Delphin Investments and USAID: Working Together to Mobilize the Haitian Diaspora to Invest “Back Home”
This blog post was written by Emily Langhorne of USAID INVEST
In the late 1960s, the United Nations (UN) created a set of criteria to identify the countries that needed the most assistance to improve the lives of their citizens. These countries became known as the Least Developed Countries (LDCs). Their residents have, on average, shortened life expectancy, limited access to healthcare, low levels of educational attainment, and meager household incomes.
The UN published its first list of LDCs in 1971. Haiti has been on the list ever since. It is the only LDC in the Americas. Over 60 percent of the population lives on less than US$2.00 a day, and in 2018 approximately 14 percent of Haitians were unemployed.
“If you go to Haiti, you realize that one of the country’s fundamental problems is the lack of employment. People want to work, but there exist few opportunities for them to do so,” explains Jean-Marc Cuvilly, a finance expert who lived in Haiti until he moved to the U.S. for college. Cuvilly serves as the Platform Lead for Haiti INVEST, an activity under USAID INVEST that aims to assist Haiti’s small and medium-sized enterprises (SMEs) in accessing financing for growth.
“To combat the lack of employment, you have to find a way to support small and medium businesses because they are the backbone of employment,” explains Cuvilly. “Unfortunately, it’s an uphill battle to mobilize investment into any place that’s facing instability. Haiti does not score well in terms of countries to invest in, so it’s difficult for local companies to grow and create jobs because they have trouble accessing finance.”
SMEs in Haiti face many challenges when trying to access capital. Because there aren’t many local private equity funds, the demand for equity capital exceeds the supply. When it comes to debt, local banks are conservative when making loans because they operate in an environment with many political, economic, and social risks that could impact the market. As a result, they charge high interest rates.
“Capital is very expensive in Haiti,” says Cuvilly. “Local capital often is too expensive to make sense from a business plan perspective. When we launched Haiti INVEST and thought about encouraging investment into SMEs, we immediately concluded that we couldn’t rely solely on in-country capital since it is so difficult to access and that investment must also come from overseas. One overseas group that we thought might be well-positioned to invest but was not yet engaged was the Haitian diaspora.”
About 2 million Haitians — a sixth of the country’s population — live outside of Haiti. Over the past decade, remittances from the diaspora have exceeded both foreign aid and international investment flows into the country. In 2019, personal remittances to Haiti made up 38.5 percent of the country’s GDP.
“This is a group that is highly-motivated, well-educated, and successful,” says Cuvilly. “So far, it has mostly engaged with Haiti’s economy by sending remittances, but if only a small percentage of that money was used for investment rather than consumption of goods, it could make a real difference for the country’s economic development. Of course, not everyone in the diaspora is looking to invest, but identifying and enabling even a small percentage to do so would be significant.”
Engaging the Diaspora Through Investment Roadshows
To target the diaspora and educate them about investing in Haiti, Haiti INVEST decided to host a series of investment roadshows. Each roadshow event would showcase investment opportunities in Haiti, featuring presentations from Haitian entrepreneurs and panel discussions with investment experts.
INVEST released a request for proposal (RFP) soliciting applications from firms, asking how they would organize such a roadshow including their strategy for engaging the diaspora and identifying potential investors.
When Guy-Max Delphin, CEO and Chief Investment Officer of Delphin Investments, heard about the RFP, he thought his firm might be a perfect partner for Haiti INVEST.
Born in Haiti, Delphin moved to the U.S. to study medicine. In the second year of his pre-med program, he took an Econ class as a graduation prerequisite. His interest in economics grew, he switched majors, and after college, he landed a job on Wall Street where he spent most of his career.
A decade later, in 2008, he began working at Yale New Haven Health Care System. He managed its pensions, endowments, and operating funds. When the financial crisis hit later that year, Delphin decided that he wanted to spend the rest of his career building financial products that were focused on mitigating risk. In early 2009, he launched Delphin Investments based on the investment philosophy of protecting on the downside so that investors experience less volatility and receive better risk-adjusted returns over the long-term.
“To me, preserving capital as much as possible is a more conservative way to manage assets for pensions and retirement. Most of the products at Delphin Investments are built and managed with that philosophy, which also means not capturing all of the upside — not a popular philosophy during a bull market that started at the market bottom on March 6, 2009,” says Delphin.
