Operating after the earthquake is presenting challenges both inside our office and in the field.

In the office, the biggest problem is the office itself. I made the decision to close one side of the building. I’m no engineer, but it looks unsafe. What appears to be a load-bearing wall has a large horizontal crack, and the portion above the crack has shifted enough that it doesn’t sit squarely on the part beneath it.

And as unsafe as parts of the building look, the office staff hasn’t wanted to work inside. They will go inside to get something, or to check something on one of our computers, but the tellers, for example, are not will to spend the day working inside as they normally would, especially after Wednesday’s very noticeable aftershock. Even yesterday, we had two minor shakes in the middle of the day, so I can’t really blame them. For now, our tellers are working in the yard in front of the branch, and I am entering transactions, a day at a time, on the desktop in my office.

We’ve had some problems with clients as well. Though many are simply grateful that we are open at all, some are frustrated by one aspect of the service we provide. The exchange rate has dropped significantly. Before the quake, we were offering almost 42 gourds to the dollar. When we opened on Monday it was only 30 gourds, though it has risen to 35 since then. Dollars are flooding into the country, and everyone wants to change them into gourds. This has hurt those receiving remittances, which is one of the important services we provide. Friends and family abroad are sending people they know here dollars, doing what they can to help them in difficult times, but when it comes time to change them into gourds, they get much less than they had hoped for.

Normally, this wouldn’t be a serious problem for our office. We would simply pay out the remittances in dollars to anyone unsatisfied with the rate we can offer. But right now we just don’t have dollars. The only currency we can pay in is gourds. And no one else in Marigo is able to serve them yet, so if someone in Marigo wants to receive a remittance right now, they are stuck with our exchange rate. We’ve had arguments with customers, and I can understand their frustration. We just won’t be able to do anything for them until the commercial banks open, so that Fonkoze can get me the dollars I need to give our customers the choice they have a right to.

And the fact that I’m working in my office every day is only making work in the field, which is already difficult, even harder. We aren’t due to have a lot of reimbursements coming right now, but those that are due have not been coming in at anything like the rate we need. The earthquake has done a lot of harm in the southeast of Haiti. Our members have suffered in lots of ways, some of them financial. And one of the consequences of the fact that Fonkoze tries to be an understanding lender is that repaying Fonkoze is not always the first priority for borrowers who have difficult spending choices to make.

It’s a little frustrating.

We spent 10 months trying to straighten out a portfolio in Marigo that was already in bad shape before the hurricanes devastated this region in 2008. Those hurricanes just made things worse. Thanks to a lot of hard work by our staff in the field, our central office, and our partners around the world, we were able to help a large majority of our members put their businesses back together over the course of 2009.

We took losses at the end of that year, the vast majority of them because of those of our members who hadn’t yet been able to right their businesses entirely and clear their debt. After that loss, and a good first week of January 2010, we had whittled the delinquency rate for Marigo to 6.5%. Too high. More than twice the traditional number for solidarity-group microfinance. But very much an indication that we were moving in the right direction.

But in the week after the earthquake our repayment rate was only 23%. We collected lots of information – about loss of life, loss of merchandise, loss of homes – but haven’t been able to collect much in the way of loan repayments. Already our delinquency rate has jumped to 10%.

It’s easy to understand. And we know that we’ve come back from big problems before. We have to be optimistic.

And, what’s more: we have good reason to be optimistic. It’s not a matter of the blind hope that springs eternal, nor of our preference for hope over despair. Real progress is already visible everywhere around us. The road from Port au Prince to Jacmel is already open to all but large trucks. The “free market “ – in this case the smuggling trade – has already shifted the Marigo supply chain for many commodities from trucks that pass from Port au Prince to Jacmel to Marigo to boats that come to Marigo from Anse à Pitre. Our liquidity has been holding up so far. Fonkoze’s main office and Port au Prince branch are up and running. And last night Marigo even had electricity for the first time since the quake.

So things are moving forward, if slowly. And we therefore conclude, reasonably I think, that we will be able to move forward as well.

Thinking during the weekend about some of the issues we might face as we opened our office in Marigo on Monday, I was worried on several levels. There were both human and technical issues to face.

The most urgent human issue was staff morale. The people who tend to work at a Fonkoze office come from one of the classes of rural residents who have been most affected by last Tuesday’s earthquake. Very many have friends, siblings, or other family members studying in universities in Port au Prince. The schools tend to be housed in large, poorly constructed buildings. Classes are often scheduled into the early evening, so when the earthquake struck, they were full. One of my colleagues in Marigo lost a brother. Others lost cousins, nieces, or nephews. All lost friends. Many have spent days not knowing whether or not their friends or loved ones were safe. As I hiked over the mountain on Sunday, I realized that I could not know how ready anyone would be to work.

The most urgent technical issues were liquidity and fuel.

We had a smaller than usual amount of cash in our safe. A large transfer from our central office had been planned for Wednesday, the day after the quake. So I was worried that money would run out fast. Normally, we coordinate liquidity problems with help from Port au Prince. They share with us the job of ensuring we have an appropriate amount of cash on hand. But for the time being, we have no central office. It’s in ruins. The large branch in Jacmel that might help us as well is in worse shape than that. There is another branch in Fondwa, on the road between Jacmel and Port Prince, which we sometimes apply to when we are in a particular fix. Its director gave me most of the training I received in branch management and his assistant is a former member of the Marigo staff, so our relations are close. But though I saw the building still standing when I went by on Thursday – it’s one of the few that still is standing in Fondwa – we haven’t been able to contact its staff thus far. For now, we are on our own.

The main ways we ourselves bring in cash are loan reimbursements and savings deposits. We couldn’t count on deposits. Right now, our clients will be making withdrawals, not deposits. The few deposits I expected to receive as I considered the matter on Sunday would come from remittances in excess of what the people receiving them needed at the time or, if in dollars, in excess of what we could pay out. But though such deposits would improve our situation on paper, it would not put a gourd or a dollar in the vault.

Nor could we count on reimbursements. Most of our borrowers took out new loans in December to maximize their inventory for the time around the end of the year, when sales are most brisk. Fonkoze loans are repaid in six months with five equal payments that start in the second month. We do this so that our borrowers have some time up front to invest their new loans before repayments begin. Right now, however, the consequence is that not much in the way of reimbursements are due.

