# MICROENTERPRISE RESULTS

REPORTING

ANNUAL REPORT TO CON GRESS, FISCAL YEAR 2 007

JUNE 2008MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS FISCAL YEAR 2007 i i The cover photo depicts a village bank in Djiguinoune, Senegal, as women line up with account booklets and monthly savings that help secure fr esh loans to fuel their small businesses.

PHOTO COURTESY OF R. NYBERG, AS PART OF THE USAID PHOTO COLLECTIONMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS FISCAL YEAR 2007 i i 

# EXECUTIVE SUMMARY

Microenterprise Results Reporting (MRR) Annual Reports summarize USAID’s investments and priorities in microfinance and micro enterprise development. This Annual Report for Fiscal Year 2007 documents USAID funding for microenterprise development through more than 250 diverse implementing partners, ranging from private voluntary organizations (PVOs) and non

- governmental organiza tions (NGOs) to for

- profit banks and enterprise development service providers. This year’s data show strong Agency support for non

- profit organizations (PVOs, NGOs, cooperatives, and credit unions), which as a group received 49 percent ($94 million) of ov erall obligations in FY 2007.

The FY 2007 report reflects USAID’s continued commitment to leveraging its investments in microenterprise development. USAID helps strengthen the performance of increasingly commercial microfinance institutions (MFIs), allo wing them to attract private investors and grow faster than if they relied solely on donor support. USAID also reduces some of the risk to private investors and lenders by offering partial credit guarantees and other enhancements. As of FY 2007, $3.4 mil lion in USAID funding for credit guarantees was supporting up to $177 million in private sector lending to MFIs and microenterprises.

For the FY 2007 MRR, USAID refined its data collection surveys, both to improve the measurement of its microenterprise d evelopment activities and to better align with the Agency’s new accounting and program reporting system. Where practical, data validation tools have been updated and more options have been provided to deal with missing or partial data. In addition, the p overty loan proxy thresholds have been corrected for inflation since 1995, thus providing a more accurate basis for reporting. The financial services questionnaire now includes a more easily verifiable option for providing all financial data

in local curr ency.

This report fulfills the 12 reporting requirements included in the Microenterprise Results and Accountability Act of 2004 (PL 108

- 484). Key findings include:

1. In FY 2007, USAID provided $193 million in funding for microenterprise development throug h 184 new and existing grants, coopera

tive agreements, and contracts in 61 countries.

2. USAID provided $21.5 million in funding through central mechanisms in FY 2007.

3. USAID provided $93 million in funding through contracts in FY 2007. Just under
$45 millio n in microenterprise funding in FY 2007 was subgranted or subcontracted, with local institutions receiving 81 percent of this funding.

4. In FY 2007, USAID missions reported that
$24 million in USAID funds were matched by
an additional $6.2 million from sourc es outside

the U.S. Government.

5. For the first time, 31 USAID

- assisted partners

in 12 countries used USAID

- certified poverty assessment tools to measure and report the share of their clients who are “very poor” according to standards specified in recent legislation. 1 

### Based on their reports, USAID estimates that 19.1 percent of funds directly benefited “very poor” clients as defined in that legislation.

1 Amendments to the Microenterprise for Self

- Reliance Act of 2000 define the “very poor” as people living on less than $1/day at purchasing power parity, or those in the poorest 50 percent of those living below their country’s poverty line.MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS FISCAL YEAR 2007 i i 

### 6. An estimated 1.44 million very poor people directly benefited from USAID

- supported microenterprise pro grams in FY 2007, including microfinance clients and owners and employees of microenterprises benefiting from enterprise development interventions. This estimate assumes that the percentage of very poor clients reported by the 31 partner institutions cite d in the previous finding applies to the broader range

of USAID

- supported microenterprise development programs.

7. Funds benefiting the very poor were estimated using USAID

- certified poverty assessment tools, which covered 17 countries when poverty data

colle ction began. In FY 2007 and early FY 2008, USAID continued to develop additional tools. By the time the next round of poverty data collection begins, USAID expects to have certified up to 26 tools, for countries receiving

more than two

- thirds of USAID mi croenterprise funding excluding several countries where security conditions preclude developing or applying poverty tools. 8. Approximately $6.7 million of USAID’s microenterprise funding in FY 2007 assisted victims of trafficking in persons and women

who are particularly vulnerable to other forms of exploitation and violence.

9. In FY 2007, 39 percent of borrowers, 39 percent of savers, and 10 percent of enterprise development clients were located in countries where a relationship between poverty and race

or ethnicity has been demonstrated.

10. USAID exceeded most of its performance goals relating to microfinance, including numbers of borrowers and savers, percent of rural clients, and financial sustainability; USAID did not meet its goals for the percent of wom en clients and the percent of funds benefiting the very poor. In the area of enterprise development, performance exceeded all goals except funds benefiting the very poor. The reasons for this are discussed on page s 8

- 10.

# ABBREVIATIONS

AMAP Accelerated Microenterprise Advancement Project

ANE Asia

- N ear East Region

DCA Development Credit Authority

ED Enterprise Development

E&E Europe and Eurasia Region

FIELD

- Support Financial Integration, Economic Leveraging, Broad

- based Dissemination and Support

FVP Funds Benefiting the Very Poor

FY Fisc al Year

GDA Global Development Alliance

ICT Information and Communications Technology

LAC Latin America and Caribbean Region

LC Local currency

MFI Microfinance Institution

MRR Microenterprise Results Reporting

NGO Non

- governmental Organizati on

PAT Poverty Assessment Tool

PEPFAR President's Emergency Plan for AIDS Relief

PPP Purchasing Power Parity

PVO Private Voluntary Organization

RDM/A Regional Development Mission/Asia

SPM Social Performance Management

STRIVE Supporting Transform ation by Reducing Insecurity and Vulnerability with Economic Strengthening

USAID United States Agency for International DevelopmentMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 1 

# INTRODUCTION

This report fulfills the requirement of the Microenterprise Results and Accountability Act of 2004 (P ublic Law 108

- 484) that each year, “the Administrator of the Agency, acting through the Director of the office, shall submit to the appropriate congressional committees a report that contains a detailed description of the implementation of this title

for t he previous fiscal year.”

The United States Agency for International Development (USAID) has been recognized as the leader among donors in the field of microenterprise development and microfinance for almost three decades. USAID provides competitive award s to hundreds of diverse partners, ranging from non

governmental organizations to business associations to consulting firms to commercial banks. USAID supports innovations in financial services, enterprise development, and the enabling environment to

stre ngthen the contribution of microenterprises to poor households’ well

- being and economic growth. 2

, 3

2 Financial services include the provision of financial services adapted to the needs of low

- income people, especially small loans, facilities for small savings deposits, and simple payments services needed by microentrepreneurs and other poor people. This report

us es the term microfinance interchangeably with financial services. Enterprise development interventions help microenterprises start, survive, and grow, by helping them acquire skills and knowledge, gain access to financing and other inputs, and develop

comm ercial relationships with other firms (both micro

- scale and larger firms) in order to tap into higher

- value markets. Enabling environment activities promote appropriate laws, policies, regulations, and supervisory and administrative practices,

in order to expand access to financial services for low

- income people or improve the business environment in which microenterprises operate.

3 This report summarizes results achieved by partner institutions with USAID assistance, consistent with the Microenterprise Results and Accountability Act of 2004 and with USAID’s own policies on results reporting. Wherever possible, USAID partners have reported only those results attributable to USAID technical and financial assistance. However, many partners receive complem entary assistance from other donors and, increasingly, 

### Financial services and enterprise development interventions expand economic opportunities for poor households and businesses, while helping them to respond to those opportunities, build household assets, and cope with emergencies. Improvements in the enabling environment for microfinance encourage investment and innovation by microfinance institutions of all types, while improvements in the business enabling environment help micro

entrepreneurs participate in markets, increase their earnings, and realize the benefits of international trade.

USAID also identifies best practices, develops analytical tools, and provides technical assistance to missions and imp lementers to strengthen their programs, and coordinates with other donors to promote good practices and aid effectiveness in microfinance and microenterprise development.

Microenterprise Results Reporting (MRR), USAID’s system for tracking microenterpris e obligations and institutional results, has prepared Annual Reports on USAID’s funding patterns and institutional results

since 1996. 4 

### MRR gathered and summarized data obtained from USAID missions and implementing partners for the production of this Annua l Report.

This report is structured to give readers a clear sense of USAID’s implementation of the Microenterprise Results and Accountability Act of 2004. The following table provides a guide to the reporting requirements and the pages where they are ad dressed:

from the private sector. Leveraging such additional resources is essential to maximize the reach, effectiveness, and sustainability of USAID assistance, and also typically leads to results that would not be possible without USAID assistance. Nevertheless, identifying the portion of partners’ results attributable to USAID’s own assistance is often difficult or impossible.

4 To view Annual Reports from previous years, visit www.mrreporting.org

.MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 2 

## SUMMARY OF REPORTING REQUIREMENTS

Reporting Requirement Location



### 1 Funding: The number of grants, cooperative agreements, contracts, contributions, or other form of assistance provided under section 252 (Microenterprise Development Assistance: Authorization; Implementation; Targeted Assistance), with a listing of:

Page 4 and Annex A,

pages 18

- 26 (A) the amount of each grant, cooperative agreement, contract, contribution or other form of assistance;
(B) the name of each recipient and each de veloping country with respect to which projects or activities under the grant, cooperative agreement, contract, contribution, or other form of assistance were carried out; and
(C) a listing of the number of countries receiving assistance authorized by s ection 252.