When a 7.0M earthquake rocked Haiti in 2010, causing massive destruction and hundreds of thousands of causalities, Delphin decided for the first time in seven years to go home.
“I wanted to go and see how I could be helpful,” he says simply.
Shortly afterwards, he and a friend started Quisqueya Capital Advisors (QCA), a Haitian firm focused on helping local companies become investment ready. Through this work, Delphin gained on-the-ground experience working in his home country, and he became more aware of USAID’s presence there.
“The Haiti Mission is very active. They’ve been doing a great job, especially considering Haiti’s challenges,” he says.
A few years later, when he learned about Haiti INVEST’s RFP, he decided to respond through Delphin Investments, his U.S-based investment advisory firm. “When I heard about this opportunity with INVEST, I believed I had an edge, being from Haiti and understanding the local context there,” says Delphin.
He was right.
“When we read Delphin Investment’s proposal, what came through was a deep understanding of the context and a technical approach that was grounded in real-life experience and expertise,” says Katie Tilahun, Partner Manager for INVEST.
INVEST is part of a larger USAID strategy focused on enabling firms with niche expertise such as Delphin Investments to work alongside USAID in creating market-based solutions to development challenges. INVEST makes government contracting easier for firms, especially small firms and those new to working with USAID. It simplifies the proposal procedure through methods such as asking for a 10-slide PowerPoint proposal rather than a 50-page written one.
“If it hadn’t been for the INVEST process, I probably wouldn’t have applied,” says Delphin. “It would have been too much because our firm would have had to weigh the chance of winning the award against the cost of doing all that paperwork ahead of time. This process makes it more palatable for smaller or mid-size firms to decide, ‘Yes, this is worth a shot because the time spent on the RFP is worth the possible outcome of a win.’”
After an award is made, INVEST guides firms through the subcontracting process, helping them with the documentation needed for USAID procedures.
“Delphin Investments was open to our guidance, and they were eager to get us whatever documentation we needed to follow USAID regulations,” says Tilahun. She explains that subcontracting with a small firm can move quickly if its leadership has the right mindset about compliance, such as Delphin. “Working with a small firm can be really beneficial because you often get to deal directly with the decision-maker, so it streamlines a lot of the process. Guy-Max Delphin is our point of contact at Delphin Investments, and when we need a question answered or an authorization signed, he’s very responsive, so the contracting moves quickly, and the implementation begins without delay.”
The implementation of INVEST’s roadshow activity consisted of events in Miami, Atlanta, New York, Boston, and Montreal. Each event featured three to five entrepreneurs and had an audience of 30 to 50 people.
“The roadshows were very important because they allowed us to identify parties within the diaspora that were keen to get involved in the Haitian investment landscape either as brokers or investors,” says Cuvilly. “Of course, we needed to keep realistic expectations: the goal was not to have hundreds of people writing checks. The purpose, rather, was to begin a long-term engagement with members of the diaspora, reinforce USAID’s commitment to the Haitian economy, and build from there.”
Delphin believes that the impact of the roadshow was two-fold. “First, it confirmed that the diaspora has an appetite for being involved in developing their native country,” he says. “Second, we were able to debunk the myth that there aren’t enough small businesses for investment in Haiti. We showcased a recycling company, a toilet paper manufacturer, a fintech company, a clean water business, middle-income housing developers, and more, all with smart, driven entrepreneurs who are craving for investors to look at them.”
The roadshow also demonstrated that some members of the diaspora would consider investing in Haiti beyond contributing remittances, but at the moment, they lacked the means to do so.
“The financial vehicles that create pathways for the diaspora to invest back home in a structured manner are very limited,” says Delphin. “When investing in the U.S., there are many vehicles where investors feel confident that their money will have some protection based on the strict regulatory environment. These types of structures and/or regulated products are not common in the Caribbean region.”
“Currently, the big challenge for the diaspora is how to invest in their home country,” Cuvilly furthers. “Here, in the U.S., an individual can call a broker and invest in one of thousands of mutual funds. In Haiti, on the other hand, that option is not available. Investing directly in a company is not practical nor realistic for most members of the diaspora. In fact, much of the feedback we received from the diaspora was ‘How exactly do I invest in Haiti?’ We quickly realized the next step we needed to take was to facilitate the creation of a vehicle that might enable that investment.”
