69–006

106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 106–82

MICROENTERPRISE FOR SELF-RELIANCE ACT OF 1999

APRIL 12, 1999.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. GILMAN, from the Committee on International Relations,

submitted the following

R E P O R T

[To accompany H.R. 1143]

[Including cost estimate of the Congressional Budget Office]

The Committee on International Relations, to whom was referred

the bill (H.R. 1143) to establish a program to provide assistance for

programs of credit and other financial services for microenterprises

in developing countries, and for other purposes, having considered

the same, report favorably thereon without amendment and recommend that the bill do pass.

BACKGROUND AND PURPOSE

H.R. 1143, the Microenterprise for Self-Reliance Act of 1999 was

introduced on March 17, 1999, by Messrs. Gilman, Gejdenson,

Houghton, Hall, and 21 other original cosponsors. The bill provides

authorization of appropriations, guides microfinance policy, and establishes a new Microfinance Loan Facility.

THE PROMISE OF MICROENTERPRISE PROGRAMS

Despite the growth of the world’s economy, billions of people in

dozens of countries have incomes below one dollar per day. The

international development community has a number of different

ways to boost the incomes of poor people in developing countries including support for infrastructure projects, structural adjustments

to the economy and free trade initiatives. Starting in the early

1980s, microenterprise development programs have become one of

the most successful ways the international community has to support the end of poverty in the developing world. Unlike other assistance programs, microenterprise lending programs reach the

poorest of the poor with credit that is repaid by individual borrowers with interest. Microlending programs have demonstrated
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that if structured correctly, poverty lending programs can help lift

the poorest members of society out of poverty, while repaying their

loans.

Dr. Muhammad Yunus of Bangladesh developed this method of

helping to end poverty in the early 1980s. He learned that while

loans made to poor individuals carried the high risks traditionally

associated with poverty lending, loans made by Yunus to support

groups, especially very poor women, were repaid at rates of 95%–

98%. This surprising innovation was the secret that made micro

lending programs work. Based on this model, Dr. Yunus founded

the Grameen bank in 1983. To date, the bank has lent over $2 billion and is now one of the largest financial institutions in Bangladesh.

Using the Grameen Bank and other microfinance models, the

international community has supported the start or expansion of

dozens of microfinance institutions. The most sophisticated of these

institutions, such as Bolivia’s BancoSol, now have the financial

strength to raise capital directly from Wall Street. Many other

microfinance institutions are becoming the largest lenders in their

respective countries. These institutions have shown that when

properly administered, the poor are outstanding credit risks who

will lift themselves out of poverty.

U.S. SUPPORT FOR MICROENTERPRISE PROGRAMS

The United States supports microenterprise development

through multi- and bilateral programs. The multilateral program is

coordinated by the World Bank’s Consultative Group to Assist the

Poorest (‘‘CGAP’’). As the number one donor to the International

Financial Institutions and the United Nations development agencies, the U.S. can play a leading role in mobilizing resources from

other countries to support microenterprise programs. CGAP now

coordinates the activities of 27 multi- and bilateral donors.

U.S. support for bilateral microenterprise programs is managed

by the Agency for International Development (‘‘AID’’). AID defines

a ‘‘microenterprise’’ as a firm with a total of 10 or fewer employees.

Funding for programs to support such firms averaged just over

$100 million per year from FY 1990–1993. In 1994, AID joined with

Congress and microenterprise groups to launch the first Microenterprise Initiative. In the 1994 Initiative, AID committed to:

Maintain women and the poor as its primary emphasis, particularly through support of poverty lending;

Help implementing organizations to reach greater numbers

of people;

Support institutional sustainability and financial self-sufficiency among implementing organizations; and

Seek improved partnerships with local organizations.

During Fiscal Years 1994, 1995 and 1996, AID provided $137

million, $133 million and $111 million respectively to support

microenterprise projects.

In February of 1997, RESULTS Educational Fund , a U.S. microcredit Non-Governmental Organization, called the first Microcredit

Summit in Washington. The heads of state and agencies attending

the summit called for ‘‘the international community to reach 100

million of the world’s poorest families, especially the women of
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those families, with credit for self-employment and other financial

and business services by the year 2005.’’ In June of 1997, the Administration, the Congress, and the Microenterprise Coalition

joined in a renewal of the Microenterprise Initiative. AID committed to a number of quantitative targets, including:

At least half of all microenterprise clients of the institutions

that AID supported would be women.

At least half of all the AID funds supporting microfinance institutions would go to poverty lending.

At least two-thirds of the clients of AID-supported micro- finance will receive loans of less than $300.

The average repayment rates for microfinance institutions

receiving AID support will be 95% or above.

Every AID-supported microfinance organization will have a

plan to reach full financial sustainability in a reasonable period of time.

AID also committed to set a target of 15% per year growth in the

number of clients receiving services. AID reports that 1.4 million

poor clients had active loans with AID-supported institutions, up

47% from levels in 1996. The average annual number of clients

served by AID is growing at a rate of 150% annually. AID also reports that 67% of these loans were ‘‘poverty’’ loans, i.e., loans at or

below $300 for Africa, Latin America, the Caribbean and Asia and

$1,000 for Europe and the Newly Independent States.

During Fiscal Year (‘‘FY’’) 1997, AID spent $165 million to support microfinance programs. In 1997, AID supported 481 microfinance activities in 62 countries with 70% of microfinance resources to support credit other than microfinance activities. Over

one quarter of these institutions report that they are covering all

of their financial and operational expenses. In FY 1998, funding

dropped to $144 million. Congress, through language to accompany

the FY 1999 appropriations conference report, directed that at least

$135 million be spent to support microfinance institutions during

FY 1999.

