Zafèn

By Barbara Magnoni

The golden way is to be friends with the world and to regard the whole human family as one.  Mahatma Gandhi

Zafèn, a crowdfunding platform that supports Haitian entrepreneurs is celebrating 3 years of operations. I would like to celebrate along.

Since its inception, Zafèn has raised $1.6 million for 300 entrepreneurs and social projects in 33 cities around Haiti. The enthusiasm around the projects in this relatively new platform is especially impressive in a country where entrepreneurship is often stunted by a lack of infrastructure, government bureaucracy, and corruption. After all, Haiti is second to last in the World Bank’s Doing Business Ranking for starting a business worldwide (only Djibouti outranks Haiti worldwide with 185 vs. Haiti’s 183 days on average to start a business). I am sure that I am not alone in wondering, who would “bank” on small businesses in this environment?

The answer is primarily Haitians! Zafèn has worked hard to mobilize and inspire Haitians to bank on their own people, leveraging a trusted and professional platform that can help them identify projects with reliable leaders and sufficient oversight to ensure that lent money is repaid (83% of loans to Zafèn businesses are re-paid).

The mechanism is crowdfunding, which offers investors the opportunity to put small amounts of money into a common “pot” to invest in a project or business.  Jennifer Powers and I wrote a paper in 2008 looking at some of the early crowdfunding models, particularly those that aimed to fund small businesses in developing countries. The paper: P2P Lending is Financial Democracy a Click Away, highlighted early on that these platforms leverage social goodwill and are able to pool small amounts of funds in an unprecedented way. We identified over USD200 million in crowdfunding investments back then.  We could not have imagined the growth of this sector in only four years. In 2012, Crowdfunding websites raised a record USD 2.66 billion. What is terrific about crowdfunding is that to different degrees, it allows for investors with limited resources to participate. KIVA, the most widely known microfinance lending platform has already raised USD 427 million for its 191 microfinance institution partners and their borrowers, for example.

Where Zafèn has been truly innovative, however, is in marrying the crowdfunding concept with diaspora outreach. It has shown that diaspora crowdfunding is not only good for businesses seeking funding but that it offers the diaspora an opportunity to link into the social and economic development of their home countries and make their money count. Yet the promise of Zafèn faced some important obstacles:

·         Lower education: 22% of Haitian immigrants (ages 25 to 65) in the US have not graduated from high school vs. 9% of native-born Americans.

·         Greater poverty rates: 20% of Haitian immigrants and their young children (under 18) live in poverty vs. 11.6% of native-born Americans.

·         Lower home ownership: 49% if Haitian immigrants own their own home vs. 69% of native-born Americans it is 69 

·         Distrust of Haitian institutions: Many Haitian entrepreneurs recall their own or family’s difficult experience of running businesses or developing social projects in Haiti and have a distrust for institutions in the country.

While these are certainly obstacles, first and second generation Haitians are rapidly joining the ranks of the middle classes in Canada and the US. Additionally, Haitians send a lot of money home – Haiti’s USD1.5-1.8 billion in annual remittance receipts place it 7^th worldwide in terms of the ratio of remittances/GDP.  The potential is enormous and crowdfunding overcomes some of obstacles, for example, low purchasing power, by reducing the threshold for entry (USD 25 investments are welcome). It also reduces “softer” obstacles such as lack of trust by offering the pre-screening and monitoring of projects by a reputable intermediary so as to reduce the “guessing” on the part of investors. What I find particularly inspiring about Zafèn, however is that it is more than an investment vehicle, it is a space to create a cross-border community where members understand that their futures are intricately inter-linked:  a “whole human family” as Mahatma Gandhi said in the quote above.

Ms Barbara Magnoni is President of EA Consultants, a development consulting firm based in New York. She has over 18 years of international finance and development experience and has worked with organizations including Goldman Sachs, Chase and BBVA and has advised institutions such as the International Finance Corporation, the US Agency for International Development and the International Labour Organization. She may be reached at +1 212 734 6461 or bmagnoni@eac-global.com.

By Will White

“Where did all the Haiti earthquake relief money go?” I hear that question a lot and see regular news stories on how money was wasted, contracted to foreign companies or just promised but not actually given to Haiti.

I am a pilot with Mission Aviation Fellowship and have lived, with my family, in Haiti for 13 years.  We were in Port-au-Prince during the earthquake in 2010 and slept in the street like everyone else, wondering if the next tremor would knock down our house.  In the following months, many of our friends and family wanted to help Haiti in a more personal way than just donating to a large organization. They would give us funds and simply say “use it to help Haiti how you see fit”.  Of course a lot of money went initially for basic shelter, food and water throughout different Haitian communities.  But soon I wanted to use the money in a way that would have a more sustainable and deeper impact in Haiti.