And even if they were due, it might not help our situation. We don’t know much yet about the earthquake’s effect on our borrower’s ability to repay. From the little data that we have, it’s already clear that we have borrowers who lost family members and that some lost their homes. It appears to have been especially damaging in the poor neighborhoods above Peredo, Marigo’s near neighbor to the east, where we have some of our best-functioning credit centers. Areas like Limè and Madival were apparently hit very hard. These are, by the way, among the areas most damaged by the hurricanes scarcely more than a year ago. We don’t yet have much information about some of the other areas around us.

We have borrowers who lost merchandise as well. I was in a credit center in Granfon yesterday, above Segen on the mountain road toward Pétion-Ville, and learned that four of its fifteen members had substantial business losses. Two had purchased loads of leeks that they were sending to sell in Port au Prince. The leeks rotted in transit when the road to the capital was blocked. Two others were bringing sugar, flour, and cooking oil over the mountain from Pétion-Ville. When the quake struck, the mule carrying their goods shied and threw off its load. Their stuff fell irretrievably over a cliff. We estimated their losses at 50% to 70% of the value of their last loan.

Fonkoze exists for its members’ benefit. There are limits to the lengths we can or should go to in pressuring them to repay what they owe when they’re in trouble, because we recognize that their repayment problems among are rarely a question of goodwill. This makes our work distinctly harder, but we really have not choice. So until our central office can figure out how to get any funds we might need to us, we can do little about liquidity but grit our teeth and hope.

Fuel is another problem. Now that the public power in southeast Haiti is out of commission, we need a regular supply for our generator. In addition, we always need a fair amount for the motorcycles we use to visit our members in the areas where they live. The fuel situation in Port au Prince is bad enough. Apparently, the main line that allows tankers to unload was damaged. But the road from Jacmel was damaged as well. Even if Port au Prince had been full of fuel, there would be no way to get it to Jacmel. Trucks cannot bring it over the hill.

But none of these issues turned out to affect us seriously. For at least the first two days, our cash has been holding up. We were helped in a way that I should have been able to anticipate. One of our best customers is a local organization that runs, among other things, a cooperative market. They sell various things wholesale. They usually make a deposit every day or two, and then make a very large withdrawal – sometimes almost 300,000 gourds, or roughly $ 7,500 – when they’re ready to restock, every two-three weeks.. They had accumulated much more cash than they were comfortable with, so they deposited about 85,000 gourds with us. It couldn’t have come at a better time.

And fuel has been a troubling expense, but not a major problem, so far. The supply from Port au Prince through Jacmel was cut off. But a new supply chain quickly established itself. Sailboats started bring barrels of it from the Dominican border. Marigo’s small port has become a fuel depot. While it’s true that this is, technically, smuggling, it’s also true that it’s working. Prices were initially very high, over $12 per gallon. (Just before the quake it had been selling for about $5.50.) But they have already dropped somewhat. At the end of the day on Tuesday, it was at roughly $7.75.

The question of morale was answered in front of my rented room on Sunday night. The staff met for a couple of hours. Though everyone was anxious to say something about their losses and to hear about those their colleagues had felt, they were all even more anxious to figure out how we would get our office up and running. Some spoke as though returning to work would be a kind of relief from more important misery, some as though it was a difficult duty, but an important one. But no one wondered whether we should open, only how.

One of the credit agents, Jean Claude, had already been working on his own, even when the office was closed. He bought his own fuel and used his own motorcycle to visit two of our hardest-to-reach centers on Friday, the day after taking the same motorcycle all the way to Port au Prince and back to establish whether his older brother, a seminarian, is alive. (He is.)

Jean Claude was anxious to know the state of the members he serves. He learned that in Mablanch, a remote area in the mountains above Belle Anse, the most urgent problem is neither loss of life nor wrecked homes nor damaged merchandise. It’s water. Area residents depend on rainwater, which they collect in cisterns. Though our members’ homes are intact, their cisterns now leak.

He also collected both reimbursements and savings deposits, which he had to hold on to until we opened on Monday.

If there was a morale problem, it was mainly a fear some had that our building could still collapse. There are minor-looking fissures. I’m not qualified to assess how minor they really are. And there have been aftershocks. But the tellers agreed they could sit in the enclosed yard in front of the building for the time being. We would manage transactions by hand, and wait to enter them into our database until we feel a little better about the building we’re in.

We’re doing a couple of things to make things easier on the staff – offering small advances on their salaries to those short on cash and a hot meal in the middle of the day – but the truth is that nothing we can do for them is the real source of their strength.

So we are managing. I hope to coax our tellers into the building in the next couple of days.

The center in Kòray Lamòt is much farther from Marigo than any of our other centers. It’s more than 45 minutes beyond the second farthest, which is in Mabriyòl, and almost twice as far as the already-distant centers in Ravin Pal and Chodri, along the ridge east of Segen. Fonkoze probably shouldn’t have opened it in the first place. Though our mission is bring financial and other services to rural Haitians, we need to do it sustainably, and the trip to Kòray twice every month is hard to sustain. We should have worked first to penetrate the market for microcredit in the areas closest to Marigo. Once the office had a strong core, further expansion would have been easy to manage.

It’s easy to understand why it was opened, though. At the time when the Marigo branch was opened, the watchword at Fonkoze was “rapid growth.” Senior management had a sense that the institution could accelerate its jump to sustainability by greatly expanding the number of borrowers it serves. Lots of branches were opened quickly and lots of credit agents were added to existing branches in an effort to dramatically speed up expansion. Under those circumstances, when a woman from Kòray came to the branch, requesting that Fonkoze begin offering credit to her and her neighbors, it was too easy to say “yes.” The center grew quickly, until it was serving thirteen solidarity groups of five women each. It was what we consider a very big center.

Then the problems started. Attendance at meetings deteriorated, and reimbursement rates did as well. By the time I got to Marigo in March, we were lucky to get fifteen members to come to a meeting, and the delinquency rate was high. Things were so bad that a woman who had come to the reimbursement meeting twenty gourds short – a trivial sum even for the vast majority of our borrowers – of a payment for more than a thousand gourds was unable to find someone in the center to lend her the other twenty gourds. She thus incurred a 120-gourd late payment fee. Her story became one of my set pieces to explain the importance of solidarity when I visited other centers.