THE WAY FORWARD

Since the founding of the Grameen Bank, microenterprise development activities have become a major part of the U.S. foreign assistance program. From the first years of founding microfinance institutions, AID and the Treasury Department (overseeing multilateral programs) must now respond to the transformation of microenterprise organizations into the medium and large financial providers they have the potential to become. As such, microfinance institutions need more than just donor capital. They need policy reform to remove outdated financial laws and regulations that work

to prevent the delivery of microfinance services. In addition, the removal of interest rate restrictions and minimum funding requirements can greatly reduce the ability of such programs to work.

The bill sets forth four major directions for the future of microenterprise programs: $152 million in FY 2000 and $167 million in

FY 2001 are authorized to be appropriated in grants with a requirement that half of all microenterprise resources shall be used

for direct support of programs through practitioner institutions

that provide credit and other financial services to the poorest with
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loans of $300 or less in 1995 U.S. dollars. A monitoring program

is also established to ensure that these programs are lifting the

poorest of the poor from poverty. Two million are authorized to be

appropriated in each of fiscal years 2000 and 2001 for the Microand Small Enterprise Development (‘‘MSED’’) program at AID. A

new Microfinance Loan Facility is established to pool the risk and

support U.S. funded microfinance institutions to recover from natural disasters, war, civil conflict or short-term financial movements

that threaten their long-term development. This is a systemic response to previous crises involving microfinance institutions in

South Asia and Central America that were nearly bankrupted by

natural disasters killing or wounding many of their client borrowers.

A new report by the President and in coordination with the Administrator of AID, Secretary of the Treasury and Secretary of

State to review key innovations and institutions that would be necessary to ensure the further growth of the microfinance sector.

COMMITTEE ACTION

H.R. 1143 was introduced by Chairman Gilman on March 17,

1999, and was referred to the Committee on International Relations, which marked up the bill in open session, pursuant to notice,

that same day. The Full Committee considered the bill and agreed

to a motion to favorably report the bill to the House of Representatives, by voice vote. There were no amendments.

RECORD VOTES ON AMENDMENTS AND MOTION TO REPORT

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires that the results of each record vote on an amendment or motion to report, together with the names of those voting

for or against, be printed in the committee report. No record votes

were taken during the consideration of H.R. 1143.

OTHER MATTERS

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the

House of Representatives, the Committee reports the findings and

recommendations of the Committee, based on oversight activities

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report.

COMMITTEE ON GOVERNMENT REFORM FINDINGS

Clause 3(c)(4) of rule XIII of the Rules of the House of Representatives requires each committee report to contain a summary of the

oversight findings and recommendations made by the Government

Reform Committee pursuant to clause 4(c)(2) of rule X of those

Rules. The Committee on International Relations has received no

such findings or recommendations from the Committee on Government Reform.
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ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act were created by this legislation.

APPLICABILITY TO THE LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

CONSTITUTIONAL AUTHORITY STATEMENT

In compliance with clause 3(d)(1) of rule XIII of the Rules of the

House of Representatives, the Committee cites the following specific powers granted to the Congress in the Constitution as authority for enactment of H.R. 1143 as reported by the Committee: Article I, section 8, clause 1 (relating to providing for the common defense and general welfare of the United States); Article I, section

8, clause 3 (relating to the regulation of commerce with foreign nations); and Article I, section 8, clause 18 (relating to making all

laws necessary and proper for carrying into execution powers vested by the Constitution in the government of the United States).

PREEMPTION CLARIFICATION

Section 423 of the Congressional Budget Act of 1974 requires the

report of any committee on a bill or joint resolution to include a

committee statement on the extent to which the bill or joint resolution is intended to preempt state or local law. The Committee

states that H.R. 1143 is not intended to preempt any state or local

law.

NEW BUDGET AUTHORITY AND TAX EXPENDITURES, CONGRESSIONAL

BUDGET OFFICE COST ESTIMATE, AND FEDERAL MANDATES STATE- MENTS

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives requires each committee report that accompanies a measure

providing new budget authority, new spending authority, or new

credit authority or changing revenues or tax expenditures to contain a cost estimate, as required by section 308(a)(1) of the Congressional Budget Act of 1974, as amended, and, when practicable

with respect to estimates of new budget authority, a comparison of

the estimated funding level for the relevant program (or programs)

to the appropriate levels under current law.

Clause 3(d) of rule XIII of the Rules of the House of Representatives requires committees to include their own cost estimates in

certain committee reports, which include, when practicable, a comparison of the total estimated funding level for the relevant program (or programs) with the appropriate levels under current law.

Clause 3(c)(3) of rule XIII of the Rules of the House of Representatives requires the report of any committee on a measure which

has been approved by the Committee to include a cost estimate

prepared by the Director of the Congressional Budget Office, pursuant to section 403 of the Congressional Budget Act of 1974, if the

cost estimate is timely submitted.
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Section 423 of the Congressional Budget Act requires the report

of any committee on a bill or joint resolution that includes any Federal mandate to include specific information about such mandates.

The Committee states that H.R. 1143 does not include any Federal

mandate.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The Committee adopts the cost estimate of the Congressional

Budget Office as its own submission of any new required information with respect to H.R. 1143 on new budget authority, new

spending authority, new credit authority, or an increase or decrease in the national debt. It also adopts the estimate of Federal

mandates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act.

The estimate and report which has been received is set out below.

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, March 24, 1999.

Hon. BENJAMIN A. GILMAN,

Chairman, Committee on International Relations,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office (CBO)

has prepared the enclosed cost estimate for H.R. 1143, the Microenterprise for Self-Reliance Act of 1999.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Joseph C. Whitehill.

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 1143—Microenterprise for Self-Reliance Act of 1999

Summary: H.R. 1143 would authorize grants and loans to capitalize institutions that would make very small loans to the poor

in developing countries. It would also authorize training and technical assistance to customers and managers of such institutions. In

addition, the bill would create a loan facility that would offer subsidized loans to such institutions should they face bankruptcy due

to natural disasters, wars, or severe financial crisis. CBO estimates

that appropriation of the authorized amounts would result in additional outlays of $291 million over the next five years. Because

H.R. 1143 would not affect direct spending or receipts, pay-as-yougo procedures would not apply.

The bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA)

and would not affect the budgets of state, local, or tribal governments.

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 1143 is shown in the following table. The costs

of this legislation fall within budget function 150 (international affairs).
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Basis of estimate: Under current law, the Administration provides grants and loans to small-scale financial institutions through

several different programs. H.R. 1143 would authorize additional

appropriations of $152 million in 2000 and $167 million in 2001 for

grants and $2 million in 2000 and 2001 for the administrative costs

and credit subsidies for microenterprise programs. The estimate assumes that the authorized amounts would be appropriated for each

year and that outlays would follow historical patterns for similar

programs.

By fiscal year, in millions of dollars

2000 2001 2002 2003 2004

SPENDING SUBJECT TO APPROPRIATION

Authorization level .................................................. 159 174 0 0 0

Estimated outlays ................................................... 12 89 114 50 26

H.R. 1143 would also create a loan facility to assist U.S.-sponsored, microfinance institutions that face bankruptcy due to natural disaster, war, or severe national financial crisis. The bill would

authorize up to $5 million annually for subsidized loans in 2000

and 2001. Funds for the facility would be in addition to the

amounts specifically authorized by the bill. CBO estimates that the

facility would spend $9 million over the next five years, assuming

appropriation of the authorized amounts.

Intergovernmental and private-sector impact: H.R. 1143 contains

no intergovernmental or private-sector mandates as defined in

UMRA and would not affect the budgets of state, local, or tribal

governments.

Estimate prepared by: Federal Costs: Joseph C. Whitehill Impact

on State, Local, and Tribal Governments: Leo Lex Impact on the

Private Sector: Lesley Frymier.

Estimate approved by: Robert A. Sunshine, Deputy Assistant Director for Budget Analysis.

SECTION-BY-SECTION ANALYSIS

Section 1. Short title

This section provides the short title for the act will be the ‘‘Microenterprise for Self-Reliance Act of 1999’’.

Sec. 2. Findings and declarations of policy

This section contains 18 findings updated from H.R. 1129 (which

the House passed during the 105th Congress) on the demand for

microenterprise credits, the success with past programs and the

need for their expansion in the developing world.

Sec. 3. Purposes

This section sets forth five main purposes of the Act. While

microenterprise development programs have become an important

part of the U.S. foreign assistance program, the Committee believes

that the success of these programs should bring their operations

and expansion into the forefront of the U.S. assistance effort.

The Committee also takes the commitments made by AID at the

1994 and 1997 Microenterprise Initiatives very seriously and has
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used these commitments as the basis for working with the Administration. The Committee also has heard clear testimony and reviewed evidence that U.S. NGOs and indigenous nongovernmental

organization intermediaries are the key partners our assistance

programs require to provide credit, savings, training and technical

services to microentrepreneurs.

The Committee believes that one of the key requirements in this

legislation is the requirement to increase the amount of assistance

devoted to credit activities designed to reach the poorest sector in

developing countries, and to improve the access of the poorest, particularly women, to microenterprise credit in developing countries.

The Committee notes that in various countries throughout the

world, the extension of credit to women has been one of the most

successful aspects of microfinance programs. As microfinance institutions help to break down the barriers to credit for women, they

unlock a vast potential for productivity long suppressed in many

societies.

The Committee believes that under the leadership of the President, AID, the Department of the Treasury and the Department of

State should better coordinate policy to support the microfinance

sector. The Committee notes and applauds the interest and involvement of the First Lady in supporting microfinance projects and

urges the President to take a strong lead in coordinating key cabinet departments and agencies in promoting microfinance institutions. The Committee notes that in addition to funding, policy

changes designed by AID and encouraged by the State and Treasury Departments are crucial to the future development of the

microfinance sector.

Sec. 4. Microenterprise development grant assistance

This section adds a new section to the Foreign Assistance Act of

1961 (as amended) (‘‘FAA’’) to authorize appropriations for grants

and govern the use of all microenterprise resources.

Subsection (a) includes findings that note the development of

microenterprise is a vital factor in the stable growth of developing

countries and in the development of free, open, and equitable international economic systems; that it is therefore in the best interest

of the United States to assist the development of microenterprises

in developing countries; and the support of microenterprise can be

served by programs providing credit, savings, training, and technical assistance. In the U.S. economy, small businesses fitting

AID’s definition of a microenterprise employ a significant portion,

if not the majority, of Americans. By supporting the development

of microenterprises, the Committee seeks to have foreign assistance

programs help developing countries move away from basing their

economies on large state-owned enterprises to the dynamic and innovative micro- and small business economy that has served the

U.S. so well.

Subsection (b)(1) authorizes the President to provide grant assistance for programs to increase the availability of credit and other

services to microenterprises lacking full access to capital and training through four major approaches—(A) grants to microfinance institutions for the purpose of expanding the availability of credit,

savings, and other financial services to microentrepreneurs; (B)
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training, technical assistance, and other support for microenterprises to enable them to make better use of credit, to better manage their enterprises, and to increase their income and build their

assets; (C) capacity building for microfinance institutions in order

to enable them to better meet the credit and training needs of

microentrepreneurs; and (D) policy and regulatory programs at the

country level that improve the environment for microfinance institutions that serve the poor and very poor.

The Committee notes that last year Congress created a technical

assistance program at the Department of the Treasury to help developing countries and countries in transition with monetary and

regulatory affairs. The Committee strongly encourages the Treasury Department to include offers of assistance for policy reform and

prudent regulation of the microfinance sector in its discussions

with potential recipients of such aid. The Committee believes that

analysis and elimination of policy barriers to microfinance and the

proper regulation of such institutions will be key factors in the

growth of the microfinance sector in the next decade.

Subsection (b)(2) requires that the assistance authorized pass

through organizations that have a capacity to develop and implement microenterprise programs, including particularly United

States and indigenous private and voluntary organizations, United

States and indigenous credit unions and cooperative organizations,

other indigenous governmental and nongovernmental organizations; or business development services, including indigenous craft

programs. The Committee notes the particular expertise of the

members of the Microenterprise Coalition and its partners overseas

in delivering this form of assistance.