2 Central Mechanisms: The amount of assistance provided under section 252 through central
mechanisms. Page 5 ; Table 2

3 Development Credit Authority: The name of each country that receives assistance under section 256 (Microenterprise Develo pment Credits) and the amount of such assistance. Pages 5

- 6 ; Table 3

4 Contracts and Sub

- Obligations: The level of funding provided through contracts, Page 6 ; Table 4
the level of funding provided through grants, contracts, and cooperative agreements that is estimated to be subgranted or subcontracted, as the case may be, to direct service providers, and Page 7 ; Table 5

an analysis of the comparative cost

- effectiveness and sustainability of projects carried out under
these mechanisms. Page 8

5 Match ing Assistance: It is the sense of Congress that USAID should include in the report required by section 258 of the Foreign Assistance Act of 1961 [as added by section 6 of this Act] a description of all matching assistance [as described in paragraph (1)] p rovided for the prior year by recipients of microenterprise development assistance under such title. Page 8

6 Funds for Very Poor Clients: The percentage of assistance furnished under section 252 that was allocated to the very poor based on the data colle cted using the certified methods required by section 254 (Microenterprise Development Assistance: Development and Certification of Poverty Measurement Methods; Application of Methods). Pages
8

- 10

7 Estimated Number of the Very Poor reached with assistanc e provided under section 252. Page 1 1

8 Poverty Assessment Methods: The process of developing and applying poverty assessment procedures required under section 254. Pages
1 1

- 1 3

9 Funds to Assist Victims of Trafficking and Exploitation: Information on th e efforts of the Agency to ensure that recipients of United States microenterprise and microfinance development assistance work closely with non

- governmental organizations and foreign governments to identify and assist victims or potential victims of sever e forms of trafficking in persons and women who are victims of or susceptible to other forms of exploitation and violence. Page 1 3 ; Table 6

10 Poverty and Race/Ethnicity: An estimate of the percentage of beneficiaries of assistance under
this title in cou ntries where a strong relationship between poverty and race or ethnicity has been
demonstrated. Pages
1 3

- 14 ; Table 7MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 3 

### 11 Performance Monitoring System: The results of the monitoring system required under section 253 [see A

- D below]. Pages
1 4

- 15
(A) The monitoring system shall include performance goals for the assistance and expresses such goals in an objective and quantifiable form, to the extent feasible.

Page 1 5 ; Table 8 (B) The monitoring system shall include performance indicators to be used in measuring or assessing the achievement of the performance goals described in paragraph (1) and the objective of
the assistance authorized under section 252.
(C) The monitoring system provides a basis for recommendations for adjustments to the assistanc e to enhance the sustainability and the impact of the assistance, particularly the impact of such assistance on the very poor, particularly poor women.
(D) The monitoring system adopts the widespread use of proven and effective poverty assessment
tools to successfully identify the very poor and ensure that they receive adequate access to microenterprise loans, savings, and assistance.

12 Additional Information: Any additional information relating to the provision of assistance authorized by this title, including the use of poverty assessment methods required by section 254, or additional information on assistance provided by the United States to support microenterprise development under this title or any other provision of law. Pages
1 5

- 1 7MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 4 

## REPORTI NG REQUIREMENT 1

A, B, AND C

FUNDING

In FY 2007, USAID provided a total of $193.1 million in microenterprise development assistance through 184 new and existing agreements, including grants, cooperative agreements, and contracts with 255 implementing pa rtners in 61 countries.

Reported microenterprise funding declined from the

level recorded in FY 2006. Much of the decline seems

to have been an after

- effect of especially rapid increases in microenterprise funding to several country programs in FY 2006, leaving them with more funds obligated for designated microenterprise activities than

t heir implementing partners could spend effectively in a single year. As a result of this “forward funding” in FY 2006, several missions did not need to provide as

muc h additional funding in FY 2007 to keep their microenterprise activities operating at full capacity. The clearest example of this pattern was Afghanistan, where USAID microenterprise funding shot up from

zero in FY 2005 to $54.5 million in FY 2006, strain ing the capacity of local partners to use the funds. USAID/Afghanistan responded by reducing its FY 2007 microenterprise funding to $37.4 million. Broadly similar situations occurred in Egypt, Ethiopia, Nigeria, and Azerbaijan, all of which reduced

micro enterprise funding in FY 2007 following large increases in the previous fiscal year.

Along with the after

- effects of forward funding of microenterprise activities in FY 2006, the unusually

late release of USAID funds in FY 2007 may have

contributed to th e reduction in microenterprise funding reported in FY 2007.

Table 1. Sources of USAID Funds for Microenterprise by Appropriation Account ($ millions), FY 1997

- 2007

Account 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

DA 5 $83.3 $79.9 $74.1 $ 88.3 $85.3 $80.7 $87.8 $91.2 $87.9 $82.8 $70.9

ESF $24.5 $33.9 $33.0 $25.2 $27.9 $48.1 $28.4 $17.7 $37.3 $78.0 $44.5

INC and ACI $2.1 $21.4 $14.8 $7.0 $32.1

FSA $20.6 $14.3 $12.8 $30.3 $19.6 $33.4 $41.0 $35.1 $21.0 $18.6 $11.5

SAI/SEED $24. 8 $4.6 $13.0 $9.2 $7.6 $6.7 $14.5 $13.9 $14.2 $8.5 $10.9

PL

- 480 $11.8 $12.4 $17.3 $8.8 $13.7 $18.6 $4.8 $10.0 $6.7 $9.0 $9.5

IRRF $7.2 $28.9 $11.3 $8.1

CSH/HIV $0.8 $0.5 $0.5 $1.0 $0.6 $0.4 $4.9

GHAI $0.7

IDFA $0.2 $1.4

CACEDRF $3.2 $8.0

Total $165.0 $145.1 $153.4 $170.6 $154.6 $188.0 $179.6 $197.1 $211.4 $216.0 $193.1

5 DA

– Development Assistance

ESF

– Economic Support Funds

INC

– International Narcotics Control

ACI

– And ean Counternarcotics Initiative

FSA

– Freedom Support Act SAI/SEED

– Special Assistance Initiatives including Support for Eastern European Democracy PL

- 480

– Local currency from monetization of P.L. 480 (Title II) food ai d

IRRF

– Iraq Relief and Reconstruction Fund CSH/HIV

– Child Survival and Health/Human Immunodeficiency Virus

GHAI

– Global Health AIDS Initiative

IDFA

– International Disaster and Famine Assistance

CACEDRF

– Central American and Caribbean Emergency Disas ter Recovery FundMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 5 

### The likely result will be additional carryover of funds

from FY 2007 to FY 2008. Finally, part of the decline may reflect under

- reporting due to the transition to USAID’s new budget and program reporting system.

Th is transition led to delays in launching the MRR

data

- gathering process as changes that reflected this transition were incorporated into the MRR surveys.

Annex A provides detailed information on USAID microenterprise funding, including the name of each

c ountry receiving assistance, the amount of each award, and the name of each institutional recipient. Annex B includes information on FY 2007 funding by

bureau. Table 1 shows the sources of FY 2007 USAID funds for microenterprise by appropriation

account.


## REPORTING REQUIREMEN T 2

CENTRAL MECHANISMS

USAID provided $21.5 million in funding through central mechanisms from USAID/Washington in FY 2007, as shown in Table 2. In contrast to previous reports, this table excludes support for micro

enterprise develop ment through local currency generated through sale of Public Law 480 food aid, previously reported by the central Food for Peace office. Beginning in FY 2007, those funds are reported directly by individual country missions, as part of the fund ing shown i n Annexes A and B.

Table 2. Central Mechanism Funding by Office ($ millions)

Microenterprise Development $16.0

Democracy and Governance $3.3

Private Voluntary Cooperation $2.1

Women in Development $0.1

Total $21.5 

## REPORTING REQUIREMEN T 3

MI CROENTERPRISE DEVELO PMENT CREDITS

Since 1999, USAID has provided partial guarantees under the Development Credit Authority (DCA) to expand access to finance for microenterprises; other guarantees support investments in other sectors, including agriculture , infrastructure, and small and medium enterprise lending. Managed by USAID’s Office of Development Credit and funded mainly by country missions, microfinance guarantees work in one of two ways: (1) encourage commercial banks and

other mainstream financia l institutions to lend to MFIs, enabling the latter to expand their own lending to microenterprises and to reduce their reliance on grants; (2) work directly with MFIs, encouraging them to finance microenterprises in riskier sectors or regions. Many USAID missions have used this vehicle to support market leaders and increase funding to

microfinance.

Table 3 (next page) summarizes active guarantees supporting microfinance as of FY 2007. The column labeled “guarantee subsidy” shows the budgetary costs of pr oviding guarantees; subsidy costs vary according to country, lender, borrower, and transaction risk. As of FY 2007, $3.4 million in USAID funding for credit guarantees was supporting up to $177 million in private sector lending to MFIs and microenterprise s. 

## REPORTING REQUIREMEN T 4 USAID uses a variety of assistance mechanisms and implementing partners to support microenterprise development initiatives worldwide. The Microenterprise Results and Accountability Act of 2004 requires USAID to report on the fo llowing levels of funding provided through:

**•** Contracts (with direct obligation recipients)

**•** Grants, contracts, and cooperative agreements
that is estimated to be sub

- granted or sub

contracted, as the case may be, to direct service providers

**•** An analysis of the comparative cost

effectiveness and sustainability of projects
carried out under these mechanismsMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 6 Table 3. Active USAID Guarantees Related to Microfinance ($ thousands)

Country Guarantee Subsidy Lending Guaranteed Fiscal Year

Morocco $25 $1,000 200 2 Nicaragua $158 $5,000 2002

Peru $74 $2,000 2002

Worldwide $75 $10,000 2003 Kenya $196 $3,000 2003

Morocco $69 $8,000 2003

Ecuador $884 $12,400 2004

Worldwide $53 $55,600 2004

Guatemala $116 $5,000 2004

Morocco $196 $10,000 2004

South Africa $76 $8,333 2004

Peru $501 $14,000 2005 Uganda $642 $12,314 2005 Georgia $77 $1,500 2006

Worldwide $13 $25,000 2006 Bulgaria $57 $1,500 2007

Haiti $152 $2,500 2007

TOTAL $3,363 $177,147



### CONTRACTS

Table 4 summarizes USAID microenterprise funding

prov ided through contracts in FY 2007. Out of $193.1 million in funding for microenterprise development in FY 2007, USAID directly obligated $93 million (48 percent) through contracts.

In FY 2007, non

- profit institutions were the direct recipients of 48.7 per cent ($94.1 million) of total microenterprise funding, while consulting firms were the direct recipients of 39.8 percent ($76.8 million). Funds obligated to non

- profit institutions include those obligated to U.S.

