output Achievement ........................................................................................................................ 13 Outcome Achievement:Evaluation Questions 7–9 ........................................................................... 27 Impact Achievement: Evaluation Questions 10 and 11 .................................................................... 43 Influences of Exogenous Factors: Evaluation Question 4 .................................................................. 49 Summary of Conclusions and Recommendations ............................................................................. 54 General Considerations .................................................................................................................... 57 ANNEX 1: Work Order ANNEX 2: Data Collection Tools ANNEX 3: Information Sources ANNEX 4: USAID Development Credit Authority (DCA). Evaluation of Capital Bank and SOGEBANK DCA Guarantees – Evaluation Framework with Indicators DCA Haiti Evaluation i TABLES Table 1: Number of Loans and Total Value in Productive Sectors vs. Number of Loans and Total Value in Rest of Portfolio (SOGESOL) ...................................................................................................................... 14 Table 2: Number of Loans and Total Loan Value to Commerce and Percentage of New Borrowers (MCC)..................................................................................................................................................................... 15 Table 3: Average Loan Tenor and Interest Rate per Month in SOGESOL ....................................................... 16 Table 4: Average Loan Tenor and Interest Rate in MCC ...................................................................................... 17 Table 5: Loan Amount by Gender and Assets (SOGESOL) .................................................................................. 17 Table 6: Distribution of Loan Amount by Gender and Assets (MCC) ............................................................... 18 Table 7: Borrowers’ Use of their Loans from Both Lenders ................................................................................ 22 Table 8: Summary of Borrowers’ Group Opinions about MSME Loans Received .......................................... 24 Table 9: Baseline Loan Portfolios (SOGESOL) ......................................................................................................... 29 Table 10: Loan Portfolios during Guarantee (SOGESOL) ..................................................................................... 30 Table 11: Pre/Post-Earthquake Loan Distribution by Activity (SOGESOL) ...................................................... 30 Table 12: Pre-/Post-Earthquake Loan Distribution by Sector (MCC) ................................................................ 35 Table 13: MCC Loan Portfolio ..................................................................................................................................... 36 Table 14: SOGESOL Borrowers' Number of Loans Pre-Earthquake by Number of Loans Post- Earthquake ............................................................................................................................................................. 40 Table 15: MCC Borrowers’ Number of Loans Pre-Earthquake by Number of Loans Post-Earthquake ... 40 Table 16: Change in Credit Score, SOGESOL Borrowers .................................................................................... 41 Table 17: Change in Credit Score, MCC Borrowers ............................................................................................. 41 ii DCA Haiti Evaluation ACKNOWLEDGEMENTS Over the days that I have been preparing this report, I have accrued a debt of gratitude to many of my friends and colleagues for their generous support. First, I would like to mention the name of my old-time friend and colleague, Jean-François Tardieu, a statistician, geographer with an expertise in marketing who graciously helped me with data treatment and analysis. I owe a great debt to my friend and colleague, Yves Conzé, an experienced economist with expertise in Finance, for his help in answering questions on financial matters. A special thanks to the SOGESOL and MCC Officials, Mme Daphney Louissaint and M. Julio Larosilière for their willingness to answer follow-up questions. M. Wönder Pigniat, MCC assistant director, Jean-Robert Jean-Louis, MCC data manager, and M. Rocheny Sifrain, SOGESOL risk director, were very helpful in facilitating access to the borrowers for the team’s interviews. Finally, I want to express my special thanks to the borrowers themselves who patiently accepted to be interviewed. Without their patience, this work would have been impossible. DCA Haiti Evaluation iii ACRONYMS ANIMH Association Nationale des Institutions de Microfinance d’Haïti APB Association des Professionnels de Banque AS advisory services BRH Banque de la République d'Haïti (Central Bank) CIA Central Intelligence Agency CMS Credit Management System CPI consumer price index DCA Development Credit Authority E3/DC Bureau for Economic Growth, Education and Environment / Office of Development Credit FY fiscal year GDP gross domestic product HIFIVE Haiti Integrated Financing for Value Chains and Enterprises IFC International Finance Corporation MCC Micro Credit Capital MCN Micro Credit National MSME micro small and medium enterprise SME small and medium enterprise SO Strategic Objective SOFIHDES Société Financière Haïtienne de Développement S.A. SOGEBANK Société Générale de Banques USAID United States Agency for International Development iv DCA Haiti Evaluation EXECUTIVE SUMMARY Haiti has been independent from France since 1804, and political instability has always been a constraint to its economy. As one of the poorest countries in the Americas, a majority of Haitians live on no more than 2 U.S. dollars a day. The country has an unemployment rate of more than 60 percent. Most Haitians work in the agriculture and commerce sectors, as the state employs less than 20 percent of Haiti’s active population. As a result, a large portion of this population is struggling to make a living from the informal sector of the economy. This sector, however, is facing an acute lack of cash in spite of its entrepreneurial spirit. Given the high rate of illiteracy in the country and a largely dysfunctional state bureaucratic structure, the informal sector cannot meet the banks’ legal paper requirements to have access to credit. Thus, getting credit is and has always been a key problem in Haiti. By the year 2004, however, the dynamism of Haiti’s informal sector had encouraged some local banks, particularly SOGEBANK and Capital Bank, to seek to generate financial profits