Subsection (b)(3) is in many ways one of the key provisions of

this legislation. This section draws on a long heritage from the

1994 and 1997 Initiatives, the Microcredit Summit and the Administration-supported House-passed versions of H.R. 386 in the 104th

Congress and H.R. 1129 in the 105th Congress. The subsection provides that in carrying out sustainable poverty-focused programs referred to above, 50 percent of all microenterprise resources shall be

used for direct support of programs under this subsection through

practitioner institutions that provide credit and other financial

services to the poorest with loans of $300 or less in 1995 United

States dollars and can cover their costs of credit programs with

revenue from lending activities or that demonstrate the capacity to

do so in a reasonable time period.

The Committee intends that the term ‘‘poverty lending programs’’ should refer to programs which directly support credit and

other financial services for the poorest with loans of $300 or less

in 1995 U.S. dollars. While the Committee is clearly and purposefully restrictive on its use of the $300 average loan limit, it seeks

to be expansive on what the Administration may use to count toward this ceiling. The Committee intends that the Administration

may include all Development Assistance, Economic Support Fund

(‘‘ESF’’), SEED Act and Freedom Support Act resources dedicated

to supporting such programs. In addition, the Administration may

also count P.L. 480, deobligate/reobligate, local currency and counterpart trust funds used to support such programs. The Administration may also reasonably and conservatively pro-rate the portion
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of training, technical assistance, capacity building, policy and regulatory support that went to poverty lending programs. For example,

if the Administration were to support a K–REP effort to remove

regulatory restrictions on the microfinance sector and K–REP used

50% of its resources to directly prove services and credit to poverty

lending services, then the Administration would be able to count

50% of the funds spent to support towards the requirement in this

section.

Subsection (b)(4) provides that the President should continue

support for central mechanisms and missions that provide technical

support for field missions; strengthen the institutional development

of the intermediary organizations described above, share information relating to the provision of assistance authorized above between such field missions and intermediary organizations; and support the development of nonprofit global microfinance networks, including credit union systems, that are able to deliver very small

loans through a vast grassroots infrastructure based on market

principles and act as wholesale intermediaries providing a range of

services to microfinance retail institutions, including financing,

technical assistance, capacity building and safety and soundness

accreditation.

Subsection (b)(5) provides that assistance provided under this

subsection may only be used to support microenterprise programs

and may not be used to support programs not directly related to

the purposes described in paragraph (1).

Subsection (c) establishes a monitoring system to maximize the

sustainable development impact of the assistance authorized under

subsection (a)(1). It directs AID’s Administrator to establish a monitoring system that will accomplish four basic tasks. First, under

this bill as under the current law of the Government Performance

and Review Act (‘‘GPRA’’ or the ‘‘Results Act’’), AID must establish

performance goals for such assistance and expresses such goals in

an objective and quantifiable form, to the extent feasible. The Committee has been concerned in the past that AID has been unable

to measure its support for poverty-lending programs. Under this

section, the Committee is clearly directing AID to measure the impact of such programs, especially on lifting the very poorest from

poverty. This subsection also establishes performance indicators to

be used in measuring or assessing the achievement of the goals and

objectives of such assistance. The Committee believes that one of

the key measures will be loans made and repaid in amounts of

$300 or less in 1995 dollars. Next, the subsection requires AID to

provide a basis for recommendations for adjustments to such assistance to enhance the sustainable development impact of such assistance, particularly the impact of such assistance on the very poor,

particularly poor women. Finally, the subsection contemplates reforms and room for improving measurement systems by directing

AID to report periodically on adjustments to measures for reaching

the poorest of the poor, including proposed legislation containing

amendments to improve paragraph (3). While the Committee is

very interested in any new and more effective changes that can be

made to measure the impact of these programs on the poorest of

the poor, the Committee directs that AID should focus its initial re-
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porting resources on measuring its support for poverty lending programs. Subsection (d) authorizes $152,000,000 for fiscal year 2000 and $167,000,000 for fiscal year 2001 to carry out this section. Originally, the Committee considered higher funding sums for these

highly successful programs but chose these funding levels as realistic, achievable and amply justified by the demonstrated success of

microenterprise programs.

Sec. 5. Micro- and small enterprise development credits

Section 5 rewrites section 108 of the FAA to directly authorize

AID’s current Micro- and small Enterprise Development (‘‘MSED’’)

program. Section 108 had become outdated and was no longer utilized by AID. This section sets into permanent law the current

guidance and policy regarding assistance for micro- and slightly

larger small enterprises.

Subsection (a) contains findings and policies that are self-explanatory. Subsection (b) authorizes the President to carry out the policy set forth in subsection (a), through three delivery mechanisms:

(1) loans and guarantees to credit institutions for the purpose of expanding the availability of credit to micro- and small enterprises,

(2) training programs for lenders in order to enable them to better

meet the credit needs of microentrepreneurs and (3) training programs for microentrepreneurs in order to enable them to make better use of credit and to better manage their enterprises.

Subsection (c) requires the Administrator of AID to establish criteria for determining which entities described in the subsection

above are eligible to carry out activities, with respect to micro- and

small enterprises, assisted under this section. There are five criteria: (1) the extent to which the recipients of credit from the entity

do not have access to the local formal financial sector, (2) the extent to which the recipients of credit from the entity are among the

poorest people in the country, (3) the extent to which the entity is

oriented toward working directly with poor women, (4) the extent

to which the entity recovers its cost of lending to the poor, and (5)

the extent to which the entity implements a plan to become financially sustainable.

Subsection (d) limits this assistance to support micro- and small

enterprise programs and may not be used to support programs not

directly related to the purposes described in subsection (b).