I probably should have simply closed the center, thus cutting Fonkoze’s losses, but I couldn’t bring myself to do it. A couple of months of visiting Kòray with Bob, the credit agent, or sending my assistant director with him, didn’t seem to improve things very much, however. So we decided to try another approach. We would send Bob once each month, but he would spend the night. That way, he’d still be holding his two meetings with the women each month. Tuesday mornings would be for discussions, and Wednesday mornings would be reimbursement.

I talked about the idea with Thomas, Fonkoze’s premier branch director. I doubted whether he would like the idea, because one of the hallmarks of his consistently successful approach has been to strictly implement Fonkoze’s simple method. I thought he might dislike the change from two trips each month to only one.

But he immediately responded that he thought the change might be just the thing for a place like Kòray. Microcredit, Thomas explained, depends completely on developing very close relationships with the borrowers. The twice-monthly trips weren’t doing that, and he wasn’t surprised that the center was failing. The length of Bob’s trip meant that he had to leave as soon as his business was complete. Getting there and back in a day involved over five hours on a motorcycle. By spending the night, he was freeing up a lot of time he could then use to get to know the members well.

I went with Bob this week, and was pleased by the progress I saw. After drop-outs and write-offs, the center is down to about thirty members. Over twenty were at the meeting, and they had news of several of the others, explaining why they hadn’t been able to attend. As I followed the discussion, I could see that Bob was getting to know them well. He addressed them by name, drawing quieter ones into the conversation through gentle teasing. The center’s chief was feeling sick, but she was present and active. He now knows where almost all of the members live, can talk about the different neighborhoods they are from, and knows where many of them do business as well.

We spoke at length with the women about the new approach, and they were very enthusiastic. They think it a big improvement over the old way, and their explanation was clear: Though they all nominally live in Kòray, they can’t afford to spend much time there. It’s a very rural area, a long way from any center of population. There isn’t much buying and selling to be done. A few of them hike from rural market to rural market with their merchandise on a donkey, a mule, or their head to make their living. But for many, their businesses are in Pòtoprens or Jakmèl or Ansapit. The buy agricultural products in Kòray, and get them to places where they can be sold. Having to come home for their meeting just once each month makes things much easier for them. If their improved attitude towards the center can combine with their improved relationship with Bob to make their center strong, I’ll have a lot to be pleased about.

But it will still leave me with a problem. The center currently has, as I said, about thirty members. We will lose a few of those. They are women with very old debts they have not been able to repay. Bob and I spoke to a few of them, and heard the usual stories: Sickness or death in the family, pregnancy, merchandise lost at sea. There are lots of ways that a market woman’s business can fail. Bob has recently started the process that will enable him to add a new solidarity group or two, but it’s hard to imagine the center growing to , say, forty reliable members any time soon, and I have a hard time justifying this very expensive trip for that small a number.

So I asked Moïse to join Bob and me on our trip this week. Moïse is the agent responsible for Tikredi, or “Little Credit,” the Fonkoze’s program for poorer borrowers. It’s an intensive six-month combination of credit and training designed for women who would fail if they entered into standard solidarity-group credit directly. From my perspective as a manager, it seemed perfect, since it functions by recruiting a whole center of women – generally thirty-forty – at once. If it works, a the Tikredi members would graduate by July, at which point we’ll suddenly have two good-sized credit centers for Bob to visit each time he makes the trip.

The Kòray center’s elected chief arranged for us to meet with her husband, the principal local elected official, along with several other local leaders. We explained the program both to the members of the center and the guests who joined us, and the response was very enthusiastic. The center chief made a long speech in which she described the different sort of women she thought could benefit: young mothers who haven’t ever been in business but whose sudden pregnancy has left them with the need for income, older women who’ve lost their husbands and now need to run their households on their own. She spoke of the women she sees who go out day by day with a little basket of this or that on their heads, trying to eke out a living, but with little prospect of getting very far with the means and skill set at their disposal. She was eloquent and, what’s more, demonstrated that she understood what we were trying to accomplish very, very well.

There was lengthy agreement about the need for just such a program in the area. Everyone said that there are many women in and around Kòray who could qualify. And there was an even lengthier discussion about which neighborhood of Kòray we should choose. Kòray is a large region. There are members of the Kòray Solidarity-Group center who walk more than an hour to get to meetings. But Tikredi works strictly neighborhood-by-neighborhood. The leaders would have to choose one area of their large community to benefit.

Eventually, there was a strong consensus that we should start in an area called “Ba Kòray.” Their reasoning was encouraging to me in my role as a manager. They said that one of the poorer areas in their region is right along the main road that leads up the mountain from Belans, the same road our agent takes to get to his center. Though the need in their own neighborhoods, mainly up above the Kòray center, might be great, especially in the less-accessible areas off the main road, serving Ba Kòray first would be easier for Fonkoze. The work would thus, they said, have a better chance to succeed.

So Moïse exchanged contact information with a few of them, and they will follow up in the next weeks.

Of course it’s too early to claim success for any of this. The signs in the solidarity-group center in Kòray are positive, and the signs are that Tikredi there might really take off. But signs are just signs. A couple of signs and 25 cents will get you a couple of coffee. Two cups, actually, in Haiti.

But if it does work, it will exemplify what I take to be one of the fundamental truths about Fonkoze. We can succeed at creating a sustainable institution, just profitable enough to guarantee that it will endure, by aiming single-mindedly at our more important objective: by reaching as deeply as possible to provide the poorest, most isolated Haitian families with the services they need to improve their lives. A better, tougher, more decisive manager than I am might have shut down the center in Kòray, but it would not have been the right decision for Fonkoze. Not until we try to save it by doing more for its members and serving their poorer neighbors as well.

Fonkoze offers two types of solidarity-group credit for two different types of borrowers. “Solidarity-group” credit is an umbrella term for one way that microcredit is typically offered. Women organize themselves into groups of five to take and repay their loans together.

