Systemic financial risk

by on November 14, 2010 at 12:41 pm in Current Affairs, Economics | Permalink

One of the largest of Haiti’s microcredit groups, Finca Haiti, wrote off almost a third of its portfolio after many clients died in the earthquake or lost their homes and businesses. A staggering 53 percent of its borrowers were late on their payments.

Here is much more, about the difficulties of running a micro-credit system in an economy with a negative real rate of return.

Elsewhere, Ireland expands aid to Haiti.  The cholera epidemic is getting much worse rapidly.

1 Bill November 14, 2010 at 9:32 am

This isn't a what is called a systemic financial risk.

Rather, this is a correlated risk. If an area is hit by a storm, other policyholders in the area will experience a loss–their losses are correlated to the event.

Systemic would be if the loss of one person caused a loss to others.

What someone should have done is bought disaster insurance or weather insurance to hedge this risk.

2 mulp November 14, 2010 at 8:37 pm

Isn't Haiti proof that less/smaller government does not boost economic growth or increase employment opportunity or any of the other things smaller government is supposed to virtuously accomplish?

Haitians outside of Haiti, say in big government US or big government Europe seem to prosper, so it is hard to argue the lack of prosperity in Haiti is caused by the Haitian people.

3 Robert Speirs November 15, 2010 at 7:29 am

How many billions have been spent in "Haitian aid"? Why with all that money can they not even have clean water, which would clear up the cholera? I think we all know the answer. Most of the "aid" goes to running the NGOs, meaning paying huge salaries to liberals, and the rest goes to maintaining the generals' mansions in Miami.

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