The international financial institutions (IFIs) are working with Haiti to rebuild its financial system from scratch, officials have told Emerging Markets.
Interbank transactions and government payments are made manually, after the computerized system was knocked out in the earthquake of January 12. The first step is to restore computerized payments; the second is to take the opportunity to push through reforms, officials believe.
“The restoration and modernization of the payment system will be central,” Corinne Delechat, IMF mission chief for Haiti, said.
The Banque de la Republique d’Haïti (BRH), the central bank, is studying technical advice and offers of aid from multilateral and bilateral agencies, prior to deciding what type of telecommunications and information systems to install.
World Bank and IDB experts are working with the central bank to identify the best approach for restoring the real-time payments system. The financial telecom system will have to be replaced, Juan Buchenau, senior financial sector specialist at the World Bank, said.
The tax administration has technical advice it requested from the US Treasury’s
Office of Technical Assistance; the World Bank is also helping to re-establish the taxation structure and systems. At the customs agency, the Canadian government is building on previous work to restore operations.
Andrew Powell, the IDB’s regional economist for the Caribbean, pointed out that private-sector lending must be renewed to enable firms to repair damaged facilities, replace equipment, relaunch production and employ workers. “We [the IDB, IMF and World Bank] are working closely together to understand the situation of firms, their need for credit, and how banks can respond,” he said.
The recovery of Haiti’s financial system will include important reforms, including “the establishment of a credit bureau, a security registry for collateral, a land registry and reform of insolvency legislation,” Delechat of the IMF said.
Haiti operates primarily as a cash economy. Its 9 million population has only 40,000 cheque accounts, and 90% of transactions are completed in cash. Cooperatives reach about 1 million clients, and microfinance institutions provide financial services to about 250,000 people. Reconstruction must include a broadening of the financial system, officials believe.
A partial credit guarantee scheme is being designed at the central bank’s request. President Rene Prevals government, the central bank and private banks are defining which firms would be eligible for the guarantees. Buchenau of the World Bank said there is a need “to design [the fund] so you don’t guarantee the loans of customers that are not viable, and don’t subsidize businesses that are viable on their own.”