- based PVOs (10.5 percent of

FY 2007 microe nterprise funding), local NGOs (36.9 percent), and cooperatives (0.3 percent), and credit unions (1.1 percent). Table 4. Recipients of USAID Funding for Microenterprise Development, FY 2007 ($ millions)

Institution Type Total

Microen

terprise

Fundin g Funding Through

Contracts

Non

- Profits 5 $94.1 $4.5
Consulting Firms $76.8 $72.6

Other For

- Profits 6 $11.2 $8.1

Other Entities 7 $11.0 $7.8

Total $193.1 $93.0

5 Non

- Profits include PVOs, NGOs, cooperatives, and credit

unions.

6 Other For

- Profits include banks, non

- bank financial institutions, finance companies, and other for

- profit institutions.

7 All Other Entities includes bu siness associations, government agencies, research and educational organizations, USAID operating expenses for microenterprise project management, and institutions

marked “other.”MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 7 

### SUB

- OBLIGATIONS

Funding for sub

- recipients is an important indication of USAID’s ability to involve local institutions in the Agency’s microenterprise development efforts.

Table 5 shows the level of funding that was sub

granted or sub

- contracted to direct service providers in FY 2007 in the form of grants, contracts, and cooperative agreements. In FY 2007, approximately $45 million was sub

- granted or sub

- contracted to 173 primarily local institutions.

Approximately 81 percent of sub

- granted or sub

contracted funds were directed to local institutions in host countries, including cooperatives, credit unions, local NGOs, business associations, and non

- bank

financial institutions.

Table 5. Reported Sub

- Obligations, FY 2007 ($ millions)

Institution Type Funding for Subgrants and

Subcontracts

Business Associations $0.2

Consulting Firms $0.7

C ooperatives $0.8

Credit Unions $8.1

Other For

- Profits 8 $4.0

NGOs $26.6

Non

- Bank Financial $0.6

PVOs $3.4

Research/Educational $0.6

Total $44.9

8 Other For

- Profits include banks, finance companies, and other

for

- profit i nstitutions. 

### COST

- EFFECTIVENESS AND SUSTAINABILITY

To track the comparative cost

- effectiveness and

susta inability of programs, MRR collects data on the financial and operational sustainability of institutions in implementing microfinance programs. 9 

### In FY 2007, 74 percent of USAID

- funded MFIs were operationally

self

- sustaining, whereas 56 percent attained the more demanding goal of full financial sustainability. As USAID considers an institution’s sustainability to be

related to its cost

- effectiveness, the Agency uses a

number of methods to assist microfinance institutions

to become self

- sustaining. These me thods include: 1) requiring that implementing partners develop concrete plans to achieve financial sustainability, so that their revenues cover all their costs; 2) providing funds and technical assistance to build strong institutions that

can continue serv ing their clients after USAID support ends; 3) identifying best practices and business models to achieve sustainability; and 4) providing credit guarantees to help microfinance institutions access private capital for financing future growth.

The Microenter prise Results and Accountability Act of 2004 called for an analysis of the comparative cost

effectiveness and sustainability of projects carried out under different funding mechanisms. Measures of

cost

- effectiveness and sustainability for any given projec t are derived from the specific objectives to be achieved by the project, the context in which it operates, and the duration of support. Given the broad application of microenterprise programs to meet development objectives, it is not possible to

calculat e and compare these measures using only the results data tracked by MRR. Nevertheless, USAID

continues to examine the cost

- effectiveness and

9 Operational sustainability measures the degree to which an institution generates sufficient revenue from operations to cover all of its operating costs, including loan losses and the costs of capital. Financial sustainability measures the d egree to which the institution’s revenues from operations also covers the cost of its funds calculated at market rates, adjusted for the effects of

inflation and subsidies.MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 8 

### sustainability of microenterprise projects in evaluations of individual projects.

In addition, in July 2006 USAI D published a comparative study of the performance of “umbrella projects”

– integrated programs that include a substantial microenterprise component. As reported in the FY 2006 MRR, the study examined microfinance umbrella programs led by both for

- profit

and non

- profit institutions, and funded through a variety of assistance mechanisms, including contracts. The study concluded that, for microfinance umbrella programs as well as for other USAID programs, the

choice of assistance instrument is not a factor in determining sustainability. Contracts are used to procure services needed to achieve USAID’s development objectives, whereas grants and cooperative agreements are used to support existing activities of USAID’s partners, where those activities

advance U SAID’s goals and objectives. As USAID moves into new regions where there is a need for microenterprise services

— for example, in post

conflict areas

— it relies on existing institutional capacity to implement new programs.


## REPORTING REQUIREMEN T 5

MATCHING ASSISTANCE

USAID frequently requires that the funds it provides for a particular purpose be matched by funds from other sources, including the institution itself. In FY 2007, $24.0 million of USAID funds were matched by
an additional $6.2 million from oth er sources. Matching funds from these sources may include funding from non

- U.S. Government sources, including private donations, multilateral funding, commercial and concessional borrowing, savings, and program income. 

## REPORTING REQUIREMEN T 6

FUNDS B ENEFITING THE VERY P OOR

Both the Microenterprise for Self Reliance Act of 2000 (henceforth, the 2000 Act) and the Microenterprise Results and Accountability Act of 2004 (the 2004 Act) mandate that at least half of all USAID funding for microenterprise dev elopment directly benefit the very poor. The 2000 Act initially defined the “very poor” as the bottom [poorest] half of those living below each country’s national poverty line. The law instructed USAID to support “poverty lending” as the principal

means of targeting the very poor. Poverty lending is based on the assumption that only very poor people would seek to take out very small loans. In that case, an institution’s outreach to the very poor could be

inferred from the share of its clients with loans smaller than a certain threshold value. Accordingly, the original 2000 Act set a “poverty loan threshold” for each region where USAID operates. For microfinance institutions, the share of each MFI’s services that benefit the very poor would be estimated from the share of its loan portfolio consisting of loans smaller than the threshold value. Similarly, the share of an enterprise development program’s services that benefit the very poor would be estimated from its reported share of clients who currently hold poverty loans. The 2000 Act set the following poverty loan thresholds,

stated in 1995 U.S. dollars:

**•** $300 in Asia, the Near East, and Africa;

**•** $400 in Latin America and the Caribbean; and

**•** $1,000 in Europe and Eurasia.

Adjusted for U.S. inflation si nce 1995, the poverty loan thresholds for Fiscal Year 2007 were $404, $538, and $1,346 respectively.

Subsequent amendments to the 2000 Act mandated a second, much more ambitious approach to estimating

the share of USAID

- supported microenterprise

benefits t hat reach the very poor. First, the amended law created a second definition of the “very poor:” those living on less than the equivalent of $1 per day,MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 9 

### calculated using purchasing power parity (PPP) exchange rates. The legislative language made clear

th at, for any given country, the applicable definition of the very poor would be the more inclusive one. Second, those amendments directed USAID to develop and certify at least two “low

- cost methods” to allow partner institutions to measure the share of the ir clients who are very poor as defined in the law, and, “with reasonable exceptions,” to require non

- profit recipients of USAID grants or cooperative agreements for microenterprise development to use those methods to measure and report the share of their very poor clients. 10 

### These changes are reiterated in the 2004

Act.

The process of developing, certifying, and applying poverty assessment tools is discussed in Reporting Requirement 8. By FY 2007, USAID had certified Poverty Assessment Tools for 17 countri es. Because implementing the tools involves substantial costs, USAID exempted institutions that spent less than $100,000 in USAID microenterprise funds in FY 2007, considering these to be “reasonable exceptions” as cited in the law. In all, 31 partner in stitutions in 12 countries reported poverty assessments in FY 2007. Of these 31 partner institutions, 8 offered only financial services, 14 offered only enterprise development interventions, and 9 offered both. Together, these 31 partner institutions rec eived 18 percent of total USAID microenterprise funding in FY 2007, or 20 percent excluding support for policy

reform.

Because partner institutions that actually implemented the poverty tools represent a modest share of total USAID microenterprise funding, this section provides two estimates of the share of those funds benefiting the very poor

– one based on the results of the poverty tools, and a second based on the poverty loan proxy used in previous Annual Reports.

10 As a matter of policy, USAID applies this requirement to for

profit firms pursuin g microenterprise development under contract. 

### Among the 17 microfinance institutions that applied and reported on the Poverty Assessment Tools, the average share of Funds Benefiting the Very Poor (FVP) is estimated at 16.3 percent. This average is based on the share of very poor clients reported by each MFI, weighted by the value of USAID microfinance funding that MFI received in FY 2007. For the 23 enterprise development programs that applied and reported on the Poverty Assessment Tools, average FVP is estimated at 20.5 percent, again weighted by each program’s FY 2007 funding for

enterp rise development. Averaging these two estimates yields an overall estimate of 19.1 percent of USAID funds benefiting the very poor. Programs pursuing policy reforms cannot report client

- level data,

and so are excluded from the calculations.

Measuring F VP using the poverty loan proxy, as in previous Reports, yields substantially different results. Based on the share of each reporting MFI’s loan portfolio held as poverty loans, an estimated 41 percent of USAID funding for microfinance

institutions direct ly benefited the very poor. The share of poverty loans was much higher in Sub

- Saharan Africa (89 percent) and much lower in Europe and

Eurasia and in Latin America and the Caribbean (6 and 27 percent, respectively). In view of the high prevalence of pove rty lending among African MFIs, the calculated share of poverty loans worldwide would probably have been even higher if more African MFIs had reported on their poverty lending; only 6 out of 21 did so. Overall FVP among MFIs was somewhat higher in FY 2007 than the 36 percent recorded in FY 2006. Part of the increase may reflect the use of

inflation

- adjusted poverty loan thresholds in FY 2007. Previous Reports did not make this adjustment, so the real value of the poverty loan thresholds used in those Rep orts had been gradually eroded by inflation.

