Micro, Small, & Medium Enterprises in Haiti: What Works and What Doesn’t

The majority of labor in low-income countries (LICs) differs from wealthier nations in the scale of formal employment opportunities. The other opportunities available to most, those who are in self-employed, seasonal or rural subsistence and ‘contract only’ jobs, are generally referred to as the informal sector: a concept first promoted in the 1970’s by the Caribbean’s Princeton/Nobel Economist W. Arthur Lewis and the ILO in their World Employment Project working papers on Kenya. This process has largely been expanded into several more methodical typologies based on the urban condition of employment.

A ‘booth’ selling knick knacks and candies.

A more common vernacular of the informal sector is portended by the behavior of micro, small, and medium enterprises (MSMEs) manifested by people that serve many roles: street vendors, hawkers, handicrafts production, basic services, as well as local transportation and markets that all live in a grey area of permitting and taxation. This area of informality is often referred to as ‘System D,’ estimated to represent more than 1/3 of the global economy (with large margins allowing for more illicit activities). Nonetheless, this shadow economy is a major ‘functioning’ of developing countries, especially in the lives of the poor and poorest of the poor.

The effects of chronic poverty in Haiti and the country’s relative isolation from world trade have had a debilitating effect on this system. Poorly organized street markets and the lack of wholesale and prepared foodstuffs are indicative of food shortages, but in a way, there is still no ‘return to normalcy’ around Port au Prince, as a result of the mass displacement due to the 2010 earthquake.

Small businesses are limited in St. Marc, with fewer amounts of small clothiers, taxis, and convenience stores than expected; even restaurants, bars, and cafes are not readily available. Not too curiously the main street side businesses that do operate regularly here are water purification facilities and barber shops. Even cellular support services are little more than a painted table with the Digicell or Natcom logo, attended by a few young people. Also, there are the small lottery kiosks that line the roadways every ½ km. Although usually to the chagrin of the person trapped inside, they are not unlikeable and they are a far cry better than the brightly lit phone booths of East and South East Asia delivering lotto, cigarettes, beetlenut and whatever else.

Thought or Debate?

Analysis of MSMEs and the informal sector is usually a matter of interest to micro finance institutions (MFIs), as well as other ‘financial inclusion’ practices targeted at the implementation of poverty reduction strategies. How can the MFIs or other Financial Inclusion services (SHGs-India, VS&LAs-Africa) serve in these conditions given the lack of available capital and/or community trust?

Reused clothes are sold street side, in front of a brick and mortar business selling water treatment systems.

The Churches, NGOs, private education centers and money transfer places make up the majority of medium enterprises, although as nonprofit and financial institutions, they don’t truly fit this category. They still serve as the bulkhead of this portion of the economy, putting capital into labor and services at a higher rate than the shops and boutiques usually associated with medium level enterprises. Hotels usually fit this category too, although lack of tourism in Haiti has left these caught between two categories: ‘convenience,’ renting rooms by the hour, and ‘luxury,’ that sit mostly empty, nothing like the guest houses or resort hotels of many other places. With 30-40% of the Haitian government’s budgetary spending dependent on foreign aid and currently over 10% of GDP resulting from remittances, the relationship of petty entrepreneurs to supply and demand in the street is equally as important as small and medium size enterprises in their contribution to the general economy.

-Michael Lieberman; Infrastructure Coordinator – Saint Marc, Haiti

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