Fonkoze’s standard solidarity group loans are the ones in the hands of the vast majority of our borrowers. The standard program starts with a three-month loan of 3000 gourdes: about $71 at the current exchange rate. Subsequent loans are for six months. Borrowers meet twice each moth with their credit agents, once for a reimbursement, and once for a discussion. Loan amounts can increase every six months, sometimes rapidly, up to almost $1200. Members can then graduate to taking individual loans.

But it turns out that a loan of 3000 gourds is not for everybody. For some, these loans are too much. Their businesses might not be ready for a 3000-gourd investment. The 250-gourd membership fee can be more than they are ready to pay. They might not have the 450 gourds they need to deposit in their savings account as a 15% collateral.

Fonkoze discovered several years ago that it was not succeeding in reaching the poorest Haitians. The 3000-gourd minimum loan was just too large. So Fonkoze created, among other things, a special loan program called “Tikredi,” or “Little Credit,” designed to reach families who would not succeed without a lower starting loan amount and some extra support.

Tikredi loans start at only 1000 gourds. Borrowers pay no membership fee, and can start with only 25 gourds of savings. Over the course of six intense months, they take three progressively larger loans. The last is for 2500 gourds. They also save towards the 700 gourds that paying their membership fee and building their collateral requires. During these six months, they meet weekly with specially-trained credit agents, more than twice as often as regular borrowers meet with their agents. The agents offer educational programs designed just for Tikredi that emphasize basic business skills, health issues, and a range of other fundamental life skills. Fonkoze has also created a book full of business models that require 1000 gourds or less. So even those who have never had a business before can receive the coaching they need to get started. After six months, Tikredi borrowers graduate to standard loans, beginning at 3000 gourds, and then move upward just like other borrowers.

I wish I could say that Fonkoze had discovered the need for Tikredi through foresight, but it was much more a result of experience. Fonkoze learned by research in the field that it was not reaching poorer borrowers and, what’s worse, it learned the lesson in part through some borrowers’ failure in programs that they were too poor to succeed in.

That is to say: When Fonkoze looked closely at those who failed at standard solidarity-group microcredit, it discovered that some of them failed because they were too poor. They did not have the financial or social resources to benefit from a 3000 gourd loan, but they took those loans anyway because Fonkoze had nothing else to offer and had no way of predicting accurately whether they were likely to succeed. They may have repaid a first or even a second loan. In some cases, their third loan was for considerably more, as much as 12,000 to 15,000 gourds. But this progress was a house of cards, ready to collapse at the first shock.

We have any number of such cases in Marigo. Magressa is an example. She was a member of our center in Desplanti, a center that probably deserves an explanation all its own. By her fifth loan, she was borrowing 15,000 gourds. But at that point, her son became ill, one of the eight children she was supporting with her commerce. Not only did expenses connected with his illness prevent her from repaying her loan, they ate up the capital in her business as well.

In March 2008, Fonkoze’s experiment in restructuring old loans reached her. Her large overdue balance was transferred to a new loan with smaller repayments stretched out over a longer period. But this didn’t really help her because her business had gone under. She made some repayments out of irregular remittances that another son sent from the Dominican Republic. But the remittances weren’t enough to get her started again. When the hurricanes came in August of that year, they washed away crops and livestock and damaged her home. Even after that, she continued to make very occasional repayments, but it would not have been enough to prevent her from being written off had a series of clerical errors by the Marigo branch’s management not done that for her.

That’s where things stood for Magressa in September, when Fonkoze’s Tikredi program came to her neighborhood. She had a large and old debt to Fonkoze, well beyond what she could repay, and no active commerce.

One key to any microcredit program is assuring that it’s reaching the right people. Tikredi identifies appropriate borrowers through an involved process called “Participatory Wealth Ranking,” which begins by inviting a neighborhood’s residents to create a list of all local households and to classify them according to their relative wealth. The Tikredi team then visits the households near the economic bottom of the list to better identify just how poor they are. Women in households that meet the criteria for Tikredi are invited to join.

When our office began the Participatory Wealth Ranking process in Magressa’s neighborhood, she showed up near the bottom of the list. Further verification confirmed that she qualified for Tikredi.

But that presented us with a problem. She already had a debt to Fonkoze. Though it should have been written off, it hadn’t been. We could not give her a new loan with one already on the books, and though I could write off her old loan, formally removing that barrier, I was troubled by the precedent that would set. The single factor most important in motivating our members to repay their loans is the knowledge that their further access to credit depends on their repayment record. If word gets out that they can fail to repay and get new loans anyway, that could affect repayment rates that are already fragile in Marigo.

So I called Gauthier for advice. He directs Fonkoze’s programs for poorer members, including Tikredi. He is the stuff that heroes are made of. Gauthier is a Haitian-American who returned to his country because he believed in trying to make it a better place. He joined Fonkoze in 2002 to take over leadership of its program of individual loans for small businesses. He succeeded in expanding the program and making it profitable. But when Fonkoze needed someone to assume leadership of its then-new program for the extremely poor, he was excited by the chance to work with those who needed him most. There’s more I could say about him, explaining why to call him a hero involves no exaggeration at all, but what is most relevant here is that his advice is always willingly given and well-rooted in both a deep understanding of Fonkoze’s mission and his years of experience working with Fonkoze members at every level.

Gauthier immediately knew what to say. On the one hand, as long as someone like Magressa truly qualifies for Tikredi, the fact that she has failed in standard credit should be no barrier. On the contrary, her failure suggests that she was in the wrong credit program to start with. On the other, it would be dangerous to let her feel that she has no responsibility for the debt she incurred. For their own benefit, and not only for Fonkoze’s, our members need to feel their commitment to repayment as something serious.

He proposed that I approve her for Tikredi, but insist that she make a small, weekly payments against her old loan. She would already be making a required 30-gourd deposit each week into a savings account. We would ask her for 50 gourds instead. 20 gourds would go towards her old loan.

The 20-gourd payments wouldn’t get her very far if the goal was to repay the old loan entirely. She owes over 8000 gourds. But they will be significant for her. Our analysis suggests that most Tikredi borrowers don’t really build up their assets during the six-month program. At best, they establish a business that will be ready to grow when they’re ready to take out larger loans. The extra 20 gourds, though it’s less than 50 cents, will make things harder.

