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Haiti - Economy : Revival of the credit market in Haiti
16/12/2010 11:01:53

Haiti - Economy : Revival of the credit market in Haiti
The World Bank Board of Directors approved a US$3 million grant to Haiti to support a partial credit guarantee program to help local banks and cooperatives restructure the loans of borrowers affected by the earthquake. The grant will also help restart lending in anticipation of a stronger demand for credit in the context of the country’s reconstruction.

"The project will benefit local banks and cooperatives, as well as firms and individuals, especially those who have been affected by the earthquake and need temporary relief to continue running their businesses," said Yvonne Tsikata, World Bank Director for the Caribbean. "These resources will be leveraged by grant funding from other donors, and form part of a larger initiative to revive the Haitian credit market."

The grant will help reduce the credit risks of financial institutions on small loans to borrowers affected by the earthquake, and micro, small and medium enterprises and housing loans. In addition, the grant will provide technical assistance to the financial sector by designing and putting in place measures to remove obstacles to credit growth.

Specifically, this US$3 million grant will support:

  • Stabilization of the banking sector: Eligible financial institutions will be able to restructure loans without damaging their asset base, since credit risk will be shared with the partial credit guarantor.
  • Rehabilitation of the productive sector: Many firms and borrowers have lost collateral and have difficulty accessing financial resources for reconstruction.

The guarantees will place firms in a better position to negotiate loan restructuring with their financial institutions, obtain new loans and continue running their businesses.

In the aftermath of the January earthquake, the World Bank is providing US$479 million in reconstruction support. Of those, US$320 million have been already provided for various government-led projects under new and ongoing projects, US$39 million were used to cancel Haiti’s Bank debt and US$49 million from the Bank’s private sector arm, the International Finance Corporation, were used to support Haiti’s private development.

The Bank’s response following the earthquake has focused on improving the lives of those affected while contributing to build the foundations for a long-term recovery. Emergency projects have included: rebuilding state capacity, clearing the city’s drainage canals to avoid flooding, feeding school children, providing solar energy to displaced Haitians, assessing housing damage and rebuilding crucial roads and bridges for the delivery of aid.

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