Subsection (e) authorizes the currently appropriated levels of

$1,500,000 for each of the fiscal years 2000 and 2001 to carry out

this section. Under Credit Reform, these amounts authorized to be

appropriated will be made available for the subsidy cost, as defined

in section 502(5) of the Federal Credit Reform Act of 1990. In addition $500,000 is authorized to be appropriated for each of the fiscal

years 2000 and 2001 for the cost of administrative expenses in carrying out this section.

Sec. 6. Microfinance Loan Facility

This section establishes a new Microfinance Loan Facility to pool

and manage the risk from natural disasters, war or civil conflict,

national financial crisis, or short-term financial movements that

threaten the long-term development of United States-supported
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microfinance institutions. For some time, the Committee has been

concerned about the security of microfinance institutions and their

ability to continue operations in the face of large natural catastrophes or man-made disasters. Recently, AID has rescued several

microfinance institutions in the Subcontinent or Latin America

who were threatened with bankruptcy caused by natural disasters.

In short, it is hard to run a bank whose clients are dead or displaced by a calamity. The Committee commends AID on these ad

hoc rescue packages but seeks a more systemic approach to the security of microfinance institutions already supported by the U.S.

taxpayer. With a more systemic approach to the security of microfinance institutions responding to calamity, the past work of AID

and the support of the taxpayer will be protected. In addition, once

microfinance institutions can be restored after a calamity, then

these institutions can play a key role in recovery efforts.

Subsection (a) establishes such a facility to pool and manage the

risk from natural disasters, war or civil conflict, national financial

crisis, or short-term financial movements that threaten the longterm development of United States-supported microfinance institutions. Subsection (b) establishes a supervisory board of the facility

composed of the following representatives appointed by the President not later than 180 days after the date of the enactment: (A)

1 representative from the Department of the Treasury, (B) 1 representative from the Department of State, (C) 1 representative

from the Agency for International Development, (D) 2 United

States citizens from United States nongovernmental organizations

that operate United States-sponsored microfinance activities.

The Committee believes that these two last appointees should be

appointed from the largest and most experienced U.S. microfinance

institutions. They will also serve for terms of 2 years.

The AID Administrator will serve as Chairman of the board with

an additional vote. The Committee understands that the board will

largely represent members of the Administration with only two out

of the six members from outside organizations.

Subsection (c) provides that the board may make disbursements

from the Facility to United States-sponsored microfinance institutions to prevent the bankruptcy of such institutions caused by (A)

natural disasters, (B) national wars or civil conflict, and (C) national financial crisis or other short term financial movements that

threaten the long-term development of United States-supported

microfinance institutions.

Such disbursements shall be made as concessional loans that are

repaid maintaining the real value of the loan to microfinance institutions that demonstrate the capacity to resume self-sustained operations within a reasonable time period. The Facility shall provide

for loan losses with each loan disbursed. The Committee understands that the best way to rescue a microfinance institution is to

lend it money, not to loan it. Nevertheless, the structure of the Facility does not provide for the full cost recovery of its operations

and that it may need to be replenished from time to time.

In order to closely supervise the operation of the Facility in its

first years, during each of the fiscal years 2001 and 2002, funds

may not be made available from the Facility until 15 days after notification of the availability has been provided to the congressional
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committees specified in section 634A of this Act in accordance with

the procedures applicable to reprogramming notifications under

that section.

Subsection (d) also requires a report not later than 60 days after

the date on which the last representative to the board is appointed

pursuant to subsection (b), the chairman of the board shall prepare

and submit to the appropriate congressional committees a report on

the policies, rules, and regulations of the Facility.

Subsection (e) contains placeholder language describing the general thrust and direction of the Committee regarding the funding

sources of the Facility. The Committee understands that the Chairman and Ranking Minority Member will offer final language on the

funding for this Facility that is acceptable to the Administration

when this bill is considered on the House.

Sec. 7. Report relating to future development of microfinance institutions

This section is intended to lay a foundation for the future development of the microfinance sector. Subsection (a) requires the

President, in consultation with the AID Administrator, the Secretary of State, and the Secretary of the Treasury, to prepare and

transmit to the appropriate congressional committees a report on

the most cost-effective methods for increasing the access of poor

people to credit, other financial services, and related training.

Subsection (b) provides that the contents of the report shall contain: First, how the President will jointly develop a comprehensive

strategy for advancing the global microenterprise sector in a way

that maintains market principles while assuring that the very

poor, particularly women, obtain access to financial services. The

Committee is concerned that as the microfinance sector grows, the

Administration should develop a comprehensive strategy to foster

the enabling environment and funding for such institutions.

Second, the subsection requires guidelines and recommendations

for—

(A) Instruments to assist microenterprise networks to develop multi-country and regional microlending programs. The

Committee believes that networks can be the key to the development of this sector in the next decade.

(B) Technical assistance to foreign governments, foreign central banks and regulatory entities to improve the policy environment for microfinance institutions, and to strengthen the

capacity of supervisory bodies to supervise microcredit institutions. Having authorized the start of the Treasury Technical

Assistance Program, the Committee encourages the Treasury

Department to include assistance for the regulation and development of the microfinance sector in its review of possible assistance that can be offered under this program.

(C) The potential for federal chartering of United Statesbased international microfinance network institutions, including proposed legislation. The Committee would like to review

the advantages Fannie Mae had in the use of its federal charter and the potential such an arrangement might have for the

development of the microfinance sector.
14

(D) Instruments to increase investor confidence in microcredit institutions which would strengthen the long-term financial position of the microcredit institutions and attract capital

from private sector entities and individuals, such as a rating

system for microcredit institutions and local credit bureaus.

The Committee was impressed with the achievement of Bolivia’s BancoSol and its development of independent access to private capital markets.

(E) An agenda for integrating microfinance into United

States foreign policy initiatives seeking to develop and

strengthen the global finance sector. The Committee believes

that under GPRA, the development of microfinance institutions

should become a key part of the State Department and AID

performance plans.

(F) Innovative instruments to attract funds from the capital

markets, such as instruments for leveraging funds from the

local commercial banking sector, and the securitization of

microloan portfolios.

