We are very much aware that the more than 2 billion smartphones used around the world today function not because of Steve Jobs’s singular genius, not even because of the private sector, but because of research and development funded by an entrepreneurial state.
Haiti does not have the research capacity to even compete in this circle of technological advances on its own. However, we know that technological innovation has raised standards of living, made populations healthier, safer and smarter, all over the world. There are three (3) barriers that hinder sustainable economic development in Haiti.
- Inferior Labor Market
The inferior labor market is primarily an effect of a failing education system that is afflicting many parts of the economy. Poor education is evident in Haiti from primary school through higher education. A large percentage of Haiti is uneducated and illiterate, especially in the rural parts of the country.
2. Lack of Access to Capital
In addition to an inferior labor market, Haitians also struggle to find investment capital, limiting their entrepreneurial opportunities as well. Access to capital is the toughest constraint for Haitian entrepreneurs. Many Haitians have legitimate business ideas and produce sound business plans, but there are simply no opportunities to achieve access to financing. Very little financing is available because investors by nature want to make investments that offer a good opportunity to earn a return with minimal risk. However, Haiti presents a higher risk due to its history of political insecurity and unrest, in addition to its unpredictable and complex business environment.
3. Lack of trust
Businesses in Haiti routinely look to cut corners for their own benefit, especially when they know they can get away with it. In the absence of stronger institutions that could enforce a rule of law, we need to create an environment conducive to positive social impact through value investments with financial gains.
We need to address these three barriers to sustainable development using primarily the principles of a circular economy through technical innovations, open leadership, and the popularization of credit.
#1. Each territorial division, communal Section, commune or Department shall have the essential educational establishments adapted to the needs of their development, without however prejudicing the priorities assigned to agricultural, vocational, cooperative and technical training, which must be widely disseminated.
#2. Crowdfunding takes the financing of small businesses out of the hands of uncaring banks and vulture capitalists and puts it into the hands of real people like the Madam Sara who can passionately support companies as a donor or investor. Therefore, the GoH could propose the adoption of Crowdfunding platforms to support access to capital for female smallholder farmers and other small producers in Haiti.
#3. The GoH should create a center of Research, Innovation, Commercialization for Human Entrepreneurship (RICHE). The RICHE center will engage the most capable among us in collaboration with our most zealous entrepreneurs to bring about a much larger middle class.
#4. In accordance with article 248 of the Constitution, the GoH should create THE NATIONAL INSTITUTE OF AGRARIAN REFORM to organize the revision of land and real property structures and to implement an agrarian reform to benefit Haiti’s economic development, help people in the rural areas with economic growth. This Institute shall create a Projet e-cadastre in concert with the DGI and should draw up an agrarian policy with advanced technological support geared toward the small farms while also building the infrastructure aimed at the protection and management of the land.
Extending Private Mortgage Access in Haiti
Like many emerging economies, Haiti has much of its capital locked in homes of low- and middle-income (LMI) households. The IMF estimated in 2002 that 95% of residences in developing countries have no access to mortgage capital.
In September, 2013, the Haitian Central Bank reported that Haitian banks had $111M in residential mortgage loans outstanding. Assuming that those mortgages are at the high end of the market, where current listings in Port-au-Prince range between $150,000 and $600,000, the number of residential mortgage holders would be well under 1000. If the “average” home value were $300,000 and the mortgage was at a 50% loan-to-value ratio, there would be only 740 mortgage holders in the country.
In the 2003 Census, 74% of households claimed ownership of their own homes. Assuming Haiti at a population of 10,500,000 people and an average household size of 7 people; 74% of the homes would be a potential market or 1,110,000 homes. If 20% of these homes took out a Home Equity Line of Credit of $30,000, the available capital to infuse into Haiti’s economy would be approximately $6,600,000,000.
Benefits of developing a broad residential HOME EQUITY LOAN market
Contribution to economic growth
Peruvian economist Hernando de Soto’s work shows that even those who live in slums possess far more capital than anyone realizes. Implementing his vision in Peru showed an annual GDP growth averaging over 6% p.a. from 2005-2014; despite significant drops in 2009 and 2014.
According to the Inter-American Development Bank (IADB), the percentage of Peruvians considered “middle class” doubled to 70% of the population between 2005 and 2011.
He and his colleagues calculate the amount of “dead capital” in untitled assets held by the world’s poor as “at least $9.3 trillion“—a sum that dwarfs the amount of foreign aid given to the developing world since 1945.
Key elements of the housing component of this growth included:
- Home-improvement retailers who focus on the large portion of the population that builds its own homes.
- Store-based credit cards and financing programs that permit the building process to accelerate.
- Mortgage-specialist private companies underwritten and/or guaranteed by government funds.
- Long-term macroeconomic and political stability that encourage families to take a long-term view of their future.
The current inflation plaguing Haitians has many sources and shortage of hard currency is one of the key factors.
Home Equity Loans would be funded by investors bring such hard currency with an attendant decrease in the Gourde/Dollar exchange rate.
The cash infusion would create a significant increase in the cash in circulation in the country, with all the benefits that could bring to both production and consumption of goods and services increasing the disposable income of the middle class.
Tax revenues would increase from the banking transactions themselves in addition to all the second- and third-order transactions that would ensue. A 2005 OECD analysis, Housing Finance Markets in Transition Economies, made the following key observations about how to establish a well-functioning market/customer-based mortgage lending system Establish sophisticated risk management techniques of mortgage lending for low- and middle-income households.
Develop mortgage products to stimulate mortgage issuance. Consider critical requirements of mortgage design for low- and middle-income households (e.g. plain and cost-efficient instruments for borrowers, low-risk instruments for lenders, and effective mortgage insurance scheme).
Make the best of secondary market funding arrangements (mortgage covered bonds/MBS) as effective risk controllers.
Attract institutional investors such as pension funds and insurance companies to the secondary mortgage market, which will particularly contribute to growing mortgage markets, improving liquidity and developing the mortgage market infrastructure.
Resolve land ownership disputes
As in Peru, clear title to the land in Haiti that homes are built on is often problematic but can be resolved with technology like e-cadastre. A means for resolving this problem is essential. The resolution also opens the possibility of mortgaging land to further increase the economic growth from increased capital in circulation.
In conclusion, we need a government at the service of its people. A friendly government. An open government. A transparent, functional, agile and entrepreneurial government. We need a nation in which the inhabitants of the Communal Sections have the right of preemption for the exploitation of the State’s land in the private domain located in their locality, in accordance with article 39 of the Constitution.