Microcredit for Self-Reliance Act of 1997

Summary: Microcredit for Self-Reliance Act of 1997 - Amends the Foreign Assistance Act of 1961 to set forth congressional findings and policy, including that:  (1) the development of micro- and small enterprise, including cooperatives, is a vital factor in the growth of developing countries and in the development of a free, open, and equitable international economic system; and (2) programs that provide credit, training, and technical assistance to private institutions can serve as a valuable complement to grant assistance provided for the purpose of benefiting micro- and small private enterprise. Authorizes the President to provide assistance to increase the availability of credit to micro- and small enterprises lacking full access to credit through:  (1) loans and guarantees to credit institutions; and (2) training programs for lenders and micro- and small entrepreneurs.  Sets forth assistance eligibility criteria. Authorizes the Administrator of the U.S. Agency for International Development (AID) to provide grant assistance for programs of credit and other assistance for microenterprises in developing countries.  Directs the Administrator, in order to maximize the sustainable development impact of such assistance, to establish a monitoring system that sets certain performance goals for it. Expresses the sense of the Congress that:  (1) AID, in carrying out the goals of this Act, shall seek to cooperate with the International Fund for Agricultural Development (IFAD) in order to complement and expand IFAD activities, especially with respect to institutional development; and (2) the United States should continue to support and contribute to IFAD activities, especially those related to microenterprises and microfinance (including the Microfinance Capacity Building Grant Initiative). Expresses 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 U.S. representative to the United Nations to use the U.S. vote to support the Program.

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 
        Fund 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. PURPOSES.

    The purposes of this Act 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.

SEC. 4. MICRO- AND SMALL ENTERPRISE DEVELOPMENT CREDITS.

    Section 108 of the Foreign Assistance Act of 1961 (22 U.S.C. 2151f) 
is amended to read as follows:

``SEC. 108. MICRO- AND SMALL ENTERPRISE DEVELOPMENT CREDITS.

    ``(a) Findings and Policy.--The Congress finds and declares that--
            ``(1) the development of micro- and small enterprise, 
        including cooperatives, is a vital factor in the stable growth 
        of developing countries and in the development and stability of 
        a free, open, and equitable international economic system;
            ``(2) it is, therefore, in the best interests of the United 
        States to assist the development of the private sector in 
        developing countries and to engage the United States private 
        sector in that process;
            ``(3) the support of private enterprise can be served by 
        programs providing credit, training, and technical assistance 
        for the benefit of micro- and small enterprises; and
            ``(4) programs that provide credit, training, and technical 
        assistance to private institutions can serve as a valuable 
        complement to grant assistance provided for the purpose of 
        benefiting micro- and small private enterprise.
    ``(b) Program.--To carry out the policy set forth in subsection 
(a), the President is authorized to provide assistance to increase the 
availability of credit to micro- and small enterprises lacking full 
access to credit, including through--
            ``(1) loans and guarantees to credit institutions for the 
        purpose of expanding the availability of credit to micro- and 
        small enterprises;
            ``(2) training programs for lenders in order to enable them 
        to better meet the credit needs of micro- and small 
        entrepreneurs; and
            ``(3) training programs for micro- and small entrepreneurs 
        in order to enable them to make better use of credit and to 
        better manage their enterprises.
    ``(c) Eligibility Criteria.--The Administrator of the United States 
Agency for International Development shall establish criteria for 
determining which entities described in subsection (b) are eligible to 
carry out activities, with respect to microenterprises, assisted under 
this section. Such criteria may 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.''.

SEC. 5. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.

    Chapter 1 of part I of the Foreign Assistance Act of 1961 (22 
U.S.C. 2151 et seq.) is amended by adding at the end the following new 
section:

``SEC. 129. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.

    ``(a) Authorization.--(1) In carrying out this part, the 
Administrator of the United States Agency for International Development 
is authorized to provide grant assistance for programs of credit and 
other assistance for microenterprises in developing countries.
    ``(2) Assistance authorized under paragraph (1) shall be provided 
through organizations that have a capacity to develop and implement 
microenterprise programs, including particularly--
            ``(A) United States and indigenous private and voluntary 
        organizations;
            ``(B) United States and indigenous credit unions and 
        cooperative organizations; or
            ``(C) other indigenous governmental and nongovernmental 
        organizations.
    ``(3) Approximately one-half of the credit assistance authorized 
under paragraph (1) shall be used for poverty lending programs, 
including the poverty lending portion of mixed programs. Such 
programs--
            ``(A) shall meet the needs of the very poor members of 
        society, particularly poor women; and
            ``(B) should provide loans of $300 or less in 1995 United 
        States dollars to such poor members of society.
    ``(4) The Administrator should continue support for mechanisms 
that--
            ``(A) provide technical support for field missions;
            ``(B) strengthen the institutional development of the 
        intermediary organizations described in paragraph (2); and
            ``(C) share information relating to the provision of 
        assistance authorized under paragraph (1) between such field 
        missions and intermediary organizations.
    ``(b) Monitoring System.--In order to maximize the sustainable 
development impact of the assistance authorized under subsection 
(a)(1), the Administrator shall establish a monitoring system that--
            ``(1) establishes performance goals for such assistance and 
        expresses such goals in an objective and quantifiable form, to 
        the extent feasible;
            ``(2) establishes performance indicators to be used in 
        measuring or assessing the achievement of the goals and 
        objectives of such assistance; and
            ``(3) provides a basis for recommendations for adjustments 
        to such assistance to enhance the sustainable development 
        impact of such assistance, particularly the impact of such 
        assistance on the very poor, particularly poor women.''.

SEC. 6. MULTILATERAL COOPERATION WITH 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) Sense of the Congress.--It is the sense of the Congress that--
            (1) the United States Agency for International Development, 
        in carrying out sections 108 and 129 of the Foreign Assistance 
        Act of 1961, as added by sections 4 and 5 of this Act, 
        respectively, shall seek to cooperate with IFAD in order to 
        compliment and expand the activities of IFAD, especially with 
        respect to institutional development; and
            (2) the United States should continue to support and 
        contribute to the activities of IFAD, especially activities 
        related to microenterprise and microfinance, including the 
        Microfinance Capacity Building Grant Initiative.

SEC. 7. 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.

            Passed the House of Representatives November 9, 1997.

            Attest:

                                                ROBIN H. CARLE,

                                                                 Clerk.