Sec. 8. United States Agency for International Development as global leader and coordinator of bilateral and multilateral microenterprise assistance activities

This section contains findings and a sense of the Congress that

the development of the microfinance sector should be included in

multilateral discussions and institutions such as the International

Fund for Agricultural Development (IFAD) and the United Nations

Development Program (UNDP). The section also calls on the Secretary of the Treasury to instruct each United States Executive Director of the Multilateral Development Banks (MDBs) to advocate

the development of a coherent and coordinated strategy to support

the microenterprise sector and an increase of multilateral resource

flows for the purposes of building microenterprise retail and wholesale intermediaries.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

FOREIGN ASSISTANCE ACT OF 1961

* * * * * * *

PART I

CHAPTER 1—POLICY; DEVELOPMENT ASSISTANCE AUTHORIZATIONS

* * * * * * *

øSEC. 108. PRIVATE SECTOR REVOLVING FUND.—(a) The Congress

finds that the development of private enterprise, including cooperatives, is a vital factor in the stable growth of developing countries

and in the development and stability of a free, open, and equitable

international economic system. It is therefore in the best interests
15

of the United States to assist the development of the private sector

in developing countries and to engage the United States private

sector in that process. In order to promote such private sector development, the President is authorized to establish a revolving

fund account in the United States Treasury. All funds deposited in

such account shall, notwithstanding any provision in an appropriation Act to the contrary, be free from fiscal year limitations.

ø(b) Of the funds made available under this chapter in each of the fiscal years 1986 and 1987, up to $18,000,000 may be deposited

in this account. Such funds used in accordance with the policies

and authorities of this section shall be in addition to other funds

available for private sector activities under other authorities in this

Act. Any reflows and income arising from activities carried out pursuant to this section, including loan repayments and fee income (as

provided in subsection (e) of this section), shall be deposited into

the revolving fund and remain available to carry out the purposes

of this section. All funds in such account may be invested in obligations of the United States.

ø(c)(1) The agency primarily responsible for administering this

part is authorized to use the funds maintained in this revolving

fund account to furnish assistance in furtherance of the policy of

subsection (a) on such terms and conditions as it may determine.

Amounts in the revolving fund account shall be available for obligation for assistance under this section only to such extent as may

be provided in advance in appropriation Acts. Assistance may be

provided under this section without regard to sections 604(a) and

620(r) of this Act.

ø(2) Assistance under this section may be provided only to support private sector activities which—

ø(A) are consistent with the United States development assistance policies set forth in section 102 of this Act and with

the development priorities of the host country;

ø(B) are the types of activities for which assistance may be

provided under sections 103 through 106 of this Act;

ø(C) will have a demonstration effect;

ø(D) will be innovative;

ø(E) are financially viable;

ø(F) will maximize the development impact appropriate to

the host country, particularly in employment and the use of

appropriate technology; and

ø(G) are primarily directed to making available to small

business enterprises and cooperatives necessary support and

services which are not otherwise generally available.

In determining whether an enterprise is a small business enterprise, the agency primarily responsible for administering this part

shall take into consideration the enterprise’s total net fixed assets

and number of employees, together with the relevant definition utilized by the host country government and the International Bank

for Reconstruction and Development and other international organizations.

ø(3)(A) Not more than $3,000,000 may be made available under

this section to support any one project.

ø(B) Not more than 50 per centum of the financial support for

any project may be provided under this section, and a substantial
16

portion of the financial support for a project assisted under this

section must be provided by sources within the host country.

ø(C) Not more than 20 per centum of the assets of the revolving

fund account under this section may be used to support projects in

any one country.

ø(D) In order to maximize the impact on institution building,

loans under this section shall be made primarily to intermediary

entities which provide necessary support and services for private

sector activities.

ø(E) Loans under this section shall be at or near the interest rate

otherwise available to the recipient.

ø(d)(1) If at any time the assets of the revolving fund account exceeds $100,000,000, the President shall remit the amount in excess

of $100,000,000 to the United States Treasury.

ø(2) As used in this section, ‘‘assets’’ includes amounts in the revolving fund account plus the value of investments made with

amounts from the fund plus the current value of outstanding obligations under loans under this section.

ø(3) In addition to the requirement of paragraph (1), at the end

of any fiscal year, the agency primarily responsible for administering this part may determine that amounts in the revolving fund

are sufficient to permit the remittance to the United States Treasury of an amount equal to a portion or the total amount of appropriated funds deposited in the revolving fund. Any such remittance

shall be deemed to be a decrease in the appropriated funds in the

revolving fund. After remittance has been made of an amount

equal to the total amount of appropriated funds, the revolving fund

shall consist and be deemed to consist entirely of nonappropriated

funds.

ø(e) A fee may be charged, where appropriate, in carrying out activities with funds from the revolving fund authorized in this section. The amount of any such fee shall be determined by the agency

primarily responsible for administering this part.

ø(f) In the event the revolving fund is terminated, all unobligated

money in the fund at the time of such termination shall be transferred to and become part of the miscellaneous receipts account of

the Treasury.

ø(g) As part of its annual congressional presentation documents

submitted to the Congress, the agency primarily responsible for administering this part shall include a description of projects proposed to be funded from the revolving fund account for that fiscal

year. To the extent that projects are proposed for funding which

are not contained in the annual congressional presentation documents, at least fifteen days’ advance notification shall be provided

to the Congress in accordance with section 634A of this Act.

ø(h) Not later than December 31 of each year, the President shall

submit a comprehensive report which details all projects funded

under this section during the previous fiscal year, all reflows to the

revolving fund account, a status report on all projects currently

contained in the fund’s portfolio. Such reports shall include, but not

be limited to, information regarding numbers and kinds of beneficiaries reached, amounts and kinds of benefits provided by the

funded projects to targeted populations, and a justification for
17

projects within the context of the goals and objectives of the United

States development assistance program.