So I invited Magressa to my office to meet with me and Moïse, her Tikredi agent. We asked her to show up at 4:00, when Moïse would have returned from a day in the field, and she was waiting in our lobby by 2:00. When he finally came, we talked for almost an hour. We talked about her experience in the Desplanti center, we went through her whole repayment history. Her adult daughter, also a Tikredi borrower was with her, as was her new Tikredi center chief. It’s clear Magressa really wants another chance. And she seems determined to succeed this time. Moïse, and I will be giving her all the extra attention we can spare.

It may be hard for us as well as for Magressa. I’ll have to go to the Desplanti center and explain to its members why a women who has failed to repay her loan has gotten new credit anyway. I’m not sure I know what I want to tell them. I can’t afford to hide what we’re doing, but I need to present things in a way that avoids making defaulting on loans appear to be an attractive alternative. It’s a center that was very troubled, and has just begun to turn itself around. Its progress seems fragile, like all of our progress in Marigo. So this will require some care.

I began to write this piece on Thanksgiving because thinking about Magressa moved me to recognize one thing I have to be thankful for. I work with an organization whose mission and leadership makes it possible for me to take a flexible view of circumstances like Magressa’s. It’s true that the Marigo office needs to be profitable. Modest profitability will enable the office to sustainably reach the many Haitians who need its services.

But for Fonkoze, profitability is never more than a means to an end. What matters is to alleviate poverty as best we can. With a lot of hard work and a certain amount of good luck, Magressa will be able to lift her family out of poverty. We don’t know whether she will succeed, but she very well might. It’s hard, though, to imagine how she could make any progress at all without the second chance that Tikredi is ready to offer her. I’m grateful that I work with an organization willing to give someone like Magressa that second chance.

Earlier in the week, I was talking to Bob, the credit agent responsible for one of our best credit centers, the one in Lakou Feliks. We gave a certificate and a present to its chief, Marie Ange, in May, when the Marigo office held its local assembly. At the time, it was one of only two Marigo centers who were 100% up to date with their loan repayments. “Zero delinquency,” as we say.

The center is no longer at zero delinquency. Two women, members of Marie Ange’s solidarity group, have fallen behind. But the center is handling these problems well, and we expect them to be solved by the end of the year. One of the women simply left Haiti to make her way in the Dominican Republic next door. Her fellow members are furious, even though she promises to send what she owes in a lump sum this month. They keep in touch with her to ensure her repayment, but they also say that they won’t take her back if she returns to Haiti. The other woman, a younger one named Manouchecar, has a more common problem. Shortly after she received her last loan, two of her brothers became seriously ill. Helping her mother take care of them ate up most of the capital in her business and took up the time she would normally spend making money as well.

I don’t have the data in front of me to support this assertion, but I think it likely that most of the delinquency we deal with is connected in one way or another to health issues. They are not the only problems our borrowers face. Their money and merchandise are sometimes stolen. Transportation issues can mean that women trying to bring agricultural products into Port au Prince can suffer losses when produce rots before it gets to market. Too much or too little rain can spoil their crops. The price of salami can plummet while they have a large stock in their hands. There are lots of things that can go wrong in their lives.

But very many of the women who have repayment problems tell us stories of children, husbands, siblings, or other family members who are sick or have died. They pay for doctors, medicines, or funerals. Many others talk about their own ill health. Being sick is expensive. They have to spend money to get better, and they lose income as long as they are sick.

The problems are especially bad around childbirth. About 6% of all Haitians die at birth. That’s ten times the number that dies in the States, a country with its own health problems. Over 500 Haitian mothers die for every 100,000 live births. Only about eight of 100,000 do in Europe.

So, for example, in the center at Lakou Feliks, Marie Ange convinced one of our borrowers not to take a new loan because she is pregnant. Another member is returning to the credit program after giving birth to and nursing a healthy child. Lakou Feliks is a good center, and good centers manage even difficult issues, like member pregnancies, well.

Other centers don’t. I’ve written before, for example, about the problems that started when Ivette, a borrower in Segen, took out a loan when eight months pregnant. (See: Working Out Problems.) And Ivette’s not the only one.

Bob and I were driving by a center in Lagad on the way back from Segen on Tuesday, and we decided to stop to see the center chief, Roselène. She is a young woman, still living with her parents, but she had been pregnant for several months. I’m not sure how many. We thought we’d stop by to ask her how she was, and discovered that she was in terrible shape. She had gone into labor, but the baby had died at birth. She had been bedridden ever since. We found her huddled on a blanket on the floor of her family’s outdoor kitchen, trying to stay warm. Her parents and siblings were sitting around the fire. She told us that she had been able neither to eat nor to sleep. And she was too weak to get onto a motorcycle or a truck for the long, bone-rattling ride it would take to get her to medical attention.

That’s where Job came in. His older brother is my “monkonpè”, the father of my godson. And that makes us family. I’ve known Job since he was a high school student. He’s now in the last month of his seven-year medical school education. He’s already a working doctor, scrambling to make a living and to help his older brothers support their younger sisters too, and he’s working hard to prepare for his marriage next March. But he always seems to have time to see me – or to see anyone else I ask him to see – whenever I call him. And I was worried about Roselène, so I gave him a call.

That was Tuesday, and Bob would have to return to the area on Friday, so I asked Job to come Thursday afternoon, spend the night, and then head up the mountain with Bob the next day. He immediately agreed.

He went up the hill on the back of Bob’s motorcycle. They had two credit centers to visit before they’d be able see Roselène, and I suggested to Bob that he have the women in those centers talk with Job about their health while he was collecting repayments.

Job didn’t do a lot in those centers. He wasn’t equipped to do a lot. But the women were grateful for his visit. He took their blood pressure, told them how they could fight hypertension by changing what they eat, and listened to their aches and pains. From what I can tell, the women loved having him, and wanted to know when he’d be back.

When he got to Roselène, he found that things were much less dark than they had seemed to me. She was overtired, a little undernourished, very sore, and somewhat depressed. She and Job had a long talk. It turns out that her labor was premature, brought on, he thinks, by the heavy farm work she was doing well into her seventh month. We sent her some vitamins. Job prescribed a couple of medicines: a pain reliever, an antibiotic, I’m not sure what else. Since Roselène has no way to get to a pharmacy, we’ll have to try to find them in Marigo. Job thinks she’ll be fine after some more rest.

