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THE FUTURE OF THE MULTILATERAL 

DEVELOPMENT BANKS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

OCTOBER 9, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–54 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON MONETARY POLICY AND TRADE

BILL HUIZENGA, Michigan, Chairman 

MICK MULVANEY, South Carolina, Vice 

Chairman 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

MARLIN A. STUTZMAN, Indiana 

ROBERT PITTENGER, North Carolina 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

MIA LOVE, Utah 

TOM EMMER, Minnesota 

GWEN MOORE, Wisconsin, Ranking Member 

BILL FOSTER, Illinois 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

PATRICK MURPHY, Florida 

DANIEL T. KILDEE, Michigan 

DENNY HECK, Washington 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

October 9, 2015 ................................................................................................. 1 

Appendix: 

October 9, 2015 ................................................................................................. 31 

WITNESSES 

FRIDAY, OCTOBER 9, 2015 

Chovanec, Patrick, Managing Director and Chief Strategist, Silvercrest Asset 

Management ......................................................................................................... 8 

Karlan, Dean, Professor of Economics, Yale University ....................................... 3 

Morris, Scott A., Senior Fellow, Center for Global Development ........................ 9 

Ravallion, Martin, Edmond D. Villani Chair of Economics, Georgetown University ................................................................................................................... 6 

APPENDIX 

Prepared statements: 

Chovanec, Patrick ............................................................................................. 32 

Karlan, Dean ..................................................................................................... 37 

Morris, Scott A. ................................................................................................. 46 

Ravallion, Martin ............................................................................................. 60 

(1) 

THE FUTURE OF THE MULTILATERAL 

DEVELOPMENT BANKS 

Friday, October 9, 2015 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MONETARY

POLICY AND TRADE, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:34 a.m., in room 

2128, Rayburn House Office Building, Hon. Bill Huizenga [chairman of the subcommittee] presiding. 

Members present: Representatives Huizenga, Mulvaney, Pearce, 

Pittenger, Schweikert, Guinta, Love, Emmer; Moore, Perlmutter, 

Himes, Carney, Sewell, and Kildee. 

Ex officio present: Representative Hensarling. 

Chairman HUIZENGA. The Subcommittee on Monetary Policy and 

Trade will come to order. Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. 

Today’s hearing is entitled, ‘‘The Future of the Multilateral Development Banks.’’ 

I now recognize myself for 5 minutes to give an opening statement, which I hope not does not consume all 5 minutes. But I first 

want to thank our witnesses today very much for your patience. 

I know that we gave you notice late yesterday about moving the 

time of the start of this hearing from 9:00 a.m. till 10:30 a.m., so 

the ranking member, as well, thanks you for your understanding. 

She asked how the family was doing this morning. We are healing. 

So, hopefully, we will be able to get some good progress. 

But that is not why we are here today. We are here today because of multilateral development banks (MDBs). And the origins 

of those MDBs lie within the creation of the World Bank at Bretton 

Woods in 1944. Its initial purpose as the International Bank of Reconstruction and Development was the reconstruction of war-torn 

countries after World War II. 

Today, the MDBs include not only the World Bank, and its other 

lending arms, the IBRD and the International Development Association, IDA. But it also includes four regional banks: the African 

Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the Asian 

Development Bank. Their core mission is to provide financial assistance such as loans and grants to developing countries to promote economic and social development. 

MDBs were created by their member countries, which provide 

capital to sustain MDB operations. Member countries are awarded 

2 

shares in MDBs proportionate to the amount of capital they provide. Because member nations provide the MDBs with a large capital base, MDBs have a AAA credit rating, which allows them to 

borrow at favorable rates from private lenders. 

The United States is a member of each of these institutions, 

therefore Congress plays an important role in determining U.S. 

funding for MDBs, and engaging in the oversight of the Administration’s participation in those. 

The MDBs have played a key role in the progress in reducing 

poverty and hunger—we certainly saw that after World War II— 

while improving global health and women’s rights. 

The MDB’s goal is to draw in member nations’ contributions to 

leverage additional private sector financing. However, MDBs are 

facing different development challenges than those they previously 

faced. The number of people around the world living on less than 

$1.25 a day has been halved since 1990, which, I would think, we 

would all agree is a very positive thing. 

And there have been major strides in expanding access to schooling and medication for poor children around the world. In addition, 

governments’ commitments to fight poverty has noticeably increased, with development assistance from rich countries reaching 

$134 billion last year, up from $81 billion in 2010. 

Today, the MDBs are operating in the world of new challenges 

and competitors. Many emerging economies have far greater access 

to capital markets for funding that I will note that capital that 

many times was locked up, and not available, starting after World 

War II has loosened up. 

And, additionally, a newly ambitious China has spearheaded the 

creation of the Asian Infrastructure Investment Bank, the AIIB, 

the development bank, or the BRIC’s Bank as it is known, to finance projects in developing countries. 

Meanwhile, researchers have developed new tools to help us understand which MDB programs have or do not have an impact. 

Given this new environment, this hearing will explore how MDBs 

should adapt. 

I look forward to hearing from our witnesses today regarding the 

future of the MDBs, and how their operations and organizational 

structure have changed, and should continue to change in order to 

maintain their relevance. 

And, with that, I would like to recognize the ranking member of 

the subcommittee, Ms. Moore, for her opening statement. 

Ms. MOORE. Thank you so much, Mr. Chairman, and it is always 

good to be here with you. I think the work of this subcommittee 

is very significant and I am looking forward to hearing from our 

witnesses here today. 

I just want to join Chairman Huizenga in welcoming you all. In 

particular, Mr. Morris, welcome back to this room. I am really excited. You have tremendous credentials here, and I am sure that 

we will be justly informed. 

My perspective on the work that these banks do around the 

world is that I think they represent a source of real strength for 

the United States, and a source of positive change in the world. 

3 

We see the impact of poverty in our own country here: unfulfilled 

dreams; lost generations; and lack of opportunity leading to frustration, which leads to all kinds of social problems. 

And these problems spill out into all aspects of society. People 

are victimized by crimes, and no one—not even the very wealthy— 

is immune or escapes the adverse impact of poverty. And so the impact of poverty abroad is no less devastating and in a global world, 

the problems of far-off places are our problems as well. 

Now, development banks don’t impose world order with force, 

military might. They promote it through understanding and economic stability. And I do believe that American leadership in multilateral development banks is critical to our world leadership. 

That is why I have been pushing the World Bank to negotiate 

strong, enforceable safeguards, including labor standards, LGBT 

rights, road safety, women’s rights, and accommodations for the 

disabled. 

It is so humbling when I consider how this committee, and particularly this subcommittee, is really at the center of so much in 

terms of global leadership. And I truly hope that we on this committee can figure out how to agree to get some of this important 

work done. 

It is not just reauthorizing the EX-IM Bank, to give our workers 

a fair shake in global markets. But—and I know it is not necessarily the subject of this hearing—also to improve the IMF quota 

reforms. 

I will commit to working with you, Mr. Chairman, in good faith 

on addressing some of the concerns of the Majority, but I believe 

that we must work with some urgency to immediately approve 

quota reform. 

And I also want to work with the World Bank to figure out how 

to make sure that its premiere development, because it is the premiere development institution in the world. To borrow a phrase 

from the Department of Labor Secretary Perez, we need to agree 

on a North Star, and to work on a path to get there. 

And with that, I yield back, Mr. Chairman. 

Chairman HUIZENGA. The gentlelady yields back. We will now 

hear from our witnesses. And our first witness is Dr. Dean Karlan. 

He is a professor of economics at Yale University, an affiliate of the 

Bureau of Research and Economic Analysis of Development, also 

known as BREAD, and the president and founder of Innovations 

for Poverty Action. 

His research focuses on microeconomic issues for public policies 

and poverty. Dr. Karlan is the author of the book, ‘‘More Than 

Good Intentions: Improving the Way the World’s Poor Borrow, 

Save, Farm, Learn and Stay Healthy.’’ 

And with that, I will recognize you for 5 minutes for your opening statement. 

Thank you. 

STATEMENT OF DEAN KARLAN, PROFESSOR OF ECONOMICS, 

YALE UNIVERSITY 

Mr. KARLAN. Thank you. Thank you, Chairman Huizenga, and 

Ranking Member Moore, for hosting this hearing, and giving me 

the opportunity to provide this testimony. The charge that I took 

4 

here is to talk about evaluation at the multilateral development 

banks, which is a critical issue to improve the return on investment that we get as taxpayers from our investments in the multilateral development banks. 

So, in the coming decades, most of the poor are going to live in 

fragile and economically deprived states. And this makes it even 

more important for U.S. interests and leadership to address issues 

of extreme poverty. But I want to be clear: we are not going to end 

extreme poverty. That shouldn’t be the aspiration. We can do a lot 

to fight it, and a lot to reduce it, but ending it is not actually a 

realistic goal. 

What is important is that we can make major inroads if we do 

it well, and if we are surgical about what we can do. 

It is also important to realize that we have made huge progress. 

This is not—we have made tremendous progress in the past few 

decades in fighting poverty around the world, but more can be 

done. So, I want to focus on three areas where we can help the 

MDBs do better, and with that, we can do better. 