Using the poverty loan proxy, 15 percent of funding for enterprise development programs was found to directly benefit the very poor, based on each reporting program’s estimated share of clients who hold

outstand ing poverty loans from any source. As in previous years, those estimates are particularlyMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 10 

### susceptible to error, because enterprise development programs do not dispense loans themselves and have little or no basis for knowing how many of their

clients hold such loans from other sources.

Combining the estimated share of FVP from each type of program yields an overall average of 28 percent of funds directly benefiting the very poor, based on the poverty loan proxy.

Overall, the results from the poverty as sessments indicate a considerably smaller share of benefits flowing to the very poor than is suggested by the poverty loan proxies. Because the former reflect reporting by only 31 institutions, it is difficult to know how representative they are of the br oader set of

USAID

- assisted microenterprise programs. More importantly, the two estimates result from applying two entirely different standards of what it means to be “very poor,” with the standard measured with the poverty assessment tools being far narr ower than that measured with the poverty loan proxies. Indeed, in virtually all cases, partner institutions that reported on both the poverty assessment tools and the loan proxy reported a much higher percentage of very poor clients using the poverty loan proxy than they measured directly using the poverty assessment tools. For example, one institution found 17 percent of its clients to be very poor using the poverty assessment tools, but reported that 87 percent of them held poverty loans. These strongl y contrasting results underscore the fact that the poverty assessment tools measure extreme poverty against a far narrower standard than USAID has reported on in previous Annual Reports.

By either standard, the share of benefits directly flowing to the v ery poor did not meet the target of 50 percent set by the 2000 Act. The extent of the shortfall depends on the type of program and method of estimation. For example, the estimated 41 percent FVP among MFIs obtained using the poverty loan proxy, though lo wer than the 50 percent target, is close enough to that target to suggest that further adjustments might permit the target to be reached. In contrast, the 19.1 percent FVP estimated using the poverty assessment tools is so far below the 50

percent target a s to raise serious questions as to whether that target could be reached by any means. The pattern of poverty assessment results raises similar questions. With a single exception, all of the 31 partner institutions that implemented the poverty

assessment tools reported percentages of “very poor” clients well below 50 percent, implying that no reallocation of funds among those partners would enable USAID to reach the target. More significantly, there are no documented examples of microenterprise

programs t hat report more than 50 percent of their clients as “very poor” based on rigorous measurement of clients’ living standards against the $1/day line or a similarly low poverty line as required by current law. In sum, by linking the existing “50 percent of f unding benefiting to the very poor” mandate to a new and much more stringent definition of being “very poor,” the amendments to the 2000 Act created a poverty targeting standard that is significantly at odds with the client base of USAID’s partners. This suggests the possible need for significant revision, either in the poverty targeting standard or in the programmatic approaches used by USAID’s microenterprise partners. Results from the application of the poverty assessment tools by additional institutio ns for FY 2008 may shed more light on this situation. Options for revising the poverty targeting standard in a way that would provide a more constructive basis for measuring the poverty levels of microenterprise clients are explored under Reporting Requir ement 8 below and in Annex C. Options for revising the programmatic approaches of USAID’s partners would need to be explored by the partners themselves.



## REPORTING REQUIREMEN T 7

NUMBER OF VERY POOR REACHED

The Microenterprise for Self

- Reliance Act directs USAID to use the poverty assessment tools called for in that Act to estimate the number of very poor clients who benefit from USAID microenterprise programs.MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 11 

### As noted in the previous section, the partner institutions that applied the certified poverty

as sessment tools together received approximately one

fifth of USAID microenterprise funding in FY 2007. Using their reported results to estimate the total number of very poor clients reached by all USAID

funded microenterprise institutions requires assuming that the share of very poor clients of all partner institutions resembles that of the partners that applied the poverty assessment tools. The realism of this assumption will only become clear in future years, as the range of countries covered by USAID po verty tools expands.

For USAID

- supported microfinance institutions, multiplying the 16.3 percent share of “very poor” microfinance clients reported in the last section by the

total number of borrowers from those MFIs

– 6.54

million

– implies that approxi mately 1.07 million very poor clients directly benefited from USAID funding

for microfinance in FY 2007.

For enterprise development programs, the most realistic approach is to include both owners and employees of microenterprises benefiting from

USAID ente rprise development programs. On that basis, such programs directly benefited approximately 373,000 very poor people. Combining these two estimates yields an overall estimate of approximately 1,440,000 very poor people who directly benefited

from USAID mi croenterprise programs in FY 2007.


## REPORTING REQUIREMEN T 8

POVERTY ASSESSMENT T OOLS

The Microenterprise Results and Accountability Act of 2004 requires this report to address:

**•** “The process of developing and applying poverty assessment procedures required under section 254 [the section of the law outlining the requirement for USAID to develop client poverty assessment tools and require their use by awardees by October 2006].”

The legislative background to USAID’s Poverty Assessment Tools (PATs) is reviewed under Reporting Requirement 6. Congress required that USAID develop the PATs to allow USAID

- supported microenterprise development institutions to measure the share of their clients who are very poor, and to

monitor USAID’s fulfillment of the mandate that at least half of USAID microenterprise funding should benefit the very poor. Amendments to the Microenterprise for Self

- Reliance Act of 2000 (the 2000 Act) linked this mandate to a very narrow standard of being “very poor”

– living on less than $1 a day at Purchasing Power Parity (PPP), or among the poorest half of those living below the national poverty line. At the time this new standard was adopted, no microenterprise institution was using credible assessment tools, calibrated against a similar standa rd, to measure and report extreme poverty among its clients. As a result, neither USAID nor the microenterprise community had a clear basis for judging whether or not it would be possible to achieve the poverty targeting mandate once linked to the new

st andard of extreme poverty.

The amended 2000 Act called for USAID to develop and certify at least two “low

- cost methods” for measuring extreme poverty by October 2004. The same amendments instructed USAID, “with reasonable exceptions,” to require USAID

- a ssisted microenterprise institutions to begin implementing the tools by October 2005. Subsequently, the Microenterprise Results and Accountability Act of 2004 (2004 Act) extended the latter deadline to October 1, 2006. These deadlines seem to have

flowed from two assumptions:

**•** First, that it would be relatively straightforward to develop reliable tools to measure extreme poverty against an absolute standard, and

**•** Second, that each poverty assessment tool would enable USAID partner institutions in a wide r ange of countries to identify how many of their clients were very poor, so that two tools (or at most, a very small number of tools) would enable partner institutions anywhere in the world to assess theMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 12 

### poverty status of their clients against the standards

mandated in the law.

Results from the testing process stipulated in the 2004 Act made it clear that the second assumption in particular was overly optimistic: achieving reasonable accuracy in measuring poverty against absolute standards, as specified in the law, requires poverty assessment tools that have been developed and tested

on a country

- by

- country basis, using country

- specific data. In particular, each USAID

- certified poverty assessment tool has been developed through statistical analysis of data drawn from an integrated household budget survey for the country in question, to identify which household characteristics are most highly correlated with extreme poverty in that country.

In developing poverty assessment tools, USAID has prioritized thos e countries with the highest levels of USAID microenterprise funding. Priorities are further refined by the availability of recent household survey data, allowing tools to be developed relatively quickly. Developing tools for countries where household

su rvey data are not already available requires that USAID gather the data itself. Because doing so is very

time

- consuming and expensive, USAID has treated it as a last resort. Moreover, security conditions or government policy make it impossible to collect household survey data in some countries with substantial USAID microenterprise programs, notably Afghanistan, Iraq, Sudan, and Egypt.

By June 30, 2007, USAID had developed and certified poverty assessment tools for 17 countries, which together accounted for 31 percent of USAID microenterprise funding for programs in specific countries, and 45 percent of such funding excluding the four countries cited above. These 17 tools provide the basis for the estimates of Funds Benefiting the Very Poor contained in Sections 6 and 7. USAID sought poverty assessment data from all partner institutions that spent at least $100,000 in USAID microenterprise support in FY 2007 in any of those 17 countries. Several of those institutions sought and

received waivers from re porting, including some focused on policy reform and others that had already completed operations and withdrawn their project personnel from the country in question. USAID expects to achieve better coverage in the future by taking advantage of forward

- loo king funding data.

During FY 2007 and into FY 2008, USAID continued to develop and certify country

- specific poverty assessment tools, while providing training to ensure that affected partner institutions can use those tools to gather the required informati on. USAID expects that the total number of certified tools will rise to 23 by June 30, 2008 and reach 26 by September 30. If those expectations are realized, USAID

- certified poverty assessment tools should cover countries accounting for 69 percent of pro jected FY 2008 USAID microenterprise funding in specific countries, excluding the four noted above. 11 

### Moreover, to expand the reach of the poverty assessment effort, USAID plans to require partners in all countries with tools certified by September 30 to im plement the tools and report their results in the next round of the MRR. Unfortunately, USAID cannot offer any assurance that coverage will continue to expand as rapidly in the future, because the pool of countries with substantial USAID microenterprise f unding and available household surveys is gradually drying up. As a result, future progress will increasingly require USAID to conduct its own household surveys, in especially challenging environments, at roughly five times the cost per country as using e xisting survey data. Moreover, to remain accurate, all country tools will need to be updated periodically.

At this time

– five years into the process of developing poverty assessment tools

– USAID would like to share

some observations and concerns. The se are presented

in Annex C.

11 Funding patterns shift from one year to another, which will also change the share of microenterprise funding going to countries with certified poverty assessment tools.MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 13 

## R EPORTING REQUIREMENT 9

FUNDS TO ASSIST VICT IMS OF
TRAFFICKING AND EXPL OITATION

The Microenterprise Results and Accountability Act of 2004 requires USAID to report information from its

missions on their efforts to ensure tha t recipients of USAID microenterprise and microfinance development assistance work closely with NGOs and foreign governments to identify and assist victims of potential or severe forms of trafficking in persons and women who are victims of or susceptible t o other forms of exploitation and violence. Table 6 shows, by region, microenterprise funding obligated to microenterprise institutions targeting these groups.