ø(i)(1) To carry out the purposes of subsection (a), in addition to

the other authorities set forth in this section, the agency primarily

responsible for administering this part is authorized to issue guarantees on such terms and conditions as it shall determine assuring

against losses incurred in connection with loans made to projects

that meet the criteria set forth in subsection (c). The full faith and

credit of the United States is hereby pledged for the full payment

and performance of such guarantees.

ø(2) Loans guaranteed under this subsection shall be on such

terms and conditions as the agency may prescribe, except for the

following:

ø(A) The agency shall issue guarantees only when it is necessary to alleviate a credit market imperfection.

ø(B) Loans guaranteed shall provide for complete amortization within a period not to exceed ten years or, if the principal

purpose of the guaranteed loan is to finance the construction

or purchase of a physical asset with a useful life of less than

ten years, within a period not to exceed such useful life.

ø(C) No loan guaranteed to any one borrower may exceed 50 percent of the cost of the activity to be financed, or $3,000,000,

whichever is less, as determined by the agency.

ø(D) No loan may be guaranteed unless the agency determines that the lender is responsible and that adequate provision is made for servicing the loan on reasonable terms and

protecting the financial interest of the United States.

ø(E) The fees earned from the loan guarantees issued under

this subsection shall be deposited in the revolving fund account

as part of the guarantee reserve established under paragraph

(5) of this subsection. Fees shall be assessed at a level such

that the fees received, plus the funds from the revolving fund

account placed in the guarantee reserve satisfy the requirements of paragraph (5). Fees shall be reviewed every twelve

months to ensure that the fees assessed on new loan guarantees are at the required level.

ø(F) Any guarantee shall be conclusive evidence that such

guarantee has been properly obtained, and that the underlying

loan as contracted qualifies for such guarantee. Except for

fraud or material misrepresentation for which the parties seeking payment under such guarantee are responsible, such guarantee shall be presumed to be valid, legal, and enforceable.

ø(G) The agency shall determine that the standards used by

the lender for assessing the credit risk of new and existing

guaranteed loans are reasonable. The agency shall require that

there be a reasonable assurance of repayment before credit assistance is extended.

ø(H) Commitments to guarantee loans may be made by the

agency only to the extent that the total loan principal, any part

of which is guaranteed, will not exceed the amount specified in

annual appropriations Acts.

ø(3) To the extent that fees are not sufficient as specified under

paragraph (2)(E) to cover expected future liabilities, appropriations

are authorized to maintain an appropriate reserve.
18

ø(4) The losses guaranteed under this subsection may be in dollars or in other currencies. In the case of loans in currencies other

than dollars, the guarantees issued shall be subject to an overall

payment limitation expressed in dollars.

ø(5) The agency shall segregate in the revolving fund account

and hold as a reserve an amount estimated to be sufficient to cover

the agency’s expected net liabilities on the loan guarantees outstanding under this subsection; except that the amount held in reserve shall not be less than 25 percent of the principal amount of

the agency’s outstanding contingent liabilities on such guarantees.

Any payments made to discharge liabilities arising from the loan

guarantees shall be paid first out of the assets in the revolving

fund account and next out of other funds made available for this

purpose.¿

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

(a) FINDINGS AND POLICY.—The Congress finds and declares

that—

(1) the development of micro- and small enterprises are a

vital factor in the stable growth of developing countries and in

the development and stability of a free, open, and equitable

international economic system; and

(2) it is, therefore, in the best interests of the United States

to assist the development of the enterprises of the poor in developing countries and to engage the United States private sector

in that process.

(b) PROGRAM.—To carry out the policy set forth in subsection (a),

the President is authorized to provide assistance to increase the

availability of credit to micro- and small enterprises lacking full access to credit, including through—

(1) loans and guarantees to credit institutions for the purpose

of expanding the availability of credit to micro- and small enterprises;

(2) training programs for lenders in order to enable them to

better meet the credit needs of microentrepreneurs; and

(3) training programs for microentrepreneurs in order to enable them to make better use of credit and to better manage

their enterprises.

(c) ELIGIBILITY CRITERIA.—The Administrator of the United

States Agency for International Development shall establish criteria

for determining which entities described in subsection (b) are eligible to carry out activities, with respect to micro- and small enterprises, assisted under this section. Such criteria may include the following:

(1) The extent to which the recipients of credit from the entity

do not have access to the local formal financial sector.

(2) The extent to which the recipients of credit from the entity

are among the poorest people in the country.

(3) The extent to which the entity is oriented toward working

directly with poor women.

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

to the poor.

(5) The extent to which the entity implements a plan to become financially sustainable.
19

(d) ADDITIONAL REQUIREMENT.—Assistance provided under this

section may only be used to support micro- and small enterprise

programs and may not be used to support programs not directly related to the purposes described in subsection (b).

(e) AUTHORIZATION OF APPROPRIATIONS.—

(1) IN GENERAL.—(A) There are authorized to be appropriated

$1,500,000 for each of the fiscal years 2000 and 2001 to carry

out this section.

(B) Amounts authorized to be appropriated under subparagraph (A) shall be made available for the subsidy cost, as defined in section 502(5) of the Federal Credit Reform Act of 1990,

for activities under this section.

(2) ADMINISTRATIVE EXPENSES.—There are authorized to be

appropriated $500,000 for each of the fiscal years 2000 and

2001 for the cost of administrative expenses in carrying out this

section.

(3) RULE OF CONSTRUCTION.—Amounts authorized to be appropriated under this subsection are in addition to amounts

otherwise available to carry out this section.

* * * * * * *

SEC. ø129.¿ 130. ASSISTANCE FOR VICTIMS OF TORTURE.

(a) IN GENERAL.—The President is authorized to provide assistance for the rehabilitation of victims of torture.

(b) ELIGIBILITY FOR GRANTS.—Such assistance shall be provided

in the form of grants to treatment centers and programs in foreign

countries that are carrying out projects or activities specifically designed to treat victims of torture for the physical and psychological

effects of the torture.