The first is through generating rigorous research on what works 

in development. Like I said, this is something the MDBs already 

do some work on, but we could do more to encourage that kind of 

research. 

The second is that we can do more to build stronger links within 

the MDBs, between those who are doing the research within the 

MDBs, the research groups, and the policy, so that the knowledge 

that is acquired from the research that is done can actually get into 

the policies of the people on the ground, doing—setting—working 

with countries on the specific programs. 

The third, and this is in some sense the most important, is to 

think about the MDBs as a global public good of knowledge, that 

what they are doing is they are creating knowledge that the world 

can use. They use it internally, yes, but even better, other countries can use it for setting their policy. The United States can use 

it, we can see benefits to the USAID, Millennium Challenge Corporation, and how they set policy based on knowledge created at 

the MDBs. 

My written testimony details five different examples of exactly 

that process having taken place. But five is not too many, and we 

should have a lot more. 

There are two things I want to note about what I have just said. 

One is that the MDBs are doing the three things I just said. They 

just need to do more of it, and we can help them do more. So, I 

am not—these are not completely brand new ideas, right? 

The second is that I would like to think that this is something 

that can get bipartisan support, right? If someone is skeptical of 

aid, there is nothing better than rigorous research to help understand what is not working, so that those things can stop, and the 

other things can happen. 

If you are someone who is an enthusiast for aid on a particular 

policy, there is nothing better than rigorous research to help further that. The nice thing is that there is a clear winner in all that, 

and it is the U.S. taxpayer. If we have better knowledge on what 

is actually working, we get more leverage for our money, and higher return on investment. 

5 

Let me share a specific example of this from my own work, and 

work that was done collaboratively with the Consultative Group to 

Assist the Poor (CGAP), which is housed at the World Bank. So, 

it started—one way of thinking about is it starts with microcredit, 

which is a set of programs around the world that have been very, 

very popular. And they had an initial promise of reaching the poorest of the poor to raise average income. 

We have now seen eight randomized trials done of microcredit, 

some done by the multilateral development banks, some by me and 

others. And they found important benefits, things that are really 

helping people, but are not achieving the two things they set out 

to do: they are not reaching the poorest; and they are not increasing average income. They are good, and we should help markets 

make those things work. 

Instead, when CGAP came to me, along with the Ford Foundation, and they had a particular program that they had seen work, 

and they wanted to know—let’s test this in six other locations. So, 

it was an integrated program that was a grant program, and instead of lending money, it provided a grant for goats. It provided 

healthcare, access to savings, and training and coaching. 

And the basic idea here was that the problem with being poor 

is not any one thing; if it was that simple we probably would have 

solved it long ago. To do lots of things at once, there is a big push 

at the household level. It is actually very successful. 

And, now we are seeing that the knowledge from that, we published this paper in, ‘‘Science,’’ and now we are seeing it in the 

hands of, with the help of the group from the World Bank, as well 

as others, get into scale-up mode. We are seeing it scaled up in 

India, Pakistan, Ethiopia, and Ghana already. 

So to conclude, I want to lay out two basic ideas from this that 

are kind of broad policy points. The first is to think about evaluation at the MDBs as a portfolio. It is not right to take any one approach. I have just told you a lot about randomized trials, but the 

last thing in the world you want to do is encourage everything to 

have a randomized trial. That would be an awful overinvestment 

in a lot of inappropriate research being done. 

So, we should think about the two basic purposes you want. One 

is accountability. Did an organization do what they said they would 

do? And the other is research, which helps us learn about whether 

they achieved what they said what they would achieve. 

The second point to leave you with is to think about the global 

public good created through this research, the knowledge spillovers, the benefits we get to MCC, USAID. And frankly, also issues 

that this committee faces in America on things like the underbanked and the unbanked. A lot of research has been done at the 

Millennium Development Banks that actually speaks quite well to 

issues we face here in America as well. 

Thank you. 

[The prepared statement of Dr. Karlan can be found on page 37 

of the appendix.] 

Chairman HUIZENGA. Thank you. The gentleman’s time has expired. With that, I would like to welcome Dr. Martin Ravallion, 

who is the Edmond D. Villani Chair of Economics at Georgetown 

6 

University. He has also been a director of the World Bank’s research department. 

He joined the bank in 1988, and from 2007 until 2012, served as 

the director. And in 2012, he was awarded the John Kenneth Galbraith Prize for the American Agriculture and Applied Economics 

Association. So, with that, Dr. Ravallion? 

STATEMENT OF MARTIN RAVALLION, EDMOND D. VILLANI 

CHAIR OF ECONOMICS, GEORGETOWN UNIVERSITY 

Mr. RAVALLION. Thank you very much. Thank you for inviting 

me. Following up on what Dean said, I actually do think it is feasible to virtually eliminate extreme poverty in the world. We can 

lift 1 billion people out of extreme poverty by 2030 with the right 

policies. And that is continuing the policies in developing countries 

over the last 20, 30 years. 

It is not like a major overhaul of existing policies, but we would 

also need some good luck. Obviously, major crises could overturn 

that objective. But I really do think we are at a really critical moment for achieving that. 

I do believe that the development banks have a major role, but 

the other thing we have to realize is that a lot has changed in that 

70 years since the Bretton Woods institution, and I think the role 

of an institution like the World Bank has also changed, fundamentally changed. 

When the institution was formed, there was no global financial 

market. There was virtually nothing. The institution was the main 

lender, the main source of money, to developing countries. That has 

changed dramatically. The bank accounts for maybe 5 percent of 

the capital flows to developing countries today. That is not the rationale today. 

Today, the rationale is anchored very much with the ability of 

the World Bank and institutions, and other development banks, 

and the IMF to deal with problems of global public good, and those 

problems center fundamentally on knowledge. 

The bundling of knowledge with lending, the bundling of the 

ability of an institution like the bank to combine those two elements is what is really unique. 

I don’t see the private sector doing that. And I don’t see the private sector investing in very risky environments as well. But I also 

don’t see them dealing with the public good problem I have talked 

about. 

That public good problem essentially is about two things: dealing 

with the constraints that countries face in escaping poverty, how 

do we achieve that 1 billion target; and what are the specific things 

we need to do in each country? 

That is an important role for the bank to develop the knowledge, 

which is analytic, it is database, but it is also analytic. About how 

we actually do that in those countries. What are the binding constraints in each country and how do we tackle those constraints? 

And we have to make that step if we are really going to achieve 

that goal. 

One reason I am optimistic about that goal, by the way, is that 

this country did it. This country was just as poor as many countries 

in Africa in the early 19th Century. This country did it. And, actuVerDate Nov 24 2008 15:48 Sep 09, 2016 Jkt 099752 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\99752.TXT TERI
7 

ally, a developing world is escaping poverty at a pace now which 

far exceeds the long run pace in the United States. 

So, there are reasons to be optimistic, but I think that the key 

issue is tackling the specific constraints in each country, identifying those constraints, and addressing them fully. 

I don’t think the bank is doing as well as it could, in this respect. 

And I think one of the limitations is that there is an excessive 

focus on the volume of lending, and this permeates—this lending 

culture permeates thinking within the bank. Managerial and staff 

incentives do have to change. The lending culture has to change. 

I am not the first person to say that. People within the bank, reviews of the bank have been saying this over many years. But it 

really does need to change. 

Knowledge must drive the lending, not just be a residual claimant. You don’t just turn to knowledge when you are not sure exactly what to do in a particular situation. The knowledge, particularly in addressing those binding constraints at the country level, 

has to drive the bank’s lending. 

And a second area is global public goods in not just knowledge, 

but in the global public bads. We are going to have more 

pandemics. We are going to have more global financial crises. The 

bank has to be mobilized to deal with that. Unfortunately, the 

country model, which developed for out of Bretton Woods, which 

was targeted very much to delivering money, borrowing from rich 

people in the world, and lending to poor people in the world, that 

country model is not ideal for dealing with global public good. 

It needs coordination—a different model, a model that coordinates people and information in a much more effective way globally. Because those global public goods are threatening all of us, 

and it is a global problem. 

We all saw it with Ebola. Suddenly people realized just how bad 

the health systems were in poor countries. We saw that graphically 

with the Ebola pandemic, but that is only the first of many going 

ahead. So, dealing with that global public goods problem is going 

to require some significant changes, I believe. 

Thank you. 

[The prepared statement of Dr. Ravallion can be found on page 

60 of the appendix.] 

Chairman HUIZENGA. Thank you. With that, we go to Mr. Patrick 

Chovanec, who is the managing director and chief strategist at 

Silvercrest Asset Management. He also teaches part-time as an adjunct professor at Columbia University’s School of International 

and Public Affairs. 

But prior to that, he was a practicing associate professor of practice at Tsinghua University’s School of Economics and Management 

in Beijing, where he also served as chairman of the Public Policy 

Development Committee for the American Chamber of Commerce 

in China. 

And, with that, welcome to you, and you have 5 minutes for your 

opening statement. 

