Thursday, January 21, 2010

after the earthquake

As the Haitian people recover from the tragedy of last week, System D--the informal economy--is playing its part.

Government officials and businessmen tell Reuters that street markets and street hawkers are back in operation in Port-au-Prince. That's hugely good news. As usual, the informal economy is back up and running before the banks and the rest of the formal economy.

2 comments:

NorthStarSTL said...

Do you think that micro-financing organizations such as Kiva will play a significant role in helping Haitians rebuild their country? Do you think micro-financing is formalizing informal markets or vice versa? Microfinancing - Pros? Cons?

rn said...

NSSTL:

I fear that microfinance is not set up to play a major role in post-disaster situations. It's simply too small and too scattershot.

Microcredit is geared to providing a tiny increment to individuals. It has much value. But in many dense cities, entrepreneurs are ready for much more. And the need for infrastructure is so great in post-earthquake Port-au-Prince that it dwarfs the very value microcredit has. What works in normal times -- small, unscaleable loans -- has no impact in a disaster zone.

A small suggestion: the idea of microcredit should be expanded and ramped up. We need a kind of venture capital program for small businesspeople. And we shouldn't worry about whether those businesses are licensed or regulated. Local people simply have to make sure they're doing what they said they'd be doing and keep them accountable.