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US remittances keep the homeland afloat

Money changing hands, Haiti 2008
(Feinstein Centre/Flickr)

Haiti's economy depends on the estimated US$1.5 billion a year in remittances sent home by its million-strong diaspora. Dilip Ratha, lead economist at the World Bank, said the figure could be even higher, accounting for perhaps half the national income.

The money is funnelled into the country via banks, transfer agencies or informal "mailmen" (facteurs), who make deliveries for friends and family, sometimes for payment. A 2007 Humanitarian Policy Group report for the Overseas Development Institute estimated that "an unknown but certainly large" amount of remittances were delivered this way.

The 7.0 magnitude earthquake on 12 January 2010 halted non-emergency travel into Haiti for a time, putting a temporary stop to the facteurs and preventing the central bank from distributing funds to branches in the countryside. Haitians in the United States and elsewhere were forced to find other ways to help relatives.

One place they turned was Fonkoze, a microfinance institution with 42 branches scattered throughout Haiti, which works with money transfer services like MoneyGram and Unitransfer, and the City National Bank of New Jersey.

"A woman in New Mexico called me in a panic - she hadn't ever done anything like this before," said Katleen Felix, a New York-based liaison for Fonkoze. "There were many calls like that."

''Haitians were plundering their bank accounts, cashing out their 401K retirement savings accounts, maxing out credit cards, and holding fundraisers''

Money flow

To keep these vital funds flowing, US Senators John Kerry (D-Massachusetts) and Evan Bayh (D-Indiana) asked Western Union and MoneyGram money transfer services to reduce or eliminate fees for people sending money to Haiti.

Western Union noted that it had reduced its transaction fees on 15 February, and would maintain them through 31 December 2010. Moneygram said it had offered $1 transfer fees in the wake of the earthquake, but on 14 February it had returned to its normal pricing schedule of 2.4 percent on average. Both companies detailed charitable assistance they were providing to Haiti.

Also helping the flow of money is the decision by the US government on 18 January to allow 200,000 of the roughly 500,000 undocumented Haitians in the US to be granted "temporary protected status", preventing their deportation for 18 months and enabling them to use formal remittance networks. Many believe the status will likely be extended for at least an additional 18 months.

Hervé Sabin, founder of the Rural Haiti Project, which runs a number of youth development programmes in the Haitian countryside, said the remittance networks allowed money to arrive in the country in a "structured manner", and this was vitally important in a time of such instability.

The director of the remittances and development programme at the Inter-American Dialogue in Washington, Manuel Orozco, agreed, but thought the structure could be improved. Before the earthquake Haiti had about 400 remittance transfer points, "a relatively small, insufficient number, given the volume of monthly transfers that enter the country," he said.

Western Union and other wire transfer offices in Port-au-Prince open for the first time since Haiti's earthquake

UN Photo/Sophia Paris
Western Union and other wire transfer offices in Port-au-Prince open for the first time since Haiti's earthquake...
Thursday, March 11, 2010
US remittances keep the homeland afloat
Western Union and other wire transfer offices in Port-au-Prince open for the first time since Haiti's earthquake...

Photo: UN Photo/Sophia Paris
Western Union re-opens in Port-au-Prince

Improving the network

"Modernizing the networks and promoting access will contribute to development: half a million of remittance-recipient households have a stock of savings between $200 and $1,000, the majority kept informally," Orozco noted.

"Funnelling those savings through banks and microfinance institutions could increase the country's meagre credit portfolio available for small businesses, which currently represents only 5 percent of all credit."

The World Bank's Ratha pointed out the "need to leverage these flows for local and national development (without directly interfering with these flows). The challenge would be to tame a temptation on the part of the government and the donor community to treat remittances as a substitute for aid or public spending on rebuilding efforts, especially in communities where migrants' relatives reside."

How much money will Haitians be able to send home? Fonkoze's Felix said they were plundering their bank accounts, cashing out their 401K retirement savings accounts, maxing out credit cards, and holding fundraisers. Orozco cautioned that the "capacity of the diaspora to help its homeland beyond current levels is quite limited."

Antoine Coq, a teacher in Brooklyn, New York, who is active in Haitian community organizations, conceded that the economy was sagging, but felt that the diaspora would "rise to the occasion. We will use all means necessary to help Haiti."


This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information:

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