8 

STATEMENT OF PATRICK CHOVANEC, MANAGING DIRECTOR 

AND CHIEF STRATEGIST, SILVERCREST ASSET MANAGEMENT 

Mr. CHOVANEC. Chairman Huizenga, Ranking Member Moore, 

and members of the subcommittee, thank you very much for inviting me to talk, and for asking me to talk specifically about China’s 

recent initiatives in development funding, development financing, 

including the establishment of a number of institutions such as the 

AIIB, the BRIC’s Bank, and the new Silk Road Initiative. I will 

very briefly summarize my written testimony, and cover the main 

points. 

The first thing to recognize is that although these initiatives 

have attracted a great deal of tension recently, they do not represent a new trend, or a completely new trend. China has—back 

in 2007, China founded the Sovereign Wealth Fund, China Investment Corporation, to help deploy capital abroad. 

It is not mainly focused in that case on development funding, but 

for the past several years, China Development Bank and China Export-Import Bank have actually provided more funding to developing countries than the World Bank. And that has raised both interest and concern. So, what we are seeing is a further development of an existing trend. 

Why are the Chinese doing this? And that is what I focus on, because I think to understand the implications, we need to understand the motivations. And there are multiple motivations, and 

some of them are actually conflicting. 

The first is to find a better use for China’s foreign exchange reserves. China has accumulated huge amounts of capital, both from 

inflows of investment and also from running chronic trade surpluses. That is, right now, at about $3.5 trillion. Most of it goes 

into very liquid sovereign bonds, like U.S. Treasuries that earn, especially these days, a very, very low return. 

And, so, the purpose behind establishing CIC, for instance, was 

to generate a higher return. Now, this kind of motivation places an 

emphasis upon disciplined investment practices, and a disciplined 

attitude towards risk. 

The second motivation is driving Chinese growth, in particular 

absorbing China’s overcapacity. One of the results of all this capital 

accumulating in China has been an overinvestment boom in China, 

a buildout of too much capacity in a whole host of different industries. 

And, so, in the past China has looked to drive growth by making 

foreign investments, but that motivation has intensified because 

now there is this desire to have some of that overcapacity absorbed. 

The danger, of course, is that China, up until this point, has not 

followed OECD principles in its investment practices, which basically bar offering subsidized financing in order to buy business. 

And one of the problems with buying business, subsidizing contracts through cheap financing, is not just that it is poor governance, but also that it conflicts with China’s first goal, which is to 

earn a higher return on their investment. 

The third goal is securing access to natural resources. Some of 

the motivation for this has lost its rationale, given the steep decline 

in commodity prices recently, over the past year, led, in many 

cases, by declining Chinese demand. 

9 

The fourth is enhancing China’s soft power abroad. Winning 

friends and influencing people has some obvious advantages, but 

the politicization of investment decisions, again, potentially conflicts with other goals, and when investments go sour, can create 

some real problems. 

China has already—China invested about $37 billion in Venezuela that has already had to be renegotiated because the Venezuelans cannot pay it back. If the Venezuelan opposition ever 

came to power, there is a good chance that they would simply default on that. So, China is investing in some risky places in order 

to make friends, but whether it actually will end up making friends 

is another story. 

And, it is important to remember that gunboat diplomacy developed because people were trying to collect on debts that had gone 

bad. 

The fifth is rivaling the World Bank and the Asian Development 

Bank. But again, establishing multilateral organizations to do this 

can constrain China just as much as it creates an opportunity. 

China doesn’t actually have to rely on multilateral institutions to 

invest its wealth. 

And, sixth, establishing China’s Renminbi as the top global currency. 

I will just conclude by making a note that it is very important 

to realize that although—the world is really awash in savings. 

What the world needs is not so much more savings from China as 

reform that generates demand. That includes for the purposes of 

development. 

A lot of development projects would be more stimulated by the 

Chinese turning their savings into consumer demand than it would 

by adding that much more capacity to the global economy. 

And, with that, I conclude my remarks and welcome your questions. 

[The prepared statement of Mr. Chovanec can be found on page 

32 of the appendix.] 

Chairman HUIZENGA. Thank you. I appreciate that, Mr. 

Chovanec. And, with that, last but certainly not least, we are welcoming Scott Morris back to the House Financial Services Committee. Previously, he had served as a senior Democratic staff 

member on Financial Services, where he was responsible for the 

committee’s international policy issues. 

He went on to much bigger and better things when he became 

deputy assistant treasury of development, finance and debt at the 

U.S. Treasury Department during the first term of the Obama Administration, and he currently is the senior fellow at the Center for 

Global Development. And he works on issues related to the international financial institutions, and particularly at the relationships 

between IFIs and the United States. 

So, with that, Mr. Morris, you are recognized for 5 minutes. 

STATEMENT OF SCOTT A. MORRIS, SENIOR FELLOW, CENTER 

FOR GLOBAL DEVELOPMENT 

Mr. MORRIS. Chairman Huizenga, Chairman Hensarling, Ranking Member Moore, thank you for this opportunity to testify before 

10 

your subcommittee on a topic that I believe is of critical importance 

to U.S. interests in the world. 

Earlier this year, the United States faced a gut-check moment 

when it comes to its leadership in the multilateral development 

banks. In June, 56 countries, including important U.S. allies like 

Germany, the U.K., and Australia, joined the Chinese government 

in creating a new MDB, the Asian Infrastructure Investment Bank. 

I think much of the criticism leveled at the United States has 

been misguided in putting the focus on poor diplomatic outreach, 

or Congress’ failure to pass IMF reform. 

While I very much believe that action on the IMF quota package 

is critical in its own right, the challenges to U.S. leadership in the 

MDBs run deeper. If Congress and the Administration are unwilling to address these deeper challenges, then we are likely to see 

a world in which institutions like the World Bank are eclipsed by 

new actors like the AIIB, and where the United States finds itself 

increasingly on the outside looking in. 

So, why should we care about that? Broadly speaking, institutions like the World Bank and the Asian Development Bank are 

important strategic and economic partners that have been shaped 

by U.S. leadership over many decades. And I will highlight five 

ways that they deliver particular value to the United States. 

First, the MDBs amplify U.S. assistance. In 2013, the United States contributed $2.8 billion to MDBs, leveraging over $100 billion of on-the-ground assistance from the MDBs themselves. 

Second, the MDBs operate at a scale and across a range of sectors that the United States alone cannot. This is why the African 

Development Bank is a key partner in the Administration’s Power 

Africa initiative. And it is also why MDBs have garnered praise 

from the U.S. military leadership for their infrastructure investments in fragile states. 

Third, the MDBs can pursue U.S. objectives more effectively as 

an honest broker in countries and environments where a visible 

U.S. role can be problematic. I point to a country like Pakistan as 

emblematic of this. 

Finally, the MDBs have been rated as the most effective development institutions by multiple independent reviews of foreign assistance. 

So, how are all these benefits at risk today? The answer rests on 

whether the United States is willing to embrace ambition for the 

MDBs in which it already leads, or whether we will simply be satisfied to watch as other countries play that role through new institutions. 

Ironically, the AIIB episode shows that much of the rest of the 

world is actually looking to embrace division of the MDBs that the 

United States itself first laid out, over 70 years ago, at Bretton 

Woods. In particular, that these institutions are primarily banks, 

not charities. And, as Ronald Reagan put it in 1981, that their aim 

is to ensure that economic growth and development would spread 

to all parts of the globe. That is a broader and more ambitious goal 

and one that is almost exclusively focused on direct poverty alleviation in the poorest countries. 

But the Bretton Woods architects understood then what still 

holds today: a world in which a growing number of countries are 

11 

prosperous and economically integrated is also a more peaceful 

world and one that ultimately benefits the United States. 

So, when U.S. officials resist calls for MDB capital increases, or 

press MDB borrowers to graduate from assistance, they are taking 

positions that are increasingly out of step with the rest of the 

world. It shouldn’t be a surprise, then, that the Chinese found so 

many willing partners when they conceived a new MDB without 

the United States. 

So how can the United States not only get back in step with its 

multilateral partners, but actually lead on a new MDB agenda? In 

short, it is about money and policy. The United States needs to 

show greater ambition when it comes to MDB financing. It can do 

so by channeling a larger share of its existing foreign assistance resources through the MDBs, and showing more flexibility around 

compelling uses of MDB capital and grant money. 

When it comes to policy, U.S. leadership is critical. And I want 

to highlight how it is being undermined in one area. The rise of 

MDB-related policy mandates attached to appropriations bills has 

become problematic. 

Yes, Congress has a key role to play in setting U.S. policy direction in the MDBs, but I strongly believe that work should be spearheaded by this committee, and its counterpart in the Senate, with 

the histories they have of transparent deliberation, robust debate, 

and open markups. 

I have been troubled by the growth of policy mandates emerging 

in spending bills with little explanation and no history of hearings 

or debates around them. This has led to hollow victories for the advocates of these policies when there is no wider buy in for the mandates themselves. At worst, it sometimes leads to conflicting mandates and messages which have undermined the ability of the 

United States to pursue policies internationally, when there is just 

a basic amount of confusion about what the U.S. position actually 

is. 