In FY 2007, the total value of such funding declined significantly from the level reported in F Y 2006. The largest declines occurred in the Asia

- Near East region, with reduced funding in Pakistan. In addition, no funding of this type was reported from Sudan, which in FY 2006 absorbed all funding of this type in the

Africa region. Finally, centra l funding for financial services and related enabling environment efforts was eliminated in FY 2007, but was partially offset by increased funding for enterprise development efforts targeted toward these populations, through the Office of Democracy and Gov ernance’s new Supporting Transformation by Reducing Insecurity and Vulnerability with Economic Strengthening (STRIVE) program under USAID’s Displaced Children and Orphan’s Fund (DCOF).

Other missions that reported funding for institutions serving thes e groups in FY 2007 include Senegal and the Democratic Republic of Congo in the Africa region; Mongolia, Pakistan, and the Regional Development Mission in the Asia and Near East region; and Belarus and Ukraine in the Europe and Eurasia region.



## REPORTING REQUIREMEN T 10

POVERTY AND RACE/ETH NICITY

The Microenterprise Results and Accountability Act of 2004 requires that USAID report “[a]n estimate of the percentage of beneficiaries of assistance under this title in countries where a strong relationship between poverty and race or ethnicity has been demonstrated.” MRR asks each USAID field mission to indicate

whether or not the count ry in which it is work in g meets this reporting criterion. Table 7 reports the number of microenterprise clients in those countries

where the USAID mission affirmed that a strong relationship existed between poverty and race or ethnicity. The table also d istinguishes between clients

who either borrowed from or saved at USAID

Table 6. U SAID Microenterprise Funding to Assist Victims of Trafficking and Exploitation, FY 2007 ($ millions)

Region Financial Services and Related Enabling

Environment Enterprise Development and Related Enabling Environment Total

Africa $0.01 $0.04 $0.05

Asia & Near East $3.22

- $3.22

Europe & Eurasia

- $0.11 $0.11

Centrally Funded

- $3.34 $3.34

Total $3.23 $3.49 $6.72MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS FISCAL YEAR 2007 14 Table 7. Estimated Number of Clients in Countries Where a Relationship Has Been Demonstrated Between Poverty and Race or Ethnicity

Region Country Borrowers Savers Enterprise

Devel opment
Clients

Africa Mali 36 3,650

- Nigeria 130,979 137,596

- South Africa

- - 3,186

Asia and the Near East Bangladesh 3,830 5,212 1,649 Iraq 22,439

- - Nepal 5,624 17,136 12,974

Tibet 106

- -

Europe and Eurasia Albania 13,311

- 37

Kosovo

- - 87 Montenegro

- - 428

Serbia

- - 167

Latin America and the Caribbean Bolivia 36

- 95

Guatemala 4,282 5,718

- Colombia

- - 6,421

Mexico 2,320,380 1,262,145 12

Panama

- - 20

Peru 43,924 178,257 1,862

Total 2,544,946 1,609,714 26,938



### assisted MFIs, or who benefited from USAID

supported enterprise development activities. Out of the total number of microenterprise clients, 39 percent of borrowers, 39 percent of savers and 10 percent of enterprise development clients were located in these

countries.


## REPORTING REQUIREMEN T 11

PERFORMANCE MONITORI NG SYSTEM

Several provisions of the Microenterprise Results and Accountability Act of 2004 address performance monitoring:

1. “The monitoring system shall include performance goals for the assis tance and express such goals in an objective and quantifiable form,

to the extent feasible.”

2. “The monitoring system shall include performance indicators to be used in measuring or assessing the achievement of the performance goals described in paragraph (1 ) and the objective of the assistance authorized under section 252 [of the Foreign Assistance Act of 1961, as amended].”

3. “The monitoring system provides a basis for recommendations for adjustments to the assistance to enhance the sustainability and the imp act of the assistance, particularly the impact of such assistance on the very poor, particularly poor

women.”

4. “The monitoring system adopts the widespread use of proven and effective poverty assessment tools to successfully identify the very poor and

ensur e that they receive adequate access to microenterprise loans, savings, and assistance.”MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS FISCAL YEAR 2007 15 Table 8. Performance Goals and Results, FY 2007

FY 2007 Results FY 2007 Goal

Microfinance

Borrowers 6.54 million 4 million

Savers 4.13 million 4 million

Women Clients 53% 60%

Rural Clients 54% 40%

Funds Benefiting the Very Poor

Based on Poverty Assessment Tools Based on Poverty Loan Proxy 16.3%

41% 50%

Financially Sustainable MFIs 56% 50%

Enterprise Development

Microenterprises Assisted 283,143 250, 000
Owners and Employees of Microenterprises Assisted 1.82 million 750,000

Women Clients 39% 30%

Rural Clients 80% 75%

Funds Benefiting the Very Poor

Based on Poverty Assessment Tools Based on Poverty Loan Proxy 20.5%

15% 50%



### Ta ble 8 shows the performance goals and indicators that USAID set for FY 2007, along with reported

results.

On a worldwide basis, USAID and its implementing partners exceeded the Agency’s goals in most areas,

but not in others.

USAID

- supported microfinance programs comfortably exceeded the Agency’s goals for total number of borrowers and for targeting rural clients; total number of savers topped the goal by a narrower margin. The share of MFIs achieving full financial sustainability also exceeded USAID’s goal, desp ite a

decline from FY 2006 due to the addition of several MFIs in Iraq, West Bank/Gaza, and Kyrgyzstan; many were at an early stage of progress toward sustainability.
In contrast, USAID

- supported microfinance programs

did not reach the Agency’s goal for t argeting female clients, mainly due to the expiration of agreements with MFIs in Ecuador and the Philippines that targeted women especially strongly.

USAID exceeded all of its performance goals for enterprise development, with the exception of

percentage of funds benefiting the very poor . This point is discussed in detail under Reporting Requirement 6. The number of employees of assisted microenterprises was an area of especially strong performance.


## REPORTING REQUIREMEN T 12

ADDITIONAL INFORMATI ON

As dir ected by the Microenterprise Results and Accountability Act of 2004, in FY 2007 USAID funded its Microenterprise Development office, leveraged investments to meet the evolving and diverse needs for microenterprise development around the world, and supporte d key central programs designed to promote innovation and strengthen theMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 16 

### ability of its missions and partners to meet the Agency’s development objectives.

LEVERAGING INVESTMEN TS IN MICROENTERPRISE DEVE LOPMENT

USAID’s investments in microenterprise developm ent have stimulated a diversity of effective approaches, capable partners, strong local service providers, and responsive funding mechanisms to meet evolving needs for microenterprise development around the world. In FY 2007, USAID continued to leverage

t hese investments to address new development challenges, reach out to poorer and more vulnerable populations, and build the capacity of institutions to sustain and grow beyond USAID support.

To maximize the impact of its investments, USAID has also priori tized linking private sources of capital and other funding to partners employing effective microenterprise development strategies. USAID’s use of guarantees for microfinance represents one exam

ple: as of FY 2007, $3.4 million in USAID funding for

credit guarantees was supporting up to $177 million in private sector lending to MFIs and microenterprises. Through other mechanisms, such as the Global Development Alliance (GDA), USAID has also pro

moted partnerships with private corporations to leverage corp orate social responsibility efforts and to invest in upgrading the operations of microenterprises to become valuable corporate partners. Late in FY 2007, USAID launched a new GDA partnership with Microfinance International Corporation (MFIC) aimed at help ing microfinance institutions in El Salvador and Mexico develop innovative transnational housing loan programs. The results of this partnership will be reviewed in the Annual Report for FY 2008.

USAID also leverages its investments through its

state

- of

- the

- art microenterprise kn owledge manage

ment program and w eb site, www.microLINKS.org, which connects practitioners with each other and with the latest learning in microenterprise development. This facilitates collaboration and peer assistance to

identi fy promising innovations, refine and disseminate lessons learned and best practices, and adapt them for application in the field. Through a sophisticated, award

- winning program of facilitated learning net

works, virtual conferences and communities of

prac tice, audio interviews with leading experts, and in

person seminars enhanced by virtual access, the Agency brings its technical leadership to bear on microenterprise activities well beyond those that it directly supports.

KEY CENTRAL PROGRAMS

In FY 2007, USAID’s microenterprise specialists provided on

- site assistance to field programs and missions including those in Albania, Angola, Brazil, Cambodia, Ethiopia, Georgia, Ghana, Kenya, Liberia, Malawi, Mali, Mexico, Nepal, Pakistan, Peru, South Africa, Sri L anka, Thailand, and Uganda. Combined

with extensive assistance to other countries through

email , this centralized technical assistance helps ensure the effectiveness of the Agency’s microenterprise de

velopment strategies and programs.

Addressing the co mplex needs of populations living in areas affected by conflict is a continuing priority for USAID. Depending on the situation on the ground, microenterprise development may be useful in helping poor households stabilize their livelihoods, protect and

bui ld assets, and gradually emerge from poverty. This role is especially important in countries where conflict has gravely depleted public resources and capacity. In selected cases, USAID has invested substantial funds to build up new institutions, linkages , systems, and policies to support microenterprises in conflict

affected settings. In FY 2007, the Financial Integra

tion, Economic Leveraging, Broad

- Based Dissemi

nation and Support (FIELD

- Support) program included a pilot to provide recommendations to M FIs in Tajikistan and Afghanistan in developing microfinance products that comply with Islamic law, and provided funding to strengthen and expand microenterprise development in Afghanistan and in West Bank/Gaza. Another pilot initiated in FY 2007

is devel oping practical guidelines to help practitioners from relief and development agencies implement microenterprise development programs in conflict

affected environments. USAID’s Accelerated Micro

finance Advancement Project (AMAP) continued itsMICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS F ISCAL YEAR 2007 17 

### leadership i n encouraging dialogue, collaboration and knowledge generation regarding effective program

ming of economic recovery and microfinance activities

in conflict

- affected environments. AMAP has developed tools, guidance, and case studies to improve knowledge a nd practice among MFI managers, donors, and mission staff. Additionally, AMAP sup

ported an analysis of value chain development efforts in post

- conflict environments, culminating in a set of recommended practices to guide future efforts of this

kind.