Having flown passengers and cargo for Fonkoze, I was familiar with their financial efforts in Haiti and their microloan programs.  At the end of February 2010, I contacted Fonkoze and asked specifically if I could sponsor a microloan project.  After a few emails back and forth I was told that soon there would be a program in place for individuals to connect directly with small business people in Haiti needing a loan. 

This was very exciting to me.  In the past I had tried to help friends with starting small businesses in Port-au-Prince.  Some worked out, others did not.  It is all but impossible for a small business to get a loan in Haiti.  And if they do, the interest rates are extremely high.

On April 28, 2010 with some of our own money and donated money, we made our first interest free “loan” to a small business in Haiti through Zafèn.  That was quickly followed by more, and as the weeks turned to months and then to years, the number of projects started to really add up.  It was very fulfilling to see the funds going directly to people in Haiti who were building a business and employing others.  I had seen too many large organizations come to Haiti with huge projects that lasted a short time and had little, if any, long term impact on the people here.  But with Zafèn I was watching as small business owners started or improved their business and in the process, created jobs in Haiti.  Not only did they employ more people, but those people generated business from their new income.

It is always encouraging to receive an email from Zafèn saying I have received a payment back from a business.  Not only does that mean the business is thriving enough to pay the loan back, but now the money can be allocated to a new project helping a new business.

Recently my wife and I were able to visit two projects we had a hand in funding.  Oramen Bakery with Mme Alexandre was badly damaged during the earthquake and her delivery vehicle destroyed.  Today she is back employing several workers and making deliveries to their vendors in a used truck.  She has big plans to replace the wood fire oven with gas ovens in the near future.  This will reduce her dependence on local wood.

We also visited Nadou Studio of Beaute, a beauty salon and barber shop run by Mme Lamothe.  Seeing the need to offer expanded services and products to her customers, she received a loan.  Now she runs a thriving salon for both men and women.  She also has the ability to offer more hair and beauty products than before.  Her clients now come from throughout Port-au-Prince instead of just the local neighborhood.

Both of these are excellent examples of how a loan to small businesses in Haiti has an ongoing effect directly on the people receiving the funds, and on their surrounding environments as they employ fellow countrymen and provide needed services.  It is a trickle-down effect that helps the country help itself.  That is what we like to see and be involved in, when giving our money to help develop individuals, businesses, and whole neighborhoods here in Haiti.

By Katleen Felix

How can we improve the performance of our investments in Haiti? That’s the question that was confounding the Diaspora when the concept behind Zafèn was born. For decades, family and friends have supported relatives, businesses and social projects “back home” in the beautiful Caribbean towns we left for many different reasons, yet still love and always will.

Remittances between $100 and $300 per month are a constant, and the Diaspora wanted to do more. The pivotal moment came April 18,2009. More than one hundred Haitians living on the island and Diaspora now residing in Boston, New York and Miami were participating in a video conference with the Inter-American Development Bank and other partners that addressed financial literacy and investment in Haiti. Great ideas were flying across the airwaves.

Pierre Labaze, a Haitian New Yorker, was one of the strongest advocates for creating a Kiva-like financing platform exclusively for what we now call small growing businesses or small- and medium-sized enterprises (SMEs) in Haiti. A year later, it was launched, and this month, we are so proud to celebrate Zafèn’s third anniversary!

It has truly taken a village to make it happen. After that pivotal meeting, Barbara Magnoni of EA Consultants who co-authored a report on Person-to-Person lending, and I began looking for grants. The Haitian Hometown Associations Resource Group backed the idea. Anne Hastings, CEO of Fonkoze Financial Services, introduced the International Vincentian Family to the mix. The stars aligned, and together, we established an online funding source to stimulate collaboration between Haiti-based business owners, the Haitian Diaspora and caring people everywhere interested in developing the Haitian economy.

For the past three years, Zafèn has been presenting businesses and social projects to the public that have been screened for their potential viability and likelihood of contributing to Haitian economic empowerment. Due diligence is conducted by business analysts who work for Fonkoze, an alternative bank for the poor with offices across Haiti. The analysts submit the proposals to a committee for evaluation. Approved projects are posted at zafen.org to attract funding.

Congratulations to Zafèn for three glorious years of empowering Haitians!

To get involved, visit Zafèn to review great opportunities. Make a loan or donation, and join the conversation on  Facebook, Twitter and LinkedIn.

Katleen Felix is general manager of KANPE, a non-profit that seeks to end to the cycle of poverty by encouraging financial independence, and chair of the Haitian Hometown Associations Resource Group.