So, I believe it is this authorizing subcommittee, in particular, 

that can play a crucial role in fixing these particular problems, but 

more importantly helping to set a strategic vision for the U.S. role 

in the MDBs going forward. 

So, I am greatly encouraged by your calling this hearing, and I 

very much hope that it will be followed by more hearings, debates, 

and even markups in the months and years ahead. 

Thank you. 

[The prepared statement of Mr. Morris can be found on page 46 

of the appendix.] 

Chairman HUIZENGA. Thank you. I appreciate that, and with 

that the Chair recognizes himself for 5 minutes of questioning. And 

Mr. Morris, I will start with you, maybe not so much a question 

as a comment. 

Could you please let our colleagues in the Senate know that we, 

too, would like to go through with the appropriations process; continuing C.R.s indefinitely does not allow anybody within any body 

to advance that debate and to figure out what is working and what 

is not working. So, I will just make a special note of that. 

Dr. Ravallion, I would like to ask you about a little bit about 

MDBs. You were asking, how do we do that? How do we lift those 

12 

billion people, as you were saying, out of poverty? You talked a little bit about how the lending culture needs to change. And I guess 

one of my questions is how, specifically? And are the MDBs really 

prepared to focus in on this? 

I am afraid, and, Mr. Chovanec, you might be able to go into 

this, or Mr. Karlan as well, are they so diffused at this point that 

we need a refocus? Or is it fine with the various issues that they 

are sort of dealing with? 

So, Dr. Ravallion, I would like to hear from you first. 

Mr. RAVALLION. Thank you. Yes, a refocus is going to be needed, 

but that is not the main problem. I think, as I said, the challenge 

of getting out of poverty is very country-specific, right? It is not a 

generalized thing. I can’t give you an answer. I just wrote a 700- 

page book, and it is coming out in 2 months, which is essentially 

trying to address your question. And I am not sure the 700 pages 

was enough. 

[laughter] 

And I don’t have—this clock is ticking. 

But I do want to emphasize very much that the specifics of how 

you deal with poverty is figuring that out at the country level. That 

is how we have done it in the past. That is how China did it. 

Chairman HUIZENGA. So, you might have been leading up to this. 

You had an article in April 2015 where you wrote, ‘‘A veritable 

gauntlet of procurement rules, safeguards, and approvals at the 

World Bank has sort of blocked a lot of that.’’ 

And I think there was a senior official at the World Bank, David 

Dollar, who had said that an Indian official once told him, ‘‘Mr. 

Dollar, the combination of your bureaucracy and our bureaucracy 

is deadly.’’ 

So, how do we cut through that? 

Mr. RAVALLION. Well, let me assure you nothing compares to Indian bureaucracy. 

[laughter] 

I work on India, and have done so for 30 years. In the present 

situation, the reality is that bank staff are assessed by the volume 

of their lending, dollars of money lent. And that is just a poor indicator of impact on poverty. You have impact on poverty sometimes 

when you don’t lend at all. 

You just argue it out in your policy dialogue at the country level 

to get the kinds of reforms that are needed to deal with the specific 

problems in that context. Or you use money, you use lending bundled with knowledge and bundled with good evaluation, feeding 

back into future lending. 

And it is that bundling of lending and knowledge that you can’t 

just measure success by the dollar value of the lending. As long as 

the incentives of staff and managers are tied to that goal, you are 

not going to have the impact the bank could have. 

Chairman HUIZENGA. So is it fair to say that many assume that 

MDBs are fighting poverty, and that is their focus, even though 

nonconcessional lending to middle-income countries can actually 

equal or exceed the loans to poor countries? 

Mr. RAVALLION. Yes, but the bulk of poverty is in those middleincome countries. 

Chairman HUIZENGA. You believe that is a proper— 

13 

Mr. RAVALLION. That is not a huge problem. Also, those categories, low income, middle income are very arbitrary— 

Chairman HUIZENGA. Okay. 

Mr. RAVALLION. —and disappearing. But thankfully, the task of 

realigning, as I keep emphasizing, realigning incentives towards 

that goal, I think the recent reforms have been a step in that direction. But it is not about the organogram. It is not about the way 

you organize the bank. That is one aspect, but it is a minor aspect. 

And, in fact, the old organogram resolidified quite quickly. It is 

about those incentives at the staff level. That is the culture that 

has to change. 

Chairman HUIZENGA. In my remaining 35 seconds, Mr. 

Chovanec, we talked a little about the AIIB, and Silk Road, and a 

number of other initiatives. Is this a threat, is China’s involvement 

a threat? Or is it really just a modern reality of global financing 

of what is going on, and there are just more people who are out 

in that space? 

Mr. CHOVANEC. It can be either. It is a reality. The fact that 

China has accumulated so much capital that it wants to deploy, the 

United States is not in the position of being able to tell China what 

to do with its money. China can deploy that capital with or without 

the assistance of other countries. 

However, and the reason why I focused on the different motivations that China has, is that some of those motivations are things 

that we can live with. Some of those things are things that we actually would like to encourage. And some of them are actually 

problematic. 

So, I think the response should be how do we shape the way that 

China interacts with the world, not can we stop China from providing capital. 

Chairman HUIZENGA. My time has expired. And I will just note 

that Professor Karlan, I would like to follow up with you in writing, and talk a little bit about your research on the effectiveness 

of microfinancing, and how much or how little should that be regulated as we are moving forward. 

So, thank you. 

With that, I now turn to the ranking member for 5 minutes. She 

wanted to know if I was going to gavel myself. Yes, I was—I am 

trying to be that evenhanded. I was going to gavel myself. So, with 

that, the ranking member is recognized. 

Ms. MOORE. This hearing certainly has met my expectations in 

terms of just the collective knowledge that you all have. And, it 

is—I would be really interested almost in a colloquy between Mr. 

Karlan and Dr. Ravallion regarding the importance of research in 

alleviating poverty. 

It seems that Dr. Karlan, you gave some examples of stuff that 

has really worked, like in Mexico, the Progresa Opportunidades, 

where women win conditional support and, Dr. Ravallion, you have 

said that we just haven’t employed research enough. So, I guess I 

am just sort of interested in what the disconnect is? Or am I perceiving something that is not there? 

Mr. KARLAN. No, I would say there is—and I think, actually, that 

part of what we were saying is that we agree very much that there 

14 

is tremendous value in the knowledge that is generated out of 

those types of research examples. 

My point was that there is just a—I gave a few examples of 

which you named one, and I think we can do a lot more. And, in 

that sense, what Professor Ravallion was talking about was the 

same basic idea: how do we get that knowledge actually into the 

hands of the policymakers. 

Ms. MOORE. Okay. 

Mr. KARLAN. And linking it more tightly with loans, for instance, 

so that we very proactively think about our value added in the 

MDBs is—I shouldn’t say our, I mean, I am not there. But is by 

not just making loans, but bringing knowledge to the world. 

Ms. MOORE. And Dr. Ravallion? 

Mr. RAVALLION. Very quickly, I have a worry, a concern that the 

volume of research is increasing, but I don’t see it fully deployed 

towards our key knowledge gaps. Think about it this way: there 

are knowledge gaps coming out of the problems, finding those binding constraints at country level, what—how do we deal with them. 

There is a disconnect—the key disconnect is between essentially 

policymakers and research. 

Ms. MOORE. Yes. 

Mr. RAVALLION. Right? They are asking questions, and we are 

answering some of them, but not all of them. And to bring the two 

together, in a more effective way, is the charge. 

Ms. MOORE. It—like, the United States, for example, just hit— 

just mentioned some research that had been done on poverty, 

that—where we haven’t deployed that information toward alleviating poverty here. 

Mr. RAVALLION. What is the question? 

Ms. MOORE. I’m sorry. As an example, is there some body of research out there regarding poverty in the United States, which we 

haven’t deployed on a policy level? 

Mr. KARLAN. No, I think there isn’t, actually. It goes a little bit 

to what was referred to earlier, there is a lot of work on the 

unbanked and the underbanked in America. And this is actually a 

perfect—not to say that it is right—segue in the sense that some 

of that research that actually should influence U.S. policy was done 

by MDBs. 

But that link wasn’t made. I think there are people trying to 

make it. I am trying. Others are trying. It is not to say there is 

no effort, but that is exactly where the research— 

Ms. MOORE. I would love to follow up, and my time is waning. 

Mr. Chovanec, you—I read, perused your testimony, and then I 

heard you talk, and I was waiting to hear whether or not the 

Renminbi part of the basket of currencies in the SCR. And what 

impact would that have? 

Mr. CHOVANEC. It is another question, but yes, I think the economic and financial significance of the Renminbi part of being— 

part of the SDR is insignificant. I don’t think— 

Ms. MOORE. Is insignificant— 

Mr. CHOVANEC. Insignificant. I don’t think it has any significant 

economic and financial impact. The thing that makes a reserve currency a reserve currency is not some kind of official imprimatur. 

15 

It is the role that it plays in the global economy, and it requires 

a currency to be both desirable and accessible. 

Desirability—on the one hand, a lot of people want to use the 

Renminbi to buy things from China. But on the other hand, it is 

not very easy to hold it. There are not that many places where people can invest it. 

