FILE h1129.ih
HR 1129 IH
105th CONGRESS
1st Session
To establish a program to provide assistance for programs of credit and other assistance for microenterprises in developing countries, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES
March 19, 1997

Mr. HOUGHTON (for himself, Mr. HALL of Ohio, Mr. DAN SCHAEFER of Colorado, Mr. TORRES, Mr. GREENWOOD, Mr. FILNER, Mr. WALSH, Mr. ABERCROMBIE, Mr. HULSHOF, Mr. ANDREWS, Mr. BOEHLERT, Mr. MEEHAN, Mrs. MORELLA, Mr. MORAN of Virginia, Mr. PAYNE, Mr. BLUMENAUER, Mr. DELLUMS, Ms. RIVERS, Mr. BROWN of Ohio, Mrs. CLAYTON, Mr. BARRETT of Wisconsin, Mr. VENTO, Mr. LAFALCE, Mrs. TAUSCHER, Mr. LEVIN, and Mr. MCDERMOTT) introduced the following bill; which was referred to the Committee on International Relations
A BILL

To establish a program to provide assistance for programs of credit
and other assistance for microenterprises in developing countries,
and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Microcredit for Self-Reliance Act of 1997'.

SEC. 2. FINDINGS AND DECLARATIONS OF POLICY.

The Congress makes the following findings and declarations:

(1) More than 1,000,000,000 people in the developing world are living in severe poverty.

(2) According to the United Nations Children's Fund (UNICEF), mortality for children under the age of 5 averages 100 child deaths per thousand for all developing countries, with nearly double that rate in the poorest countries.

(3) Nearly 35,000 children die each day from largely preventable malnutrition and disease.

(4)

(A) Women in poverty generally have larger work loads, and less access to educational and economic opportunities than their male counterparts.

(B) Directly aiding the poorest of the poor, especially women, in the developing world has a positive effect not only on family incomes, but also on child nutrition, health and education, as women in particular reinvest income in their families.

(5)

(A) The poor in the developing world, particularly women, generally lack stable employment and social safety nets.

(B) Many turn to self-employment to generate a substantial portion of their livelihood.

(C) These poor entrepreneurs are often trapped in poverty because they cannot obtain credit at reasonable rates to build their asset base or expand their otherwise viable self-employment activities.

(D) Many of the poor are forced to pay interest rates as high as 10 percent per day to money lenders.

(6)

(A) On February 2-4, 1997, a global microcredit summit was held in Washington, District of Columbia, to launch a plan to expand access to credit for self-employment and other financial and business services to 100,000,000 of the world's poorest families, especially the women of those families, by 2005.

(B) With five to a family, achieving this goal will mean that the benefits of microcredit will thereby reach nearly half of the world's more than 1,000,000,000 absolute poor.

(7)

(A) The poor are able to expand their incomes and their businesses dramatically when they can access loans at reasonable interest rates.

(B) Through the development of self-sustaining microcredit programs, poor people themselves can lead the fight against hunger and poverty.

(8)

(A) Nongovernmental organizations such as the Grameen Bank, Accion International, and the Foundation for International Community Assistance (FINCA) have been successful in lending directly to the very poor.

(B) These institutions generate repayment rates averaging 95 percent or higher, demonstrating the bankability of the poorest.

(C) International organizations such as the International Foundation for Agricultural Development (IFAD) and the United Nations Development Program (UNDP) have demonstrated success in supporting microcredit programs.

(9)

(A) Microcredit institutions not only reduce poverty, but also reduce the dependency on foreign assistance.

(B) Interest income on a credit portfolio can be used to pay recurring institutional costs, assuring the long-term sustainability of development assistance.

(10) Microcredit institutions leverage foreign assistance resources because loans are recycled, generating new benefits to program participants.

(11) The development of sustainable microcredit institutions which provide credit and training, and mobilize domestic savings, are critical components to a global strategy of poverty reduction and broad based economic development.

(12)

(A) In 1994, the United States Agency for International Development launched a microenterprise initiative in partnership with the Congress.

(B) The initiative committed to expanding funding for the microenterprise programs of the Agency, and set a goal that, by the end of fiscal year 1996, half of all microenterprise resources would support programs and institutions providing credit to the poorest, with loans under $300.

(C) In order to achieve the goal of the microcredit summit, increased investment in microcredit institutions serving the poorest will be critical.

(13) Providing the United States share of the global investment needed to achieve the goal of the microcredit summit will require only a small increase in United States funding for international microcredit programs, with an increased focus on institutions serving the poorest.

(14)

(A) In order to reach tens of millions of the poorest with microcredit, it is crucial to expand and replicate successful microcredit institutions.