US AID has also continued to improve its strategies for harnessing microenterprise development to benefit poorer and more vulnerable populations. These strategies include partnering with the President's Emergency Plan for AIDS Relief (PEPFAR) to expand livel ihood opportunities for HIV

- and AIDS

affected households; developing approaches to link

food

- insecure and highly vulnerable households to microenterprise opportunities as a means to help them emerge from dependence on safety nets; and efforts to

create ec onomic opportunities for growing numbers of unemployed youth. Most recently, the STRIVE program is working to improve the economic cir

cumstances of vulnerable children and the families and communities that care for them. Managed by USAID's Displaced Chi ldren and Orphans Fund, STRIVE will implement field projects including value chain interventions, savings

- led finance models, and efforts to enhance adolescents’ earnings through appropriate microenterprise or wage employment. One of STRIVE’s main goals i s to produce replicable methodologies for economic development that can benefit vulnerable children worldwide. To help iden

tify the most promising methodologies, STRIVE places strong emphasis on impact assessment.

With growing concerns over rural poverty and food insecurity, USAID is working to better meet the financial services needs of poor rural and agriculture

based households . For example, USAID is support ing

for the development and dissemination of technology

based delivery channels , which allow fa rmers to credit and payments services remotely through cell phones, smart cards, and other methods. Other innovations focus on reducing the risks faced by poor rural and farming households and the financial institutions that

serv e them : these include inde x

- based insurance, which allows farmers to insure against weather

- related crop failure, and warehouse receipts financing, which allows them to use crops delivered to warehouses as collateral when borrowing to finance inputs for the

next planting season.

With more commercial capital entering microfinance, and growing numbers of MFIs tapping into capital markets through structured deals, debate has emerged regarding the microfinance sector’s ability to adhere to

the “double bottom line” of financial access and poverty alleviation. In response, USAID has played a key role in promoting and advancing social perfor

mance management (SPM) in microfinance. SPM involves measuring MFIs’ performance in reaching less advantaged clients and delivering services that

t hose clients value. A social rating tool developed by USAID has been adapted by commercial rating agencies including MicroRate and Planet Rating. In addition, the Microenterprise Development office funded internal assessments of SPM systems by

microfinan ce providers in Azerbaijan, Macedonia, Mongolia, Pakistan, Serbia, and Uganda. These activities help mainstream and integrate SPM among both investor s and MFI s , so that profitability and social impact can be properly balanced.

A final central function inv olves management of the MRR system itself. In preparing to launch the data

gathering process for this Annual Report, it became clear that the database system used by MRR had reached the end of its useful life, making it difficult to incorporate new data

- c leaning functions, adjust to recent changes in USAID’s budgetary accounting system, or make the system more user

- friendly overall. In response, USAID recently committed funds to undertake a thorough overhaul of the database system. USAID expects the impr oved system to be in place in by the time MRR begins gathering data for the FY

2008 Annual Report

.MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 18 

# ANNEX A: FY 2007 FUN DING BY MISSION, INSTITUTION , AND
FUNCTION ($ THOUSANDS)

Annex A was generated from the MRR database with data current as of Ju ne 2008. MRR is a live system that can be updated by missions and institutions at any time.MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 19 

## ANNEX A: FY 2007 FUN DING BY MISSION, INS TITUTION, AND FUNCTION ($ THOUSA NDS)

MISSION OR
OFFICE INSTITUTION FUNCTION OBLIGATION
AMOUNT

AFRICA BUREAU

Democra tic Republic of the Congo Development Alternatives, Inc Enterprise Development $58 Education Development Center Enterprise Development $68 International Institute of Tropical Agriculture Enterprise Development $80

Pact

- Inc Partners Acting Together Enterprise Development $40 Total DR Congo $246 Ethiopia CARE Enterprise Development $104 Cooperative Housing Foundation Enterprise Development $94
Catholic Relief Services Enterprise Development $388 Food for the Hungry International Enterp rise Development $183 Relief Society of Tigray Enterprise Development $731
Save the Children Enterprise Development $128
World Vision Inc. Enterprise Development $148 Total Ethiopia $1,775
Gambia Catholic Relief Services Enterprise Developme nt $636
Total Gambia $636
Ghana Opportunities Industrialization Centers International Enterprise Development $353
TechnoServe Enterprise Development $2,335
Total Ghana $2,688 Kenya Agreement Pending Enabling Environment $200 Development A lternatives, Inc Financial Services $728 Emerging Markets Group Enterprise Development $861 Total Kenya $1,789
Liberia Agreement Pending Enterprise Development $1,880
Total Liberia $1,880 Madagascar Chemonics International Inc. Enterprise D evelopment $37 Development Alternatives, Inc. Enterprise Development $200 Total Madagascar $237
Malawi African Parks (Majete) Ltd. Enterprise Development $60 Chemonics International, Inc. Financial Services $642 Chemonics International, Inc. Financial Policy $642
Catholic Relief Services Financial Policy $430
Catholic Relief Services Enterprise Development $520 Development Alternatives, Inc. Enterprise Development $426
Land O' Lakes Enterprise Development $262 Project Concern I nternational Enterprise Development $113
Total Malawi $3,095

Mali Abt Associates Enterprise Development $1,900
Africare Financial Services $41 Trickle Up Enterprise Development $300

Total Mali $2,241MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 20 MISSION OR
OFFICE INSTITUTION FUNCTION OBLIGATION
AMOUNT
Mozambique Microenterprise Program Support Enterprise Development $200 Confederation of Business Associations of Mozambique Financial Policy $50 Opportunity International Financial Services $150
TechnoServe Enterprise Developme nt $300 Total Mozambique $700 Nigeria Academy for Educational Development Enterprise Development $100
Bank PHB/SKYE Bank Financial Services $520
Catholic Relief Services Financial Services $45 Centre for Development and Population Activities Financial Services $650
Chemonics/MARKETS Financial Services $800
Chemonics/MARKETS Enterprise Development $200

Winrock International Financial Services $47 Total Nigeria $2,362
Rwanda ACDI/VOCA Enterprise Development $100
International Resources Group Enterprise Development $50

Total Rwanda $150 Senegal Counterpart International Enterprise Development $2 Counterpart International Financial Services $8
Catholic Relief Services Enterprise Development $277

International Resou rces Group Enterprise Development $740 International Resources Group Enabling Environment $600 Total Senegal $1,627
Sierra Leone American Refugee Committee Enterprise Development $300
Total Sierra Leone $300
Sudan Volunteers for Economic Gro wth Alliance Enterprise Development $2,400
Volunteers for Economic Growth Alliance Financial Services $600
Total Sudan $3,000

Tanzania ACDI/VOCA Enterprise Development $125
African Wildlife Foundation Enterprise Development $145 Enterprise W orks Enterprise Development $129
Total Tanzania $399 Uganda ACDI/VOCA Enterprise Development $76 Auburn University Financial Services $750
Chemonics Financial Services $4,578
Catholic Relief Services Enterprise Development $9
Save the Chi ldren Enterprise Development $15
World Vision Inc. Enterprise Development $10 Total Uganda $5,439
West Africa Regional Program Catholic Relief Services/USCCB (Burkina Faso) Financial Services $932 Total West Africa Regional Program $932
Zamb ia Cooperative League of the USA /PROFIT Enterprise Development $400 Cooperative League of the USA /PROFIT Financial Services $6
Total Zambia $406

Total Africa Bureau $29,901MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 21 MISSION OR
OFFICE INSTITUTION FUNCTION OBLIGATION
AMOUNT

ASIA & NEAR EAST BUREAU Afghanistan Academy for Educational Development Financial Services $26,630 Development Alternatives, Inc. Financial Services $10,823 Total Afghanistan $37,453 Bangladesh Winrock International Enterprise Development $78
Winroc k International Financial Services $18
WorldFish Center Enterprise Development $575 Total Bangladesh $671
Cambodia Development Alternatives, Inc. Enabling Environment $876 Development Alternatives, Inc. Enterprise Development $1,155
Total Ca mbodia $2,031
East Timor Development Alternatives, Inc. Enabling Environment $500 Development Alternatives, Inc. Financial Services $1,500 Development Alternatives, Inc. Enterprise Development $2,000
Total East Timor $4,000 Egypt Chemonics I nternational, Inc. Financial Services $1,028 Total Egypt $1,028
India Microenterprise Program Support Enterprise Development $175
ACDI/VOCA Enterprise Development $490
Total India $665

Indonesia Booz Allen Hamilton Financial Policy $102

D evelopment Alternatives, Inc./AMARTA Enterprise Development $766
SENADA Financial Policy $803
The Asia Foundation Enabling Environment $543
Total Indonesia $2,214 Iraq ACDI/VOCA Financial Services $1,000
Al Aman Financial Services $250
A l Bashair Financial Services $250
Al Takadum Financial Services $250 Cooperative Housing Foundation/ASCI Financial Services $500 Iraqi Company of Bank Guarantees Financial Services $5,000
Relief International Financial Services $800

Total Ir aq $8,050
Lebanon ACDI/VOCA Enterprise Development $250 American Near East Refugee Aid Enterprise Development $500
ECODIT Enterprise Development $1,807 International Executive Service Corps Financial Services $173
International Executive Se rvice Corps Enterprise Development $1,636
SRI International Enterprise Development $550
Total Lebanon $4,915 Nepal International Development Enterprises Enterprise Development $1,707 World Education Incorporated Financial Services $311
Total Nepal $2,018
Pakistan Khushalibank Financial Services $2,000
SAS Shorebank International Ltd Financial Services $1,200
Total Pakistan $3,200MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 22 MISSION OR
OFFICE INSTITUTION FUNCTION OBLIGATION
AMOUNT
Philippines Agreement Pending Financial Se rvices $1,700 Total Philippines $1,700
Regional Development
Mission/Asia Pact Financial Services $1,475 The Bridge Fund Enterprise Development $35 The Bridge Fund Financial Services $107 Tibet Poverty Alleviation Fund Financial Services $22 Total Regional Development Mission/Asia $1,639
West Bank/Gaza Academy for Educational Development Financial Services $3,000
Total West Bank/Gaza $3,000