The other aspect, though, which a lot of people ignore, is accessibility. In order for China’s currency to function as a reserve currency, it has to move from being an importer of foreign currency 

to being an exporter of foreign currency. 

Ms. MOORE. Thank you. And, Mr. Morris, I have to ask you a 

question. You have been critical of the United States’ foreign aid 

budget. We should do more with multilateral. How would it be better to provide it to multilaterals rather than bilateral support? I 

ask for indulgence, Mr. Chairman. 

Chairman HUIZENGA. Ms. Moore, I gave myself 30 seconds, so 

keep going. 

Mr. MORRIS. Thank you, no, just very briefly, and I did try to 

outline why I think these institutions provide particular value to 

the United States. I think it is important to recognize how small 

of a share of the foreign assistance budget they account for, and as 

I advocate for more of that share, I am not talking about dramatic 

changes here. Really, very small shifts in how much we rely on 

these institutions, which, in a strictly financial sense, leverages our 

money tremendously. We could get a lot out of that. And that is 

really what my point is. 

Ms. MOORE. Thank you for your indulgence, Mr. Chairman. 

Chairman HUIZENGA. The gentlelady’s time has just expired. 

With that, we recognize the vice chairman of the subcommittee, 

Mr. Mulvaney of South Carolina. 

Mr. MULVANEY. I thank you, Mr. Chairman, and Ranking Member Moore, and I thank all of you gentlemen for being here. Dr. 

Ravallion, I actually thank you most especially. Unbeknownst to 

you, you are a part of an important friendly competition between 

myself and the chairman. 

You will notice that he has stepped out. As a person who holds 

a degree in economics from your fine institution, I will inform you 

that the competition now between witnesses from Georgetown University versus witnesses from Texas A&M is dramatically in the 

Hoyas favor. But the chairman left before I had a chance to have 

some fun at his expense. 

I want to try and draw some themes together. If I heard this correctly—and that is what I enjoy about these hearings is actually 

trying to find out information—Dr. Karlan, Dr. Ravallion, and Mr. 

Morris, I think what I heard was that there was a common theme. 

I heard Dr. Ravallion talk about public common good. Dr. Karlan 

talked about microfinancing. 

And if I looked for a theme between those two things, it might 

be that those two things, in my mind, are things that the private 

sector might not be doing. Certainly, they are not doing it for the 

public goods. And they are doing it a little bit, I think, in micro. 

And then I think about Mr. Morris’ arguments saying, well, we 

need to be doing more and more. But then he uses a quote from 

1981. 

16 

Dr. Ravallion, I think, mentioned that one of the biggest changes 

in the last 30 years has been the globalization of the economy, and 

the fact that a lot of what the World Bank, especially, used to do 

is now done by the private sector. 

So, I want to drill down for a few minutes on this concept of filling in the gaps where the private sector does not provide liquidity, 

credit. 

Dr. Karlan, am I right on that? What is the private sector doing 

with microcredit, and could the World Bank be doing more in a 

more effective way? 

Mr. KARLAN. I think there are two basic thoughts here. One is 

that there is—what I think to Professor Ravallion’s points that I 

completely agree with is that the knowledge, the private sector is 

not going to provide the knowledge, and that knowledge is a great 

public good that the MDBs can provide. 

Mr. MULVANEY. And for the benefit of— 

Mr. KARLAN. And that is knowledge at micro as well as macro 

kind of— 

Mr. MULVANEY. And for the folks who might not be familiar with 

the term ‘‘public good,’’ why won’t the private sector do it? 

Mr. KARLAN. The private sector is not going to do that because 

it costs too much money relative to the profit that they will make 

as an individual firm. The society as a whole benefits, and so it is 

worth it for society to do it, but for any one firm, the money is just 

not there. It is just not that valuable for any one particular firm. 

On the micro side, the second thought is that one of the striking 

things with the microcredit industry is it started off as a subsidized 

program around the world. And, basically, people learned that actually this can be done in a profitable way, and make people’s lives 

better off. It just isn’t solving some of the issues that it set out to 

solve initially. 

So, I think one of the things we can do here is let markets work 

with—regarding microcredit. Do some things, there are some regulations that are needed to help make it work well. But let the markets work for that. 

But meanwhile, let’s not forget the original goal that we set out 

with, which was alleviating poverty and increasing income for the 

world’s poorest, and for that microcredit is not doing that, and we 

need to address some other—look for other paths to do that. And 

that—some of those things do actually require a subsidy. There is 

not a market solution for some issues. 

Mr. MULVANEY. Thank you, Dr. Karlan. Dr. Ravallion, I want to 

come back to something you said, because you talked about knowledge, which I understood, and I understood perhaps the connection 

between a development bank, like the World Bank, getting involved in that. But then you went someplace I want to press you 

on a little bit; you talked about health. You talked about the Ebola 

crisis. 

And, just without knowing the answer to the question, is the 

bank really the best vehicle for doing that? Wouldn’t a health organization be best suited to do that, instead of a development bank? 

I get it on knowledge. You sort of lost me at health, and I am 

just asking you to fill in the blanks. 

17 

Mr. RAVALLION. It is sad—somewhat sadly the case that there is 

really nobody doing it. That is the problem. Now, if we could get 

the WHO to reform, we could get the—it to be properly funded, 

maybe. But it needs a global institution. I think the funding role, 

and the convening role of the bank would remain even if we got 

the WHO working better. 

Mr. MULVANEY. Give me an example of how the bank—what the 

bank could do to help build this public body of knowledge regarding 

health? 

Mr. RAVALLION. Yes, it has a lot to do with building health systems in poor countries, right? And that is also about information. 

Dealing with a pandemic is about information; it is amazingly important to know what is happening locally, what is happening in 

the next country, and getting that information really quickly, and 

being very responsive. The fundamental infrastructure on health 

systems, and the information just flows have to be much more effective. 

Mr. MULVANEY. Super. Gentlemen, thank you very much. I appreciate the input and I thank the chairman for the time. 

Chairman HUIZENGA. The gentleman yields back. With that, we 

will recognize Mr. Carney for 5 minutes. 

Mr. CARNEY. Thank you, Mr. Chairman. This is a very interesting conversation. I must admit ignorance on what these development banks do, and trying to figure out what our role is as Members of Congress, and members of this committee. 

So, maybe we should start at a basic level. Where do each of you 

feel that the banks are not serving American interests as well as 

they could? Why don’t we just go right across, starting with Dr. 

Karlan. 

Mr. KARLAN. So, first of all, I do think they are serving U.S. interests well. They can just do better. And I think— 

Mr. CARNEY. And how could we do better? 

Mr. KARLAN. Basically, by drawing tighter links between knowledge and policy. By making it so that others can use that knowledge that they are creating more, and that, internally, to the multilateral development banks. That it is kind of like the way Professor 

Ravallion described: it is not just—the banks are not just going out 

and making a loan to another country. But bring with that loan 

knowledge about how to set policy, and help that country learn 

themselves in their context what is working best. 

Mr. CARNEY. So, Dr. Ravallion, and I am going to come back to 

ask the question, what countries are more successful than others 

that are not so successful. Dr. Ravallion? 

Mr. RAVALLION. Which countries are more successful? And which 

are— 

Mr. CARNEY. No, I am going to come back to that question. You 

are the one who said these— 

Mr. RAVALLION. Yes, okay, on your first question, I love the way 

that the senior member put it, that poverty is a global problem. It 

is a—poverty in Africa, Sub-Saharan Africa is a problem for America. We are global citizens. 

But it is not just our citizenship, it is not just the moral and ethical argument. It is the spillover effects. The way poverty costs peoVerDate Nov 24 2008 15:48 Sep 09, 2016 Jkt 099752 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 K:\DOCS\99752.TXT TERI
18 

ple globally, we see that in things like the Ebola crisis and the 

risks that has to this country. The world as a whole is better off. 

So, all of the issues we have addressed, about how the banks, 

banks plural, could be more effective in supporting knowledge 

based financial intervention to assure poverty reduction in those 

countries is in America’s interest. 

Mr. CARNEY. So, maybe you can answer the second question now. 

Where in Africa is it more successful than others? Or where has 

it been successful, and countries where it has not been so successful? 

Mr. RAVALLION. Actually, Sub-Saharan Africa as a whole has 

been on a new trajectory since the turn of the millennium that is 

really impressive. People don’t realize the success story. We used 

to say it was mostly the work of China and India in reducing global 

poverty. That is no longer true. 

The trend rate of poverty reduction in Sub-Saharan Africa went 

up from a trend of just a miserable 0.4 percent per year in reducing 

the poverty rate by $1.25 a day, to a very respectable 1 percent 

trend rate of reduction since 2000. So the region as a whole—now, 

obviously, there are exceptions. Zimbabwe is doing very badly, and 

we know why. But we are seeing it, it is not just a few little— 

Mr. CARNEY. One country that stands out? 

Mr. RAVALLION. I am talking in over 48 countries, so you just go 

through the board. You are seeing progress on some or all dimensions of poverty across Sub-Saharan Africa, with a few exceptions. 