Unfortunately, Fonkoze doesn’t have doctors it can send to the field on a regular basis. I’m lucky that I have Job. But the women we work with live in places where health care can be hard to find. An occasional visit by a doctor willing to donate his time is a very good thing.

The worst part of my job is write-offs. As the third quarter closed at the end of September, I wrote off a few loans. There were a couple left over at the end of October, and these I did last week. As someone who’s been to the meetings at which Fonkoze members receive their first credit, meetings animated by excitement and hope as they count out the money we put into their hands, the moment when I click the “abandon this loan” icon in our accounting system is not a happy one. I think about how far such a grim, bureaucratic end is from what a new borrower hopes for, from what she plans. It feels rotten.

We don’t generally write-off a lot of loans at Fonkoze. Generally speaking, repayment rates are high. But we are now in the fourth quarter, looking to the end of Fonkoze’s fiscal year on December 31st. And we are faced with having to write-off an unusually high number.

The reason for this is worth explaining. We are completing a year of hurricane credit, the loans that Fonkoze offered members who had been affected by the storms in August and September of last year. The loans were interest-free for the first six months. After that, the interest rate was subsidized to less than half of what the institution normally charges. These loans went to members who had lost their homes, their businesses, or both. Fonkoze eliminated the interest due on any credit already in the women’s hands, and then recapitalized them with a new loan in the amount of the loan they had taken most recently.

Fonkoze’s evaluation unit did detailed studies of a large number of hurricane credit borrowers at the time they received their loans, and the follow-up is still pending, so we can’t yet speak in very clear terms about the degree to which the loans helped people re-establish themselves. But anecdotal evidence about and from our members is plentiful and positive. And the financials are pretty good. System-wide, 80% of the money that was lent out has been repaid. In Marigo, the percentage is slightly lower.

But the hurricane credit loans that are not paid by the end of December are to be written off. Some of the credit out there is in the hands of women who are still working to pay it back. They have businesses, and are making repayments, but they are behind schedule. Some of the money is, however, in the hands of women who have no realistic chance to eliminate their debt. The loans did not enable them to re-start their business. It might be because sickness or death in their family during the year burned through their capital. It might be because their reduced level of income was too small to feed their family and send their children to school, so their assets slowly dwindled to nothing. It might be that the range of needs they had at the moment when they received the loans – to rebuild a lost home, replace furniture or clothes, or to feed hungry children – was so great that the money never went into a business in the first place. Despite Fonkoze’s efforts, livelihoods in Haiti became even much more fragile than they already were before the storms, and the impending write-offs are a direct consequence of that fact.

So our office’s whole emphasis for the next two months is to try to collect as much of the money, especially the overdue hurricane credit money, as we can before the end of the year. We laid the groundwork for part of that effort over the past six months as we improved our relationship with our credit centers’ elected chiefs and renewed an emphasis that had been flagging in Marigo on center attendance. We’re seeing more of our borrowers in their centers than we used to, and their chiefs are doing more to help us keep close track of their fellow members. Centers in places like Plantiyon, Chodri, Ravinpal and Lilankou have really turned themselves around.

But another part of that effort involves a kind of work we did little of in my first six months in Marigo. It’s called “suivi delenkans”, or “delinquency follow-up.” It involves visiting the women who are behind in their repayments at their homes or the markets where they do business.

The strategy is based on an assumption that is widely held among Fonkoze’s Haitian staff – which is more than 98% of us – that many women could pay if they felt more pressure to do so.They believe that some women, when they discover that Fonkoze can’t or won’t make them pay, will simply decide not to.

I want to be careful about this. Although it’s true that my Haitian colleagues speak of “bad faith” among some of our delinquent borrowers, I think the reality is complicated. I’m not inclined to look at the question from the perspective of the women’s moral obligation to repay their debt. There is something to that, of course, and probably have some members who have decided to take the money and run. We also have women who are so committed to making good on their promise to repay that they probably do their families some harm. Such women have been allowed to borrow too much, and they and their children are paying the price. Though Fonkoze could not survive if large numbers of women refused to pay their debt, we would rather absorb some losses than see its members’ children go without meals. If the only reason for a woman to repay a loan is her moral duty to make good on her word, she should probably default.

Fonkoze’s job is to work closely with its members to ensure both that it is more advantageous for them to repay than to default and that they understand the advantages well. This involves helping them discipline themselves to invest their whole loan in their businesses, working with them to ensure that their loan is the correct size, and accompanying them as they learn to make their businesses increasingly profitable. If their businesses are functioning well, and they can see the good use they’re making of borrowed capital, then, unless they confront a crisis in their household, they’ll repay at a very high rate. That’s been the lesson of microfinance worldwide, and in Haiti as well.

Meanwhile, we have been going out into the field to try to collect delinquent loans. Our approach to suivi delekans has been quite different from other work that we’ve done since I came to Marigo. We are sending two-four staff members out together, rather than sending a single credit agent alone. The Marigo team feels as though this gives each visit extra weight. We are borrowing staff from the Jakmèl branch for some of these visits, because the staff believes they also gain weight from the presence of an unfamiliar face. Finally, the staff has unanimously asked me not to participate. They say that in cases where something like an extra visit is necessary at all, my being foreign can only undermine them. They feel that rural Haitians are too accustomed to viewing foreigners as the bearers of gifts. So I’ve had to sit on the sidelines as credit agents and others have undertaken this important work.

So I can only report on these expeditions second-hand. They involve talking firmly with some borrowers and encouragingly with others. They have brought in some money – not a lot, but some – and have improved attendance at a couple of centers. But sending four people out into the field is expensive and hard to schedule, especially if it involves borrowing someone from a neighboring office. So we’ll need to be careful in our planning, making some good guesses as to when and where such an expedition might help.

But on January 1st, though we expect to be a smaller office after write-offs, we also expect to have a portfolio that’s in pretty good shape. Then we can return to the emphasis on reconstructing broken credit centers that has been our priority since I moved here, even as we recruit new members into those of our centers that are functioning more or less. Our intermediate goal, though not our ultimate goal, is to get our office to the point at which it can break even, and that requires a portfolio both larger and cleaner than ours now is. Write-offs are, unfortunately, part of cleaning it up. Better to stop counting on repayments from women who can’t or won’t pay back.