Total Asia & Near East Bureau $72,583

Europe & Eurasia Bureau

Albania Development Alternatives Inc. Enterprise Development $1,693
Total Albania $1,693 Azerbaijan International Rescue Committee Enterprise Development $14 Total Azerbaijan $14
Belarus International Organization for Migration Enterprise Development $57
Total Belarus $57 Bulgaria NACHALA Cooperative $57 Total Bulgaria $57
Croatia DAI Development Alternatives Inc. Enterprise Development $1,048
Total Croatia $1,048 E&E Regional SEGURA IP3 Partners LLC Financial Policy $160 Total E&E Regional $160 Georgia Community Habitat Finance International Enterprise Development $476 Community Habitat Finance International Enabling Environment $15 International Executive Service Corps Enterprise Development $860
International Executive Service C orps Enabling Environment $7 International Executive Service Corps Financial Services $87
Winrock International Enabling Environment $200
Winrock International Financial Services $800 Total Georgia $2,445
Kazakhstan Central Asian Microfinan ce Alliance II Financial Policy $10 Development Alternatives, Inc./AgLinks Enabling Environment $19 Development Alternatives, Inc./AgLinks Enterprise Development $109 Pragma/Kazakhstan Small Business Development Project Enterprise Development $262
Total Kazakhstan $400
Kosovo Chemonics Inc./Kosovo Cluster and Business Support Enterprise Development $610
Total Kosovo $610MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 23 MISSION OR
OFFICE INSTITUTION FUNCTION OBLIGATION
AMOUNT
Kyrgyzstan Development Alternatives, Inc. Financial Ser vices $9 Development Alternatives, Inc. Enterprise Development $614
Central Asian Microfinance Alliance II Financial Services $521
Central Asian Microfinance Alliance II Financial Policy $280 Chemonics International, Inc./Land Reform/KG Enabl ing Environment $76 The Pragma Corporation/BEI Enabling Environment $193
Winrock International Enterprise Development $72 Total Kyrgyzstan $1,765
Moldova Citizens Network for Foreign Affairs Enterprise Development $400 Development Alternativ es, Inc. Enabling Environment $1,086
Total Moldova $1,486 Montenegro Cooperative Housing Foundation Enterprise Development $600 Total Montenegro $600
Russia ACDI/VOCA Financial Services $1,167
Russian Microfinance Center Financial Policy $9 00
Total Russia $2,067
Serbia Development Alternatives Inc. Enterprise Development $6,750
Total Serbia $6,750 Tajikistan CARE/Counterpart International Financial Services $68 Development Alternatives, Inc./AgLinks Enterprise Development $302 Chemonics International, Inc./Land Reform/KG Enabling Environment $126 The Pragma Corporation/BEI Enabling Environment $8
Winrock International Enterprise Development $95 Total Tajikistan $598
Turkmenistan Development Alternatives, Inc./AgL inks Enterprise Development $513
Total Turkmenistan $513
Ukraine The Pragma Corporation/Access to Credit Initiative Financial Policy $247
Booz Allen Hamilton Enabling Environment $351
Chemonics International/LED Enabling Environment $266
Eur asia Foundation Enterprise Development $518
Financial Markets International Inc. Financial Policy $80 International Organization for Migration Enterprise Development $50
Total Ukraine $1,513
Uzbekistan Development Alternatives, Inc./AgLinks Ent erprise Development $411
Winrock International Enterprise Development $230
Total Uzbekistan $641

Total Europe & Eurasia Bureau $22,418MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 24 

### MISSION OR OFFICE INSTITUTION FUNCTION OBLIGATION AMOUNT

LATIN AMERICA & CARIBBEAN BUREAU

Bolivia Adven tist Development and Relief Agency Financial Services $140
Chemonics International Enterprise Development $4,774 Food for the Hungry International Financial Services $100 World Council of Credit Unions, Inc. Financial Policy $860
Total Bolivia $5,874

Brazil Agreement Pending Financial Services $100
Amazon Conservation Team Enterprise Development $35

Fundacao Centro Estudos Comercio Exterior Enterprise Development $160
Fundacao Centro Estudos Comercio Exterior Financial Services $20
Fundacao Centro Estudos Comercio Exterior Enabling Environment $120

TransFair Enterprise Development $200
World Wildlife Fund Enterprise Development $250

Total Brazil $885
Colombia Associates in Rural Development Financial Services $3,166

A ssociates in Rural Development Enterprise Development $16,080 Associates in Rural Development/MIDAS Financial Policy $850 International Office of Migration Financial Services $31 Panamerican Development Foundation Enterprise Development $6,209
Total Colombia $26,336
El Salvador Aid to Artisans Enterprise Development $378
Total El Salvador $378
Guatemala Agreement Pending Financial Services $200
Catholic Relief Services Enterprise Development $496
SHARE Enterprise Development $491
Save The Children Financial Services $653
Total Guatemala $1,840 Guyana Carana Corporation Enabling Environment $40 Carana Corporation Financial Policy $15 Carana Corporation Enterprise Development $200 Total Guyana $255

Haiti Developm ent Alternatives, Inc./MSME Financial Services $1,751 Development Alternatives, Inc./MSME Enterprise Development $500
Total Haiti $2,251 Jamaica Citizens Development Corps Enterprise Development $160 PA Consulting Services Inc. Enterprise Devel opment $688 USDA Forest Service International Programs Enterprise Development $100 Total Jamaica $948
Mexico Microenterprise Program Support Financial Services $255 Microenterprise Program Support Financial Policy $64
Chemonics International , Inc. Enterprise Development $1,250 Development Alternatives, Inc./AFIRMA Financial Policy $240 Development Alternatives, Inc./AFIRMA Financial Services $960 Development Alternatives, Inc./AFIRMA Enterprise Development $450
Total Mexico $3,2 19MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 25 

### MISSION OR OFFICE INSTITUTION FUNCTION OBLIGATION AMOUNT
Nicaragua Adventist Development and Relief Agency Financial Services $277
Catholic Relief Services Financial Services $516 Project Concern International Financial Services $150

Total Nicaragua $943
Panama Casals & Associates Financial Services $64 International Resources Group/TETRA TECH JV Enterprise Development $48 Nathan Associates, Inc. Enterprise Development $175

Total Panama $287
Peru Caritas del Peru Financial Ser vices $871
Chemonics International Enterprise Development $1,605 Nathan Associates, Inc. Enabling Environment $350 Nathan Associates, Inc. Financial Policy $100 Nathan Associates, Inc. Enterprise Development $550 U.S. Peace Corps Enterprise Development $15
Total Peru $3,491

Total Latin America & Caribbean Bureau $46,707



### CENTRALLY FUNDED PROGRAMS
Democracy and
Governance Academy for Educational Development Enterprise Development $3,342
Total

- Democracy and Governance $3 ,342 Microenterprise Development Microenterprise Program Support Financial Policy $1,355
ACDI/VOCA Enterprise Development $2,225 Academy for Educational Development Financial Policy $2,463 Academy for Educational Development Enabling Environment $1,200 Academy for Educational Development Enterprise Development $776
Cities Alliance Financial Policy $118 Consultative Group to Assist the Poor Financial Policy $300 Cooperative Housing Foundation Financial Services $36 Development Altern atives, Inc. Enterprise Development $300
Volunteers in Economic Growth Alliance/EMDAP Financial Services $150
FINCA International Financial Services $332 Institute for Liberty and Democracy Enabling Environment $2,000
Center for Institutional R eform and the Informal
Sector Enterprise Development $50
Center for Institutional Reform and the Informal
Sector Financial Policy $430 Opportunity International Financial Services $445
Save the Children Financial Services $190
Shorebank Interna tional Ltd. Financial Services $534 Strategic Development Cooperation Asia Enterprise Development $350 The QED Group, LLC Financial Policy $933 The QED Group, LLC Enabling Environment $433 The QED Group, LLC Enterprise Development $433

Weide mann Associates Financial Policy $250 World Council of Credit Unions, Inc. Financial Services $650
Total

- Microenterprise Development $15,953MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 26 

### MISSION OR OFFICE INSTITUTION FUNCTION OBLIGATION AMOUNT

Private Voluntary Cooperation Americas Assoc iation of Cooperative/Mutual

Insurance Societies Enterprise Development $309

Americas Association of Cooperative/Mutual

Insurance Societies Enabling Environment $50

Americas Association of Cooperative/Mutual

Insurance Societies Financial Services $351

ACDI/VOCA Financial Services $126
ACDI/VOCA Enabling Environment $63
ACDI/VOCA Enterprise Development $161 Communications Cooperative International Enabling Environment $29 Communications Cooperative International Enterprise Development $29
CHF International Enabling Environment $65
CHF International Enterprise Development $186
CHF International Financial Policy $52 National Cooperative Business Association Enterprise Development $71 National Cooperative Business Association Enabling Env ironment $13 National Cooperative Business Association Financial Policy $4 World Council of Credit Unions, Inc. Enterprise Development $307

Total

- Private Voluntary Cooperation $2,058
Women in Development dTS Development & Training Services Ent erprise Development $83 dTS Development & Training Services Enabling Environment $37
Total

- Women in Development $120

Total Centrally Funded Programs $21,149



### TOTAL FY 2007 FUNDING $193,081MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 27 

# ANNEX B: MICROENTERP RISE
FUNDING BY USAID BUREAU, FY 2007 ($ THOUSANDS )

Annex B was generated from the MRR database with data current as of June 2008. MRR is a live system that can be updated by missions and institutions at any time.MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 28 

## ANNEX B: MICROENTERP RISE FUNDING BY USAI D BUREAU, FY 2007 ($ THOUSANDS)

MISSION OR
OFFICE FINANCIAL
SERVICES FINANCIAL
POLICY ENTERPRISE
DEVELOPMENT ENABLING
ENVIRONMENT TOTAL

AFRICA BUREAU

DR Congo $246 $246 Ethiopia $1,775 $1,775
Ghana $2,688 $2,688 Kenya $728 $861 $200 $1,789
Liberia $1,880 $1,880 Madagascar $237 $237

Malawi $642 $1,072 $1,381 $3,095
Mali $41 $2,200 $2,241 Mozambique $150 $50 $500 $700 Nigeria $2,062 $300 $2,362