So, in other words, I would answer your question by pointing out 

the cases where it is not happening. 

Mr. CARNEY. Okay. Mr. Chovanec? 

Mr. CHOVANEC. I don’t want to claim to be in a position of 

critiquing the existing development banks. What I would say is 

that with the new Chinese development banks, the concern is that 

they may not bring the same level of governance to the table that 

the existing banks did. And that concern is based upon the lending 

practices already of China Development Bank, China Export-Import Bank, and some of the kind of mixed motivations that they 

have brought to the table. 

Maybe other countries flocking to join these banks will actually 

be a blessing in disguise in the sense that it gives a higher level 

of transparency and a higher level of attention to governance. 

But—and that is one of the reasons why perhaps we should—we, 

the United States should consider taking an observer role, even if 

we don’t participate, taking an observer role with some of these 

new institutions. 

Mr. CARNEY. Mr. Morris? 

Mr. MORRIS. I guess the one area I would point to where the 

MDBs have struggled, and have not shown as much success as we 

would like, is the relatively small set of countries that we consider 

fragile and conflict-affected. And here, I think it is not the MDBs 

alone. I think the international community struggles with these situations, but it is of great importance for the United States. And I 

think for the MDBs they have to find a way going forward to be 

more effective in these environments, and particularly to be more 

agile. 

19 

I think, if you look at a case like Cote d’Ivoire a few years ago, 

where after a great deal of instability you finally have a democratically elected government coming in, the MDBs struggled greatly to 

respond quickly to that situation, and show support. Once they did, 

it is a good news story. I think there is tremendous success happening now in that country, and the MDBs are actually playing a 

good role, but it took them a while to get there. 

Mr. CARNEY. I see my time has expired. Thank you, Mr. Chairman. 

Chairman HUIZENGA. Thank you for your honesty. I was just trying to give a light gavel. So, with that, I would like to recognize 

Mr. Pittenger, the gentleman from North Carolina, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. I thank each of you 

for being here. I would like to follow up on Mr. Mulvaney’s questioning, and get some clarity on the role of the MDBs as it relates 

to the reduction of poverty. Were they the primary factor? Were 

there other factors involved? Did the private sector play any role? 

Give me some additional information, Dr. Karlan and Dr. Ravillion. 

Mr. RAVALLION. It certainly wasn’t just the banks. The biggest 

single thing I would point to is the change in the policy environment. The more market-friendly policies—I am not a pro-markets 

guy all the time, and I am all the time talking about problems like 

market failures and addressing those, but there were some major 

reforms starting from the mid-1990s that put a lot of the developing world on a new trajectory. And we have to realize that. 

Macro stability was key. This is something that the banks and 

they fund, encourage in dialogue, but the attribution problems are 

huge in terms of saying, well, how much was there—the external 

players versus the internal domestic players. 

We are in a kind of dialogue all the time about better policies, 

ranging from macro stabilization, macro instability is one of the 

worst things for poor people. People don’t realize just how bad that 

is often. 

All the way through to the micro policies that Professor Karlan 

talked about on microcredit, for example. All the way through, it 

is really—the best way to think about is the institutions—the international institutions are in a dialogue with policymakers in countries, trying to encourage, and learn, too. We are learning from one 

country to help another. Learning and encouraging a better policy—evidenced based policy environment. 

Mr. PITTENGER. As you look toward, I think you said 2030 and 

the elimination of poverty for 1 billion people, what role do the 

MDBs play? And what other factors are involved there? 

Mr. RAVALLION. A big factor is going to be in the global finance 

going to developing countries, and maintaining that is going to be 

key. Now, that is hardly about the direct financing of the banks, 

but also about their facilitating role, and their leadership role. You 

have to realize there are many countries where there is risks, for 

example. The private sector, one of the problems in private sector 

lending is getting to risky places. The World Bank has persistently 

identified places being the first in lead the private sector into that 

country. 

20 

Mr. PITTENGER. When you look at risky places are you referring 

to countries that have an intense amount of corruption? What role 

does corruption play in terms of how assistance is given out? 

Mr. RAVALLION. Part of what we do, what we—not we, I am no 

longer part of what the World Bank does—is very much building 

the institutions that will be more robust to the existence of potential corruption. It is not like you get rid of corruption and suddenly 

everybody is going to behave differently. You just have to make the 

institutions, and the capacity of the state itself is key to that. 

One of the mistakes that we make is we think that—we abandon 

the states because we see corruption. You have to make those 

states stronger. You have to increase capabilities for monitoring. 

You are strengthening legal systems and property rights is part of 

the process of better development policy, facilitated in part through 

lending. Lending is also—the bank does, is also part of the process 

of ensuring those things don’t happen as much. It will never go 

away, though. 

Mr. PITTENGER. Sure. Dr. Karlan, your research is it—regarding 

the poor, what have you learned or discovered about institutions 

like MDBs that has altered your thinking, and upended maybe 

some of the essential understandings that we have had about 

MDBs? 

Mr. KARLAN. Well, there we go. Not sure, you know— 

Mr. PITTENGER. Are there blind spots that you discovered about 

MDBs that we didn’t have before? 

Mr. KARLAN. Any what spots? 

Mr. PITTENGER. Blind spots. 

Mr. KARLAN. Blind spots. So I think what we have seen is a dramatic increase in the past 10 years, 10, 15 years, in doing careful 

randomized trials of micro level policies. So, not the kind of macro 

structural types of issues, and there are a lot of other issues out 

there that the World Bank has also been working on. But we have 

seen a huge increase in micro level studies that help understand 

did this particular policy actually change outcomes for a set of people. 

It kind of goes to the question you asked, how do we attribute 

the global changes in poverty and it is saying, no, no, that is—for 

exactly the reason Dr. Ravallion said, it is very difficult to actually 

establish attribution, or what caused poverty to drop in Ghana. 

But what is possible to do is say this particular policy over here, 

what effect did it have in this context? And, so, this is one of the 

areas that the MDBs have made massive inroads in, in the past 

15 years, doing that kind of research. And it—you would basically 

think about it as kind of a three prong attack. 

It is, first, establish causality, establish that in this context this 

micro policy had this impact. Second, is have some understanding 

as to why it worked. And, third, is to then replicate and test this 

elsewhere, and see how do you take this lesson from that context 

and bring it somewhere else, bring it to another country, et cetera. 

And that is the knowledge spillover that we keep talking about 

that is essential, is to make sure that you have kind of thought 

through those things. 

But this is about micro level policy, and I just want to be clear 

what I am talking about. That is not going to be—you don’t use 

21 

that tool to answer the question why has poverty dropped around 

the world. 

Mr. PITTENGER. Thank you. My time has expired. 

Chairman HUIZENGA. The gentleman’s time has expired. With 

that, the gentleman from Michigan, Mr. Kildee, is recognized for 5 

minutes. 

Mr. KILDEE. Thank you, Mr. Chairman. I want to thank my 

friend from Michigan for holding this hearing. It is an important 

discussion. I want to start off with Mr. Morris, and ask you to 

make some observations on the global need for water infrastructure. 

And I just want to point out a bit of an irony. I come from Flint, 

Michigan, which is currently going through its own emergency related to available drinking water. It has been revealed that the 

water source that the City has been using is highly corrosive, and 

has led to lead levels in the water that have made it very dangerous, undrinkable, and has forced unanticipated expenditures in 

the tens of millions of dollars for a City that has an annual budget 

of $50 million. 

I point this out because this is a situation, a condition occurring 

in my district, in the State of Michigan, in the richest country in 

the world, at the richest time in its history, and we have a hard 

time finding ways to sustain water infrastructure. 

I wondered if you could discuss, and I would ask maybe each of 

you to offer any observations on the difficulties in developing water 

infrastructure in economies that are far less robust than the one 

that I represent. And what the hurdles look like, and, I guess, 

maybe even further, how water infrastructure fares in terms of 

project selection as a priority for MDBs. 

Mr. MORRIS. Thank you, Congressman. This is a very important 

point, and there was this earlier discussion about, well, let’s look 

globally at all the money that is flowing today, and capital flows, 

and of course the MDBs are a shrinking—ever shrinking share of 

global capital flows. 

But it is important to focus on where they actually lend, and 

what situations, and what we would call market failures. And 

water infrastructure, and infrastructure more broadly, is a very relevant example of, among all those capital flows that are flowing 

from private sources, they aren’t reaching what are often pressing 

needs, water is one area. And, yes, there are some models that 

bring in private investment to develop water infrastructure. But 

they aren’t meeting the needs that we face globally on this. 

I did want to make another point, because you raised the situation in Flint. I think it is important, from a U.S. perspective, to 

recognize—we think of these multilateral development banks, and 

development banks, as something that we give money to so that 

stuff can get done elsewhere. And then you rightly observed, in 

fact, we have the kinds of needs that, water infrastructure needs 

in the developing world, we have them here, too. 

One thing to recognize, and this, frankly, is within your jurisdiction is the United States has, in fact, saw fit in the past to create 

this kind of model for itself. We have something called the North 

American Development Bank, which does infrastructure projects 

22 

along the southern border, on both the U.S. side, and the Mexico 

side. 