(B) These institutions need assistance in developing their institutional capacity to expand their services and tap commercial sources of capital.

(15) Nongovernmental organizations have demonstrated competence in developing networks of local microcredit institutions so that they reach large numbers of the very poor, and achieve financial sustainability.

(16) Recognizing that the United States Agency for International Development has developed very effective partnerships with nongovernmental organizations, and that the Agency will have fewer missions to carry out its work, the Agency should place priority on investing in these nongovernmental network institutions through the central funding mechanisms of the Agency.

(17) By expanding and replicating successful microcredit institutions, it should be possible to create a global infrastructure to provide financial services to the world's poorest families.

(18)

(A) The United States Agency for International Development can provide leadership to other bilateral and multilateral development agencies as such agencies expand their support to the microenterprise sector.

(B) The United States Agency for International Development should seek to improve coordination of donor efforts at the operational level to promote the use of best practices in the provision of financial services to the poor and to ensure that adequate institutional capacity is developed.

(19) Through expanded support for microcredit, especially credit for the poorest, the United States Agency for International Development can continue to play a leadership role in the global effort to expand financial services and opportunity to 100,000,000 of the poorest families on the planet.

SEC. 3. MICROENTERPRISE DEVELOPMENT ASSISTANCE.
(a) PURPOSES- The purposes of this section are--
(1) to provide for the continuation and expansion of the commitment of the United States Agency for International Development to the development of microenterprise institutions;

(2) to make microenterprise development the centerpiece of the overall economic growth strategy of the United States Agency for International Development;

(3) to support and develop the capacity of United States and indigenous nongovernmental organization intermediaries to provide credit, savings, and training services to microentrepreneurs;

(4) to increase the amount of assistance devoted to credit activities designed to reach the poorest sector in developing countries, and to improve the access of the poorest, particularly women, to microenterprise credit in developing countries; and

(5) to encourage the United States Agency for International Development to provide global leadership in promoting microenterprise for the poorest among bilateral and multilateral donors.

(b) AUTHORIZATION-
(1) The President, acting through the Administrator of the United States Agency for International Development, is authorized to provide assistance for programs of credit and other assistance for microenterprises in developing countries.

(2) Microenterprise credit and related activities assisted under this section shall be carried out primarily through United States and indigenous nongovernmental organizations and United States and indigenous credit unions, cooperative organizations, and other private financial intermediaries, that have the capacity to develop and to implement microenterprise programs, and that are oriented toward working directly with the poor, especially women.

(c) ELIGIBILITY CRITERIA- The Administrator of the United States Agency for International Development shall establish criteria for determining which entities described in subsection (b)(2) are eligible to carry out activities assisted under this section. Such criteria shall include the following:

(1) The extent to which the recipients of credit from the entity do not have access to the local formal financial sector.

(2) The extent to which the recipients of credit from the entity are among the poorest people in the country.

(3) The extent to which the entity is oriented toward working directly with poor women.

(4) The extent to which the entity recovers its cost of lending to the poor.

(5) The extent to which the entity implements a plan to become financially sustainable.

(d) FUNDING LEVELS FOR FISCAL YEARS 1998 AND 1999-

(1) IN GENERAL- Of the amounts made available to carry out chapter 1 of part I of the Foreign Assistance Act of 1961 (22 U.S.C. 2151 et seq.)--

  • (A) not less than $170,000,000 for fiscal year 1998 shall be made available for assistance under this section; and

  • (B) not less than $180,000,000 for fiscal year 1999 shall be made available for assistance under this section.

    (2) ADDITIONAL REQUIREMENTS-

  • (A) Of the amounts made available under each of subparagraphs (A) and (B) of paragraph (1) for fiscal years 1998 and 1999, not less than $85,000,000 for fiscal year 1998 and not less than $90,000,000 for fiscal year 1999 shall be used to support poverty lending as defined in paragraph (3).

  • (B) Of the amounts made available under each of subparagraphs (A) and (B) of paragraph (1) for fiscal years 1998 and 1999, not less than $50,000,000 of such amounts for each such fiscal year shall be provided through the central mechanisms of the United States Agency for International Development for support of United States and indigenous nongovernmental organizations.

    (3) DEFINITIONS-

  • (A) For purposes of this subsection, the term `to support poverty lending' means--

    (i) funds lent to members of the poverty target population (as defined in subparagraph (B)) within low-income countries in amounts equivalent to $300 or less in 1997 United States dollars; and

    (ii) funds used for institutional development of an entity described in subsection (b)(2), which is engaged in making loans of $300 or less in 1997 United States dollars to members of the poverty target population (as defined in subparagraph (B)) or the portion of a mixed program which makes such loans.