Rwanda $150 $150 Senegal $8 $1,655 $600 $2,263
Sierra Leone $300 $300
Sudan $600 $2,400 $3,000

Tanzania $399 $399 Uganda $5,328 $111 $5,439
West Africa Regional Program $932 $932
Zambia $6 $400 $406

Total Africa $10,497 $1,122 $17,483 $800 $29,901

ASIA & NEAR EAST BUREAU

Afghanistan $37,453 $37,453 Banglades h $18 $653 $671
Cambodia $1,155 $876 $2,031

East Timor $1,500 $2,000 $500 $4,000 Egypt $1,028 $1,028
India $665 $665
Indonesia $905 $766 $543 $2,214 Iraq $8,050 $8,050
Lebanon $173 $4,743 $4,915 Mongolia $0 $0 Nepal $311 $1,70 7 $2,018

Pakistan $3,200 $3,200 Philippines $1,700 $1,700
Regional Development
Mission/Asia $1,604 $35 $1,639
West Bank/ Gaza $3,000 $3,000

Total Asia &
Near East $58,036 $905 $11,723 $1,919 $72,583MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 29 MISSION OR
OFFICE FINANCIAL
SERVICES F INANCIAL
POLICY ENTERPRISE
DEVELOPMENT ENABLING
ENVIRONMENT TOTAL

EUROPE & EURASIA BUREAU

Albania $1,693 $1,693 Azerbaijan $14 $14
Belarus $57 $57 Bulgaria $57 $57
Croatia $1,048 $1,048 E&E Regional $160 $160 Georgia $887 $1,336 $222 $2,445
Kazakhstan $10 $371 $19 $400

Kosovo $610 $610 Kyrgyzstan $530 $280 $686 $269 $1,765
Moldova $400 $1,086 $1,486 Montenegro $600 $600

Russia $1,167 $900 $2,067
Serbia $6,750 $6,750 Tajikistan $68 $397 $133 $598
Turkmenista n $513 $513

Ukraine $327 $568 $617 $1,513
Uzbekistan $641 $641 Total Europe &
Eurasia $2,708 $1,678 $15,685 $2,347 $22,418

LATIN AMERICA & CARIBBEAN BUREAU

Bolivia $240 $860 $4,774 $5,874
Brazil $120 $645 $120 $885
Colombia $3,197 $850 $2 2,289 $26,336
CRP $0 $0
El Salvador $378 $378
Guatemala $853 $987 $1,840 Guyana $15 $200 $40 $255

Haiti $1,751 $500 $2,251 Jamaica $948 $948
Mexico $1,215 $304 $1,700 $3,219 Nicaragua $943 $943

Panama $64 $223 $287
Peru $871 $100 $2,170 $350 $3,491

Total Latin
America &
Caribbean $9,254 $2,129 $34,814 $510 $46,707MICROENTERP RISE RESULTS REPORTI NG: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 30 MISSION OR
OFFICE FINANCIAL
SERVICES FINANCIAL
POLICY ENTERPRISE
DEVELOPMENT ENABLING
ENVIRONMENT TOTAL

CENTRAL FUNDING

Democracy and Governance $3,342 $3,3 42
Microenterprise Development
Office $2,337 $5,849 $4,134 $3,633 $15,953

Office of Private Voluntary Cooperation $33 $2,025 $2,058

Women in Development $83 $37 $120

Total Central Funding $2,337 $5,882 $9,583 $3,670 $21,473

TOTAL
FUNDING $ 82,832 $11,716 $89,288 $9,246 $193,081MICROENTERPRISE RESU LTS REPORTING: ANNUA L REPORT TO CONGRESS FISCAL YEAR 20 07 31 

# ANNEX C: REFLECTIONS ON THE
POVERTY ASSESSMENT P ROCESSMICROENTERPRISE RESULTS REPORTING: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 32 

## ANNEX C: REFLECTIONS ON THE POVERTY ASSES SMENT PROCESS

As reviewed earlier in this Report, recent legisla

tion calls for USAID to develop and certify l ow

cost tools to allow microenterprise institutions to measure the percent of their clients who are “very poor”

– defined as living on less than $1 a day at purchasing power parity or being among the poorest half of those under the national poverty

line

– and to require their use by USAID

- sup

ported institutions. As USAID reads the relevant legislation, Congress’s underlying intent was two

fold: first, to provide microenterprise institutions

more effective means to understand the economic

status of their c lients and to target their programs toward poorer clients; and second, to give USAID a means to track its success in meeting the legisla

tive mandate that at least 50 percent of USAID microenterprise funding should directly benefit the very poor, and to re port on that success to Congress and the public.

USAID has worked hard to meet these goals. In consultation with the broader microenterprise community, USAID has developed (and continues to develop) a set of poverty assessment tools that

e nabl e institut ions to estimate t heir clients’ living

standards in relation to one or more specified poverty lines, rather than simply distinguishing

between more

- and less

- poor clients . USAID’s tools enable both microenterprise partners and other development programs t o measure the living standards of a sample of households, with reason

able accuracy and at relatively low cost

– certainly far lower than measuring each household’s income or spending directly. Calibrated against an appro

priate poverty line or set of liv ing standards, such tools can help partner institutions develop a better understanding of the kinds of clients they are reaching. Moreover, once a tool has been devel

oped for a given country, it can be re

- calibrated against different or additional lines relatively easily. In sum, USAID’s poverty assessment tools pro

vide a general means to measure absolute house

hold poverty accurately and relatively cheaply.

Unfortunately, the law as currently written requires that USAID’s poverty assessment tools

be calibrated against what appear to be unrealisti

cally stringent standards of being “very poor.” The pattern of results from the first round of implementation of the poverty assessment tools strongly support this interpretation:

**•** among the 31 institutions that implemented the tools, only one reached the 50 percent target, and none exceeded it;

**•** the two institutions with the second

- and

third

- highest reported shares of “very poor” clients tied at 43 percent; and

**•** the simple average of “very poor” clients

amo ng all 31 reporting institutions was 21.6

percent.

To the extent that this sample is representative of the broader set of USAID partners, this pattern of

results means that USAID could not meet the legislative target of 50 percent of funding benefiting t he very poor through any reallocation of funds among its current pa rtner institutions.

That dramatically limit s USAID’s ability to meet the poverty targeting mandate that the law creates.

The only obvious way for USAID to achieve the poverty target woul d be to devote a large share of USAID microenterprise funds to subsidize the higher costs of partners that committed them

selves to target exclusively households living in

extreme poverty . Doing so would drive up their costs substantially and compromise U SAID’s longstanding emphasis on sustainability, which is widely considered to be one of the central tenets of best practice in microfinance . Sustainability is strongly and repeatedly endorsed in the 2000 andMICROENTERPRISE RESULTS REPORTING: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 33 

### 2004 Acts as one of Congress’s central goals fo r USAID’s microenterprise development efforts.

By re quiring that USAID calibrate its tools against

a n unrealistically stringent standard of being “very

poor , ” the law as currently written actually reduces the potential for those tools to help partners

effe ctively target their p rograms toward poorer

clients. Properly designed poverty assessment tools would provide partners with as much infor

mation as possible on the actual living standards

of all their clients

– including those living on more than $1 per d ay, but nevertheless living in what virtually any Ame rican would view as desperate

poverty

– suffering serious malnutrition, high rates of disease and child mortality, and constant vulne

rability to a wide range of economic and health

risks

. Essentially a ll such clients lack access to

formal finance. These are exactly the type of clients that USAID’s partners are eager to serve ; as the results of the poverty assessments reported here confirm, they represent the majority of clients of those partner institu tions. In contrast, the law as currently written mandates that USAID’s tools classify all clients who spend more than $1.01 per day as “not very poor,” suggesting

that all other information should be discarded as unimportant.

Requiring USAID to calibra te its poverty tools against an unrealistic ally low poverty line may also undermine partners’ motivation for applying the tools carefully and consistently. Though simple

and low

- cost compared with full

- scale household surveys, implementing a USAID povert y tool nevertheless absorbs several thousand dollars plus several weeks of staff and management time to attend USAID training, train internal staff, hire and train interviewers, plan and conduct the assessment, enter the data, and write the summary

report. In line with the requirements of the law, the first set of USAID poverty tools boil all that time and effort down into a single number per assessment: “percent of very poor.” Having made that effort, if the partner looks at the results and concludes that the assessment tool is calibrated against a poverty line that is too far below its organizational mission to be relevant, that

co nclusion could easily reduce the effort it puts into obtaining accurate results in subsequent years.

Finally, it is not clea r what policy objective is served in mandating the development and imple

mentation of poverty assessment tools limited to answering a single question

– what percent of

clients fall below a certain line

– especially when

that line is set so low that it excl udes most clients of almost all USAID partner institutions. Especially at a time when the microenterprise field is moving away from a narrow focus on poverty measurement toward social performance measurement, which looks at a wide range of

economic and so cial indicators

– and which is finding favor among major private investors in

microfinance

– it makes little sense for USAID to focus its measurement efforts so narrowly on a data point not grounded in clear, practical implications for its partner institut ions.

USAID welcomes the opportunity for a renewed discussion over the appropriate parameters of a poverty targeting mandate for the microenterprise institutions it supports, particularly regarding the definition of the “very poor.” With a growing

number of poverty assessment tools coming on line, with the experience and results from the first year’s application of those tools in hand, and with growing ex perience elsewhere in the micro enter

prise field with alternative social performance

measurement, we no w have an opportunity for a

far richer and better

- informed discussion of these key issues than was possible when the legislation was passed. Shifting the focus of USAID’s poverty assessment tools to more realistic poverty lines, developed in collaboration with the micro

enterprise community and Congress , would enable

USAID to better target its programs toward the poor while continuing to support progress toward sustainable, cost

- effective microfinance and microenterprise development programs.MICROENTERPRISE RESULTS REPORTING: ANNUAL REPORT TO CONGRESS FISCAL YEAR 2007 34 

## U.S. Agency for International Development 1300 Pennsylvania Avenue, NW Washington, DC 20523 Tel: (202) 712

- 0000 Fax: (202) 216

- 3524

www.usaid.gov