And it is well worth looking at that model as something, and 

more generally, realizing that it is not so much the MDBs operating in a very small group of countries we consider poor. They actually are operating in a diverse group of countries, some of which 

look, in many ways, a lot like us. 

Mr. KILDEE. Would any other panel members like to comment on 

water infrastructure? Or the particular challenges? I guess, the 

question I have really has to do with developing these sorts of infrastructure which traditionally we think of as being sort of ratebased, or supported on a market basis. And communities, even 

challenged communities in this wealthy country, see that as a difficult prospect. What about in nations that have far less robust 

economies? 

Mr. RAVALLION. Very quickly on that, a couple of points, most developing countries today are a long, long way from a point where 

you could consider the water drinkable. A key behavioral thing is 

then how you deal with that. You boil the water, which means that 

the problems of water and ill health, particularly in kids, diarrhea, 

diarrheal diseases is a huge problem. 

How you deal with that is about other aspects of what we do in 

development, and particularly in maternal education. A huge factor 

in the interaction effect between bad water and child ill health is 

maternal education. 

But this is a long, slow road for building that basic infrastructure 

in water and sanitation, and that is something the development 

banks do a lot of. But we have to be realistic here. It is going to 

be a long time before that happens. 

Mr. KILDEE. Thank you. My time has nearly expired. I just want 

to say thanks to the chairman for holding this important hearing. 

Thank you. 

Chairman HUIZENGA. Thank you. The gentleman yields back. 

With that, Mrs. Love, from Utah, is recognized for 5 minutes. 

Mrs. LOVE. Thank you. Thank you, Mr. Chairman. First of all, 

I understand that the MDBs may be feeling some competition from 

the Chinese development banks, and the BRIC bank—the BRIC’s 

banks. And that perhaps they may be lowering their standards in 

order to meet the competition. 

What do you think we need to do in terms of the standards and 

the safeguards in this new landscape? And I ask each one of you, 

do you think that we need to adjust traditional methods? Do you 

think that we need to adjust a little bit to accommodate for what 

is happening in this type of landscape? 

Mr. KARLAN. So, I have a thought from afar. 

Mrs. LOVE. Okay. 

Mr. KARLAN. It is not like I have dealt with that directly, but the 

thought would be if the loans that are being offered by the MDBs 

are actually attached to better information about how to implement 

better policy, that would be a good way of winning. And if there 

was some sort of competition between development banks. 

But realistically, I don’t see that kind of directly hands-on. So, 

it is not like I have been at the table, where I have experienced 

this kind of competition to be able to speak— 

23 

Mrs. LOVE. Okay. 

Mr. KARLAN. —too well. 

Mrs. LOVE. Okay. Thank you. 

Mr. RAVALLION. Very quickly, the World Bank will not be, I am 

very sure, lowering its standards as part of competition with the 

China banks. The China banks will be raising their standards, and 

we are seeing that already. I was also, for many years, one of the 

few, I think the only, international advisor to Chinese government 

on aid policy. And I saw this in that experience. 

I saw the change. I saw from a great naivete about things like 

evaluation, assuring that the processes work on the ground, to a 

great sophistication. So, China is capable of raising its standards 

in all of this to a global, international level. And I think we will 

see that. It might be— 

Mrs. LOVE. So you think you will see them raising them their 

standards? 

Mr. RAVALLION. Exactly. 

Mrs. LOVE. Okay. I will just move on. Professor Karlan, in reading your testimony, you highlight the value of translating knowledge and you have mentioned that several times today, into policy 

and practice. In other words that the MDBs can provide great 

value through the research they conduct, and determine which programs have the great—have the greatest positive effect on development, and therefore give us the best return on investment. 

So, the MDBs collectively have many decades of experience, and 

you give some examples of specific programs, such as Kenya, and 

the public transportation there. In my view, they are very micro 

level programs, so my question is: what are the broader conclusions, do you think we can draw about the types of reforms that 

would be most effective in spurring development? For example, the 

policies that encourage the private sector to grow as a key to sustainable growth. 

Mr. KARLAN. So, I think—that I go back to kind of Dr. 

Ravallion’s answer, which is that would require longer than a 700- 

page book, to really get at very, very specific things. And the reality is that there is no generalized answer to that question. 

There are guiding principles that we have seen consistently happen over and over again. But I think the most important thing is 

to put in place a process of learning, so that in a particular context 

you can use information from elsewhere, but if you have a process 

of learning in that context what then works, you can then learn 

better how to implement policy. 

So, there are some general guiding principles we have seen, 

take—the example of the study that I referred to that worked with 

the ultra-poor. A guiding principle there was very simple, which is 

it wasn’t any one thing that was a problem. 

And so policies which just go and try to tackle one thing at a 

time, we are having issues. And they weren’t achieving their goals. 

But an integrated package was. And this does speak to an important theoretical idea that there is interlinking— 

Mrs. LOVE. I have one more question I need to get in, because 

this is an important question for me. How do you think the MDBs 

can better support entrepreneurship in business-led growth, as a 

24 

foundation for stronger economic growth and higher living standards? I can ask you, Mr. Morris, do you think that we can? 

Mr. MORRIS. Sure, no—and I agree it is an important question. 

And it is a dilemma for the banks, frankly, because I think there 

is broad recognition over many years that private sector development is central to development— 

Mrs. LOVE. Yes. 

Mr. MORRIS. —and job creation. The model the MDBs have tends 

to be dominated, and it is some of the concerns that Dr. Ravallion 

raised, they are essentially lenders to private firms, and sometimes 

private equity funds effectively. And it has tended to crowd out 

probably more focused efforts, whether its micro, SME, their dominant approach is to go after, frankly, what in too many cases what 

is safer investments, and raising questions about how much value 

they are bringing to the transaction that wouldn’t happen anyway 

from other sources of investment. 

I think they really have a lot of work to do to figure out how to 

be more innovative in this area. 

Mrs. LOVE. Yes. Thank you. 

Chairman HUIZENGA. The gentlelady’s time has expired. With 

that, the Chair recognizes Mr. Schweikert, from Arizona, for 5 minutes. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. I am actually elated that we are having this hearing, and by looking around you can 

see how many of us truly are geeky enough to love this. 

I want to do two things. I was actually, and I am hoping I am 

not too much of an outlier here, I was not enraged but I was close. 

I thought it was inappropriate, I thought the United States should 

have participated in the chartering of the Chinese-sponsored Asian 

Development Bank for the governances. A quick question, and then 

I want to get into something I have a great interest in. The four 

of you obviously know this area well, am I right or wrong in that 

position? 

Mr. CHOVANEC. I would say that you are not wrong. I don’t think 

is a right or wrong position on whether the United States wants 

to join the AIIB. I don’t think—I think what the United States did, 

though, was fall into the trap of simply thinking that it could oppose it without offering— 

Mr. SCHWEIKERT. As you see— 

Mr. CHOVANEC. —any kind of—if it had issues, it needs to offer 

a compelling, competing vision. 

Mr. SCHWEIKERT. Look, it is a little duplicitous to say, we don’t 

want to play because we are worried about governance issues, but 

if we don’t show up, we can’t have influence on governance issues. 

Meaning you can’t have both. So, and you see the number of our 

allies, who we care about that we tried to influence not to participate and they did. 

Mr. CHOVANEC. Right. I think to be fair, though, some of them 

of them were also motivated by less high-minded— 

Mr. SCHWEIKERT. Oh, of course. 

Mr. CHOVANEC. —ideas. 

Mr. SCHWEIKERT. There is money involved. 

Mr. CHOVANEC. The U.K.—there is this idea that China is sort 

of doling out money and you want to be there when it happens. 

25 

And the U.K. in particular, which was the first one to break, was 

driven very much by this desire to be the center of Renminbi trading. So, I think everybody kind of brings some mixed motives to the 

table. 

Mr. MORRIS. If I could— 

Mr. SCHWEIKERT. Mr. Morris. 

Mr. MORRIS. —to the degree we pose this question today, look, 

I don’t think when it comes to being country number 58 in the new 

institution I don’t think there is tremendous value. We can go back 

and look at the earlier question. 

Going forward, to me the obvious area of emphasis for the United 

States from a perspective of leadership is how are we leading in 

the institutions where we are already the number one shareholder. 

Mr. SCHWEIKERT. And that is fair, but look, we know we have 

some bureaucratic problems. We had some allocation problems. We 

also have some decision-making design problems. And I am hoping 

over this next few months, we can actually sort of dig down in that. 

A one off, but I think it is actually not focused on enough. Doctor, 

you eloquently spoke about the microfinancing, the layering within 

there. Something I don’t—and I would love to find someone who 

has a publication where I can delve into this, someone has researched it, is micro trade. Before I got this job, I was blessed to 

do lots and lots of traveling to a lot of unusual places in the world. 

And had to—a 30 second example. A family I met about 70 kilometers north of Bagan in Myanmar, carved tables. A couple of 

months ago, I was playing on the computer, and I found out they 

have this little tiny website selling their carvings, and their 

version, I guess, of PayPal. 