And it is certainly the right decision to write them off because making the branch marginally profitable is only an intermediate goal. It is, more precisely, a means. It is the means by which we make helping women remove their families from poverty sustainable. Only when this office can generate the income it needs to cover its expenses will we be able to guarantee that the work can endure.

The credit center in Tèsè has been like a little gem for us. It’s a relatively new center, just a couple of years old. But its members are wonderfully regular about coming to meetings, and very good about making their repayments. Clotude, their center chief, is forceful, but also popular. Their loans have been growing, with some of them already managing as much as 11,000 gourds, or about $270. Things have been going pretty well.

It’s not as though they haven’t had problems. In May, we gave awards to the centers we work with that had no delinquency. Tèsè had none at the time, but did not win recognition because the reason it had no delinquency on our books was that we had just written off one of its larger loans. The woman who defaulted, Silvena, had never really had a business. She would simply turn her loan over to her husband. The Tèsè members knew this, but they didn’t give it a thought, because they knew her, and she repaid regularly. But when the husband left home to try to earn a living in the Dominican Republic, he walked away with the whole loan and she had no way to repay. The Tèsè women brought me to her home so that we could try to work something out, but we got nowhere.

The truth is that they were angry and worried, and they wanted me to arrest Silvena. When I pointed out that I am not the police, they said it didn’t matter. I could bring her to my office, and tell her she couldn’t leave. She’d obey. They thought that, until she repaid her portion of the loan they had taken together, they would be unable to get new loans themselves. They said her family would come up with the money somehow if they felt threatened.

But when I got to the house, I found Silvena, a sickly-thin young woman, with her even-thinner mother, and a skinny but lively little girl. There was a very small pot on a little fire in the yard, but it didn’t appear to have much inside it. Fonkoze is not in the business of making life harder for those already on the edge of survival. The leverage we have as we try to collect low-performing loans is limited. So we assured the women that their loans would not be delayed by her default, and we wrote off Silvena’s loan.

That was March. When I attended their first meeting in September, Clotude welcomed Silvena to the center as a special visitor, and informed her fellow members, their credit agent, and me that Silvena had come with more than half of what she owed. Apparently, her husband had send her some money. Silvena looked much better. The women gave her warm applause as she counted out the money. Everyone seemed pleased and hopeful about how it was turning out.

When Ilionna started to run into trouble, they reacted differently. She is an older woman, the mother of a grown daughter who had three children of her own. She and her group got their most recent loan in June, and her problems started right away. Her mother-in-law became ill. Since she and her husband thought she could take better care of his mother than he, she gave him her loan and sent him to Port au Prince to do her buying. A reasonable division of labor.

He was mugged and robbed, beaten up badly enough to require hospital expenses on top of the lost loan capital. He then got sick — Clotude thinks that it was the stress of the loss that made him ill — and that ate up even more of their money.

So Ilionna found a job in Jacmel, as the maid in a rich family’s home. It pays poorly, and interferes with her ability to run her business, but it brings in something, and the truth is that most of her business capital is gone anyway.

By working hard, and selling some livestock, she was able to make a payment and a half by mid-August, about six weeks late. She managed to pay the late fee as well. She worked things out with her employer so that she could take the days of her center meetings off, and, so, stay involved. She wanted to be sure she’d be ready to recapitalize her business with a new loan on schedule.

But disaster struck last week. One night, Ilionna’s daughter called Clotude, who is her neighbor, over in the middle of the night. Her five-month-old seemed sick. Clotude described how she felt the child’s arms, her legs, and finally her face for any sign of warmth or breath. She found none. The child was dead. The very least part of Ilionna’s loss was the fact that the money she had collected to bring her repayments up-to-date went towards her granddaughter’s funeral.

It is hard to talk about loans at such a moment, but that is the side of things I deal with directly. And Ilionna’s case brings out the fragility of the tools we can make available to women here, a fragility made worse when credit is given recklessly, without sufficient attention paid to building in as much of a safety net as circumstances here allow.

Fonkoze’s credit is designed to help women face even such grave obstacles to progress out of poverty. A credit center should have between thirty and fifty women, organized into six to ten groups of five. When women have small problems — a payment is a few gourds short — the four other members of her group give her a hand. When more serious problems occur, the whole center gets involved. Most of the financial problems a Fonkoze member would face in the ordinary course of affairs — I’m not thinking of the hurricanes that can wipe out whole regions — are manageable when her center divides them by thirty to fifty.

But the portfolio in Marigo was developed carelessly. The staff here wanted it to grow as quickly as possible, and they lacked to patience to do things right. One consequence is that some women were given bigger loans than they could manage. Another is that some women received loans without our office ensuring that they had real businesses they were investing in. But a third was that loans were handed out in new centers before those centers were to scale.

Normally, a center should start with four or five groups. A credit agent will recruit groups in a neighborhood, and won’t hand out credit until there are four or five ready to join. Two or three might get their credit first, but only when the others are already in line to join them.

But the center in Tèsè opened with just two groups, or ten women. One woman dropped out early on. Then we had to write off Silvena. That leaves just eight members, and even in the best of times, it would be hard for a group of eight women to step in to help Ilionna right now. And these are not the best of times. Her problem exceeds their ability to pitch in.

I went to the center yesterday to talk to them about Ilionna’s plight, and about how it underscores the danger they all face. We have been talking with them for almost two months about recruiting new groups, but they’ve made little progress. They are rightly careful about the kind of neighbor they invite to join them. They want women they can count on. Now they are ready to add one more group next month, and we’ll congratulate them when they do, but it isn’t really enough. I think they are now beginning to understand how important it is for them to make their center grow, but we’ll have to wait to see whether they can find he kind of fellow-members they are looking for.

For months I’ve been bemoaning the way the Marigo portfolio is divided into too many centers that are too small. I’ve thought of it as one of my hardest management issues: how to help a reduced number of credit agents serve the number of centers we have to serve. But watching Ilionna’s experience in Tèsè demonstrates that the management issue is the smallest part of the problem.