  • (B) The term `poverty target population' means the poorest 50 percent of those individuals living below the poverty line, defined by the national government of the foreign country.
    • SEC. 4. PROGRAM PERFORMANCE CRITERIA.

    (a) STRENGTHENING OF APPROPRIATE MECHANISMS- The Administrator of the United States Agency for International Development shall strengthen appropriate mechanisms, including mechanisms for central microenterprise programs, for the purpose of strengthening the institutional development of the entities described in section 3(b)(2).

    (b) MONITORING SYSTEM- In order to maximize the sustainable development impact of the assistance authorized under section 3, the Administrator of the United States Agency for International Development shall establish a monitoring system that--

    (1) establishes performance goals for such assistance and expresses such goals in an objective and quantifiable form;

    (2) establishes performance systems or indicators to measure the extent to which projects are achieving such goals; and

    (3) provides a basis for recommendations for adjustments to such assistance to enhance the sustainable development impact of such assistance on the very poor, particularly women.

    (c) ADDITIONAL MONITORING REQUIREMENTS- As a part of the monitoring system established under subsection (b), the Administrator of the United States Agency for International Development--

    (1) using data provided by lending institutions, shall monitor the actual amount of microenterprise credit and number of loans made available to the poverty target population as a result of each project or program carried out pursuant to this Act;

    (2) using data provided by lending institutions, shall monitor the amount of funding provided pursuant to this Act which is allocated to organizations engaged in making loans of under $300 to the poverty target population, or to the poverty lending portion of mixed programs;

    (3) shall report annually on the compliance of United States Agency for International Development missions with the microenterprise initiative described in section 2(12); and

    (4) shall include a summary of the information collected under paragraphs (1) and (2) in the annual congressional presentation document of the United States Agency for International Development to the Congress.
    SEC. 5. CONTRIBUTIONS TO THE INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT.

    (a) FINDINGS- The Congress finds the following:

    (1)(A) The International Fund for Agricultural Development (`IFAD') has as its mission serving the poorest of the poor in rural areas.

    (B) IFAD has had two decades of experience in assisting the economic development of the rural poor.

    (2) IFAD has been a significant supporter of microenterprise and other microfinance activities for the rural poor almost since its inception and it was the first international institution to assist the Grameen Bank.

    (3) IFAD can make a significant contribution to developing a global network of sustainable microenterprise and other microfinance institutions which serve the very poor through support for nongovernmental organizations and other community based microcredit institutions.

    (b) UNITED STATES CONTRIBUTIONS TO IFAD-

    (1) IN GENERAL- (A) There are authorized to be appropriated $20,000,000 for each of the fiscal years 1998 and 1999 for United States contributions to the International Fund for Agricultural Development for the purpose of establishing and carrying out a special initiative to provide grants to nongovernmental organizations and other private community-based microenterprise institutions serving the very poor, especially women.

    (B) Funds authorized to be appropriated under subparagraph (A) are in addition to amounts otherwise available for such purposes.

    (2) ADDITIONAL REQUIREMENTS- (A) Amounts contributed to IFAD under paragraph (1) shall be available only for the following:

    (i) Loans to members of the poverty target population (as defined in section 3(d)(3)(B)) within low-income countries in amounts equivalent to $300 of less in 1997 United States Dollars.

    (ii) The institutional development of financial intermediaries that primarily or exclusively make loans to members of the poverty target population (as defined in section 3(d)(3)(B)) in amounts equivalent to $300 or less in 1997 United States Dollars, or for training of such borrowers.

    (B) Microenterprise credit and related activities assisted under this section shall be carried out primarily through nongovernmental organizations, credit unions, cooperative organizations, and other private financial intermediaries, that have the capacity to develop and to implement microenterprise programs, and that are oriented toward working directly with the poor and women.

    (c) OTHER CONTRIBUTIONS TO IFAD- The President shall urge other donor nations to the International Fund for Agricultural Development to support and contribute to the microenterprise and microfinance activities of the Fund (as described in subsection (b)).

    SEC. 6. UNITED NATIONS DEVELOPMENT PROGRAM'S MICROSTART PROGRAM.

    It is the sense of the Congress that--

    (1) the Microstart Program established by the United Nations Development Program (UNDP) represents an important new initiative; and

    (2) the President should instruct the United States representative to the United Nations to use the voice and vote of the United States to support the Microstart Program of the United Nations Development Program.
    Return to the Documents Section

    Hari Srinivas - hsrinivas@gdrc.org
    Return to the Virtual Library on Microcredit