Creating a Pathway for the Diaspora to Invest in Haiti
After the roadshow concluded, INVEST released an RFP asking firms to provide suggestions for how they would structure a vehicle that would allow overseas investors to invest in Haiti.
Again, Delphin Investments responded to the RFP. This time, the firm proposed creating a pan-Caribbean fund, with specific allocations to countries across the region including Haiti.
“Delphin was successful in winning both contracts because they bid on proposals that align with what the firm already does,” says Tilahun. “Reading the second proposal, it was obvious that they hadn’t done desk research to think about the approach: they had specific on-the-ground expertise on which they were basing this approach.”
“Delphin performed very well with their first engagement under INVEST, the diaspora roadshow,” adds Amanda Bartels, an INVEST Activity Coordinator who supports the Haiti work. “As an asset manager with deep networks with the Haitian diaspora, Delphin is uniquely positioned to create an alternative avenue for channeling investments beside remittances into Haiti and the region overall.”
USAID is supporting the creation of this investment vehicle by providing funding that covers the cost of setting it up and other logistics. The fund will invest in a portfolio of SMEs across Haiti and the Caribbean, providing a pathway for investment for those who remain interested in the region despite its challenges.
“We are an investment firm: our goal is to do well for our investors,” says Delphin. “We are not an ‘impact investing’ firm. However, we are very conscious, and I like to ask how I can bring value to my investors while having some type of impact. This fund will create liquidity and awareness for the region in general.”
Investing in SMEs Is Investing in Development
SMEs play an integral role in the development of a country. They create jobs, offer services, and provide products locally, all of which help better the livelihood of people.
“Having a middle class elevates the standard of living of an entire country,” says Delphin. “The development of a country’s middle class relies on the growth of SMEs because a large portion of the economy is driven by small and medium-sized businesses. Any country that really wants to increase the standard of living for its population should work to grow SMEs. For me, that’s why investing in SMEs is critical to helping Haiti and Haitians.”
In the midst of the COVID-19 pandemic, supporting SMEs has become even more crucial to supporting the development of Haiti.
“SMEs can get hit hard with external events such as the COVID-19 pandemic, relative to larger organizations. To survive these difficult times, they may need assistance, especially with additional financing,” says Cuvilly. “However, being locally based in harder-to-reach communities, they are often also well-positioned to provide services during such times. One thing we have learned during this crisis is that economies must be diversified in order to be resilient. They cannot be dependent on only one industry, such as tourism for example, because that creates major problems when there is a shock to the market. All over the Caribbean, SMEs will continue to play a vital role in changing this landscape, so we need to encourage their expansion and increase their access to capital.”
By working with Delphin Investments, USAID has been able to tap into the investment expertise required for mobilizing private capital into Caribbean economies. At the same time, Delphin Investments has benefited from the resources and support of USAID.
“To have USAID as a partner who supports our vision has been tremendous,” says Delphin. “I had no idea we could do this with USAID’s help until I heard about Haiti INVEST’s opportunity. I would have never thought about tapping into USAID resources and working with them. When most private sector companies think of clients, they probably tend to stay away from government organizations because of the stigma about the bureaucratic nature and government compliance. There is a lot of documentation and paperwork, but our experience has been great.”
Beyond enjoying the experience of working with USAID, Delphin believes the development agency will elevate the long-term sustainability of its work by approaching development with market-based strategies and working alongside private companies
“I think the blending of USAID’s development expertise with investment management expertise like that of our firm is what’s going to make this implementation strategy so effective,” he says. “I think it will lead to a lot of success, not just in Haiti or the Caribbean, but hopefully, globally.”
From INVEST’s perspective, Delphin Investments has exactly the right attitude needed to work with USAID: they’re flexible and open to feedback. The firm began working with INVEST in May of 2019, and throughout the entire process, Delphin Investments has been responsive to the feedback of the INVEST team.
“Delphin have been open and transparent since the beginning,” says INVEST’s Bartels. “They have a problem-solving mindset and positive attitude, which is important when working with government because you have to think creatively while understanding the limitations that come when working with stewards of taxpayer money.”
“I think that’s really what we look for in a partner — someone who’s responsive and flexible in their approach and willing to take feedback and adjust,” adds Cuvilly. “We feel fortunate to have found Delphin and to have been able to work with them so far, and we look forward to our continued efforts with them.”