The other seven women in the Tèsè center will have problems, too. It’s easy to imagine losing them because they lack the protection that a well-built center provides. But if we can help them grow to a core of five or six groups, Clotude’s leadership could make them one of the strongest centers we have.

One of our successes these last months has been in starting to rejuvenate the portion of our loan portfolio in downtown Marigo itself.

This is important to us. On one level, there is question of our own morale. It means a lot to us to feel ourselves in the midst of borrowers whom we can watch as they succeed. The Fonkoze members we see every day, our closest neighbors, are starting to do much better than they were six months ago, and that makes it a lot easier to feel encouraged in our work.

On a more serious level, Fonkoze has seen other offices struggle mightily once they lost the part of their portfolios closest to them. Those are the areas a branch can serve least expensively. The higher profits we make on loans to nearby borrowers can help defray the higher costs of serving more distant members. These areas often offer members with a greater capacity to borrow and invest than those in harder to reach places, so they contribute significantly to a branch’s ability to make its portfolio grow.

Marigo may not have much of a downtown, but it does have one. So we realized that repairing the very damaged credit center there, where the majority of members weren’t making repayments, weren’t coming to meetings, or weren’t doing either, had to be a high priority. And we’ve made progress.

We started by splitting the large center into two smaller groups. One is for a number of members who had been repaying regularly, but not coming to meetings. Their businesses have been managing to hold their ground or even to grow, but they aren’t in Marigo. They are on the Dominican border in Ansapit. It’s a long boat ride from Marigo, one that our members hesitate to make too often, especially during hurricane season. By offering them the chance to hold their two monthly meetings on consecutives days, we figured we’d cut their necessary trips in half, and make it easier for them to meet our expectations. (See: Creating a New Center.)

The other center is for the remaining members, women who, for the most part, were neither coming to meetings nor repaying their loans. We have been investing heavily in re-establishing this half of the center. The credit agent spends a day or more before each meeting going door-to-door, reminding members of the upcoming meeting, talking to them about their businesses and their prospects for repaying, and getting their help in locating borrowers with whom contact has been lost.

The work has been paying off. Members of the stronger of the two centers have been repaying more or less as they always do, and have been coming to the center more regularly.

More and more members of the weaker center have been coming to their center as well, and some of their delinquent repayments have started to come in. They recently elected a new center chief – the original chief of the combined center is now with the stronger group – and thus the handful of them who have succeeded in repaying what they owe were able to request new loans. It is, once more, a living center. Seeing their fellow members get new loans can only serve to encourage further repayment.

We are beginning to feel a very moderate, but distinct degree of optimism. But progress is not continual, because the barriers to progress are not only our own correctible errors, but problems our members face that are perfectly real.

Attendance was down at this month’s meetings of the new, stronger Marigo center. And, what’s worse, some of the center’s members failed to make the payments that were due. We have to take this very seriously, not just because of the money or because of the importance we attach to this particular center, but also because these are women who have always paid very well. In the midst of the worst times for Fonkoze Marigo, these women would consistently make their repayments. They would pay even if they were bad about coming to meetings. They would pay even while wondering out loud why they should repay their loans when so many other women were failing to do so. They are terrific borrowers, already able to manage significant loans and probably capable of growing.

The problem is related in part to the sardines, which I mentioned last week.
(See: Salami and Sardines). The sea has been calm and clear lately, making fishing easy. And it’s been rich as well, yielding lots of fish. The women who were not able to repay are fish merchants. They buy in large quantities from the fishermen who work the coastal waters east of Marigo, and sell to other merchants from Jakmèl and Port au Prince. The price of fish has fallen to the point that they were not able to make enough to feed their families and repay their loans.

And the situation is more difficult than that. I happen to know one of these women well, better than I know any other of our members, and so can speak of her situation in detail. Her name is Emirène. She is my next-door neighbor and landlady in Marigo. Her fourth child, Jean Manno, is my plumbing. About once a week, it is his job to fill the barrel of water in my bathroom. Now that school has started, I help him and his younger siblings with their homework after I leave the office each day.

The timing of the crash in the market for fish couldn’t have been worse, and it’s precisely the opening of school that’s the problem. Emirène has eight children in school: her own seven and a young niece who helps Emirène’s mother with chores. She and her husband, a diabetic fisherman, also support her mother, a deaf friend of her mother’s, and her husband’s two older children. It’s a considerable household.

But let me stick to the school costs for a moment. Though the Haitian constitution promises free, universal primary-school education, the government delivers nothing of the sort. Less than 15% of schools in Haiti are public. Emirène is paying private school tuition and buying uniforms, books, and other school supplies for all eight kids just at the moment her income is at its lowest. What’s worse: Her clients’ children started school this month as well. A lot of them bought from her on credit so that they’d have the cash to send their kids to school. Emirène’s finances are a mess. And she’s sick about it.

My own management probably made things harder for her. One of the first things I did when I came to Marigo was insist that we hold members accountable for their attendance at meetings. It’s something we say we require, and our borrowers agree to attend meetings. It’s one of the conditions we stipulate when they get their loans. But the Marigo staff hadn’t been pushing the point. When I started approve new loans for members who were ready for them, I did it with attendance sheets in hand. Members who missed several meetings would get lower loan amounts, even if they had repaid their loan on time. I thought that this was the least I could do towards showing that we really do expect them to come.

Emirène fell into this category and received a much smaller loan than she had wanted, and this had a big effect on her income. She used to have two businesses: her main one selling fish, and a smaller one selling cases of soft drinks to retail merchants. When her childless aunt died in April – yet another person she was responsible for – the funeral expenses ate up her soft drink business. She had hoped to reinvest in it with her new loan, but the amount she received was too small. So her second, smaller, but more regular income stream, disappeared.

All I can try to do now is help her avoid slipping into a cycle. If she continues to struggle to repay her current loan, she would ordinarily qualify for an even smaller one when it’s repaid. This will further reduce her income, ad make it even harder to reestablish her second income stream. By the time she sets her business back on firm ground, it could be much smaller than it was. And she could be poorer.

That’s not our goal. So we will need to maximize what we can prudently offer her, and get it to her as soon as she’s ready. Making the right call will take a lot of conversation. With her credit agent and, more importantly, with her. But it’s certainly the only way to help her start moving herself forward again.