Haiti’s investment landscape is characterized by a sophisticated banking sector, but one that is risk averse and largely inaccessible to small to medium-sized enterprises (SMEs). The country’s nine commercial banks have total assets of over US$4 billion and a combined outstanding loan portfolio exceeding the country’s cumulative level of Foreign Direct Investment between 2004 and 2013. However, the banking sector’s focus on large-scale transactions and microfinance initiatives has left a significant gap in financing for SMEs.
The capital map of Haiti illustrates the country’s investment landscape, with a large number of financiers operating in the country, including commercial banks, Development Finance Institutions (DFIs), and equity funds. However, a significant portion of these organizations focus on transactions above US$3 million or provide targeted financing for micro- and small entrepreneurs. This has created a “missing middle” of enterprises that are too large to qualify for microfinance but too small to access equity from major investors or secure affordable debt from local banks.
The banking sector’s risk aversion is attributed to various factors, including currency risk, potential for political instability, lack of organized financials, and high default rates. Central bank policies, such as increased reserve rates and attractive returns from bonds, have also dissuaded banks from lending to SMEs. Despite the Development Credit Authority (DCA) program’s efforts to incentivize Haitian banks and microfinance institutions to take on riskier loans, the program’s limited support for lending between US$100,000 and US$3 million has hindered its effectiveness.
Non-deposit taking financial institutions, such as the Fonds de Développement Industriel (FDI) and Société Générale Haïtienne de Developpement (SOFIHDES), have emerged as key players in filling the financing gap for SMEs. FDI, a development finance institution backed by the Government of Haiti, offers attractive terms, including average interest rates of 10%, and focuses on value-add sectors such as agriculture and manufacturing. SOFIHDES, a Haitian development finance institution with over 30 years of experience, has an active portfolio of HTG 800m (US$16.5m) serving 180 firms with an average loan size of about US$90,000.
The Haitian government’s efforts to support SMEs, such as the establishment of the FDI and the DCA program, have been instrumental in addressing the country’s investment landscape. However, the lack of access to financing for SMEs remains a significant challenge, and further initiatives are needed to bridge the gap between microfinance and equity financing.