I just bought a table from them, from someone who is in a rural 

area in Burma. If you care about micro financing, if you care about 

economic growth, if you care about the empowerment of the poor, 

isn’t my ability using the new platforms, we are all walking around 

with these supercomputers, to engage in that type of trade. How 

do we promote that? 

Mr. KARLAN. Great question, and I can send you some papers. 

There has been work on it. It is much newer, I would say, but it 

is one of the—and I am not—I can’t, like, in this time, go into all 

the details, but there are a lot of market failures that do exist 

there, and just as you said, there are gadgets out there that are 

reducing the transaction costs, making transactions and trade that 

was not previously possible, possible. But there is a lot of work to 

figure out how to make those markets work exactly right. And 

there is recent research that I can forward. 

Mr. SCHWEIKERT. And generally, because so many of us have focused on the capital facilities, infrastructure facilities down to the 

micro financing, how about also now on the sort of micro production side? The ability to produce and sell your products. The ability 

to communicate you have the availability of those products to a 

world market. I have always thought that was the portion that was 

missing in this discussion for alleviating poverty around the world. 

Mr. RAVALLION. That is interesting, actually, because I never 

thought it was missing. In some sense I always thought that trade, 

micro trade, all kinds of trade between people, is one of the things 

that gets sorted out, that just starts to happen once you deal with 

26 

the fundamentals: access to credit, access to information, access to 

infrastructure. And that development was about working on those 

things. 

Now trade between people is one of the things that happens 

when you get the fundamentals in place. No, I am not trying to 

avoid the question— 

Mr. SCHWEIKERT. I would love to give this a little intellectual 

thought, and I am way over time, but this is something I— 

Chairman HUIZENGA. The Chair is prepared to move forward, 

though, with a second round of questioning, and seeing no objection, we have gotten an okay. If the gentleman will yield back. 

Mr. SCHWEIKERT. I yield back. 

Chairman HUIZENGA. What I would like to do is recognize myself 

for a brief question, and then we can go to you for a second round, 

if that is okay with our witnesses? I want to make sure everybody 

is able to make their trains and planes after we have delayed you 

somewhat today already. 

So, I guess, Dr. Karlan, I would like to revisit you, instead of 

writing to you. I would really like to know a little bit more about 

your research on the effectiveness of microfinancing, and really 

how much or how little should microfinancing be regulated, as we 

are in a very—in an increasingly regulatory mind bent by government. 

Mr. KARLAN. Sure. There is a lot that can be done to facilitate 

markets, but yes, there are some regulations that I do think need 

to be put in place. So, I will give you an example of one study that 

actually has implications for here in the United States. It is a 

study we did in Turkey. 

Whether people are aware of the price they are paying, and any 

sort of hidden fees in terms and conditions is obviously an important issue for regulatory purposes. How to make it so that people 

are aware of the prices, and how to actually write those disclosure 

policies is not so easy and obvious. 

Chairman HUIZENGA. Who is the appropriate governing body to 

be doing that? Should it be the MDBs that are then giving some 

of these grants? 

Mr. KARLAN. In this context, no. It is not the MDBs, but it is research MDBs can do to figure out how to do this, and that they 

then work with the regulatory bodies, for instance. So, there is one 

instance in Malawi, where a World Bank researcher did work to 

help understand how to get better biometric data into the use by 

the banks, so that when you take out a loan you know, kind of, 

who you are borrowing from. And then that information now is in 

the hands of the banking system, and the central banks to try work 

with other banks, such as when you try to encourage that type of 

exchange. So, it is not coming through the loans. That is coming 

directly from the research group. 

Chairman HUIZENGA. Okay. 

Mr. KARLAN. To the— 

Chairman HUIZENGA. But the MDBs do have some involvement 

with these microfinancing organizations, correct? 

Mr. KARLAN. Yes, but it is actually a little bit more removed. So, 

there is this—there is CGAP, which is a unit that is housed at the 

World Bank, which does a tremendous amount of work to try to inVerDate Nov 24 2008 15:48 Sep 09, 2016 Jkt 099752 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\99752.TXT TERI
27 

fluence policy, and establish regulations that are appropriate for 

the markets, to let markets work, but not hinder them. But it is 

not that CGAP is making direct loans. That is just—it isn’t— 

Chairman HUIZENGA. No, I understand it may not be direct loans 

but their involvement in there, could they not be helping to then 

set the parameters of disclosure or any other? 

Mr. KARLAN. Exactly. 

Chairman HUIZENGA. Okay. Would anybody else care to comment 

on that? All right. With that, I yield back my time and recognize 

the gentleman from Arizona for his additional question. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. Gentlemen, first 

off, if my sort of outlier question or dialogue we are having in regards to that ability to sort of engage, and I use the term micro 

trade because I haven’t come up with a better one, and I am actually not familiar with what is actually in the literature, but if you 

look at the technology platforms in Africa, you know, where this is 

also your bank, that should empower the ability to engage in other 

levels of trade. 

Can you share with me your experiences of what you are seeing 

out there in this happening? Because, it may be a little more chaotic, it may be outside a more structured, but you could also get 

some pretty good data on its philosophy. What do you see happening? And that is an open question, because I have no idea who 

should respond to it. 

Mr. KARLAN. I can give you an example of some research which 

shows that, and it is not going to get at velocity in terms of international trade, but trade just more commerce and trade improving 

outcomes. So, and this goes to, I think understanding what the 

market failure is, at the first place, that was preventing trade from 

happening. It is kind of like what Dr. Ravallion was saying, was 

it a credit market failure? Was it information failure? 

So, this is a perfect example of cell phones actually changing 

something. There are two different examples I can give you. One 

is from fishermen in India. So, when cell phones first got built, and 

towers got put up in—for the fishermen in India, in—beforehand 

they would have to just dock, and take the price whatever it is. 

A lot of fish were literally thrown away because they would dock, 

and there were no more buyers that was it, they couldn’t go back 

to sea and go to another dock. When cell phones came out, they 

were—in that basically, it is just improving information from markets. 

Mr. SCHWEIKERT. The price efficiency. 

Mr. KARLAN. Price efficiency, yes, and all of a sudden what happened was the fishermen could send a text, find out the price at 

the different docks, and go to the right place. All of a sudden, you 

saw smooth prices across the villages on the shore, and much less 

waste. More trade was taking place. More efficiency. And that was 

a direct byproduct of understanding. 

In this case, they didn’t set up cell phones to solve this problem, 

but it was the case that they reduced transaction costs and made 

that happen. 

In Kenya, a much shorter example, but mobile money, the ability 

to send money cheaply from one place to another, is reducing a 

transaction cost, making transactions that were not otherwise posVerDate Nov 24 2008 15:48 Sep 09, 2016 Jkt 099752 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\99752.TXT TERI
28 

sible, possible. And that has increased people’s ability to share risk, 

so that when something bad happens to them, others are able to 

help them. 

Mr. SCHWEIKERT. But in these examples, if we start to think 

about, if our passion is dealing with global poverty, and a path out 

of it, I am concerned or hopeful that the new information age, the 

fact that I often have very poor citizens around the world who are 

still holding some type of smart phone. And the information, the 

ability to move money now on those platforms, but also the ability 

to offer services or an indigenous product, or an enhanced—a value 

added product. 

How do I see the layering of, okay, yes, we have the huge development banks over here, they are going to build a bridge and a 

dam, but I have this other world that has also focused at the poverty level of providing at the community, at the individual, at the 

village level. 

And how do we, as Members of Congress, also make sure that 

we understand it, and are actually promoting those things that 

help the poorest around the world? 

Mr. RAVALLION. Okay, I think what you have to realize these 

days is a place like the World Bank is not just doing big infrastructure, big dams and so on. In fact, it is not doing much of that. In 

fact, dams are pretty much out of the picture these days. Rather, 

it is trying to—a lot of it is community-based work, which is exactly what you are talking about, in countries, which isn’t necessarily the kind of World Bank lending to a village. 

It can be the World Bank setting up a social fund to which villagers apply, or individuals apply. It is creating a kind of infrastructure at another level, which tries to facilitate those things. 

And the community-based aspect, based on individuals own initiation is key. 

Mr. SCHWEIKERT. Now, years ago, just as in that same line, rural 

India and the participation of an NGO that I believe had some resources, they actually weren’t giving money to the village, they 

weren’t giving money. What they were doing is they were subsidizing the transportation of the product to go from here to here, 

so it was economical. 

So, I accept it is complicated. There are lots of layers. But do understand there are a number of us who are just really interested 

in how commerce, the ability to work and trade, is a key solution 

to dealing with world poverty. 

And, with that, I yield back, Mr. Chairman. 

Chairman HUIZENGA. The gentleman yields back. I want to again 

thank the witnesses for their flexibility today, as we had a few 

things coming up. And I really appreciate that. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And again, I would like to thank each one of you for joining us 

today. I think this was very enlightening. It is very helpful, as we 

29 

are looking at examining the various roles that we play around the 

world. And with that, the hearing is adjourned. 

[Whereupon, at 11:58 a.m., the hearing was adjourned.] 

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A P P E N D I X 

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