(c) USE OF FUNDS.—Such assistance shall be available—

(1) for direct services to victims of torture; and

(2) to provide research and training to health care providers

outside of treatment centers or programs described in subsection (b), for the purpose of enabling such providers to provide the services described in paragraph (1).

SEC. 131. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.

(a) FINDINGS AND POLICY.—The Congress finds and declares

that—

(1) the development of microenterprise is a vital factor in the

stable growth of developing countries and in the development of

free, open, and equitable international economic systems;

(2) it is therefore in the best interest of the United States to

assist the development of microenterprises in developing countries; and

(3) the support of microenterprise can be served by programs

providing credit, savings, training, and technical assistance.

(b) AUTHORIZATION.—(1) In carrying out this part, the President

is authorized to provide grant assistance for programs to increase

the availability of credit and other services to microenterprises lacking full access to capital and training through—

(A) grants to microfinance institutions for the purpose of expanding the availability of credit, savings, and other financial

services to microentrepreneurs;
20

(B) training, technical assistance, and other support for

microenterprises to enable them to make better use of credit, to

better manage their enterprises, and to increase their income

and build their assets;

(C) capacity building for microfinance institutions in order to

enable them to better meet the credit and training needs of

microentrepreneurs; and

(D) policy and regulatory programs at the country level that

improve the environment for microfinance institutions that

serve the poor and very poor.

(2) Assistance authorized under paragraph (1) shall be provided

through organizations that have a capacity to develop and implement microenterprise programs, including particularly—

(A) United States and indigenous private and voluntary organizations;

(B) United States and indigenous credit unions and cooperative organizations;

(C) other indigenous governmental and nongovernmental organizations; or

(D) business development services, including indigenous craft

programs.

(3) In carrying out sustainable poverty-focused programs under

paragraph (1), 50 percent of all microenterprise resources shall be

used for direct support of programs under this subsection through

practitioner institutions that provide credit and other financial services to the poorest with loans of $300 or less in 1995 United States

dollars and can cover their costs of credit programs with revenue

from lending activities or that demonstrate the capacity to do so in

a reasonable time period.

(4) The President should continue support for central mechanisms

and missions that—

(A) provide technical support for field missions;

(B) strengthen the institutional development of the intermediary organizations described in paragraph (2);

(C) share information relating to the provision of assistance

authorized under paragraph (1) between such field missions

and intermediary organizations; and

(D) support the development of nonprofit global microfinance

networks, including credit union systems, that—

(i) are able to deliver very small loans through a vast

grassroots infrastructure based on market principles; and

(ii) act as wholesale intermediaries providing a range of

services to microfinance retail institutions, including financing, technical assistance, capacity building and safety

and soundness accreditation.

(5) Assistance provided under this subsection may only be used to

support microenterprise programs and may not be used to support

programs not directly related to the purposes described in paragraph (1).

(c) MONITORING SYSTEM.—In order to maximize the sustainable

development impact of the assistance authorized under subsection

(a)(1), the Administrator of the United States Agency for International Development shall establish a monitoring system that—
21

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

extent feasible;

(2) establishes performance indicators to be used in measuring or assessing the achievement of the goals and objectives of

such assistance;

(3) provides a basis for recommendations for adjustments to

such assistance to enhance the sustainable development impact

of such assistance, particularly the impact of such assistance on

the very poor, particularly poor women; and

(4) provides a basis for recommendations for adjustments to

measures for reaching the poorest of the poor, including proposed legislation containing amendments to improve paragraph

(3).

(d) AUTHORIZATION OF APPROPRIATIONS.— (1) IN GENERAL.—(A) There are authorized to be appropriated $152,000,000 for fiscal year 2000 and $167,000,000 for fiscal

year 2001 to carry out this section.

(B) Amounts appropriated pursuant to the authorization of

appropriations under subparagraph (A) are authorized to remain available until expended.

(2) RULE OF CONSTRUCTION.—Amounts authorized to be appropriated under paragraph (1) are in addition to amounts otherwise available to carry out this section.

SEC. 132. UNITED STATES MICROFINANCE LOAN FACILITY.

(a) ESTABLISHMENT.—The Administrator of the United States

Agency for International Development is authorized to establish a

United States Microfinance Loan Facility (hereinafter in this section

referred to as the ‘‘Facility’’) to pool and manage the risk from natural disasters, war or civil conflict, national financial crisis, or shortterm financial movements that threaten the long-term development

of United States-supported microfinance institutions.

(b) SUPERVISORY BOARD OF THE FACILITY.—(1) The Facility shall

be supervised by a board composed of the following representatives

appointed by the President not later than 180 days after the date

of the enactment of Microenterprise for Self-Reliance Act of 1999:

(A) 1 representative from the Department of the Treasury.

(B) 1 representative from the Department of State.

(C) 1 representative from the United States Agency for International Development.

(D)(i) 2 United States citizens from United States nongovernmental organizations that operate United States-sponsored

microfinance activities.

(ii) Individuals described in clause (i) shall be appointed for

a term of 2 years.

(2) The Administrator of the United States Agency for International Development or his designee shall serve as Chairman and

an additional voting member of the board.

(c) DISBURSEMENTS.—(1) The board shall make disbursements

from the Facility to United States-sponsored microfinance institutions to prevent the bankruptcy of such institutions caused by (A)

natural disasters, (B) national wars or civil conflict, and (C) national financial crisis or other short term financial movements that

threaten the long-term development of United States-supported
22

microfinance institutions. Such disbursements shall be made as

concessional loans that are repaid maintaining the real value of the

loan to microfinance institutions that demonstrate the capacity to

resume self-sustained operations within a reasonable time period.

The Facility shall provide for loan losses with each loan disbursed.

(2) During each of the fiscal years 2001 and 2002, funds may not

be made available from the Facility until 15 days after notification

of the availability has been provided to the congressional committees specified in section 634A of this Act in accordance with the procedures applicable to reprogramming notifications under that section.

(d) REPORT.—Not later than 60 days after the date on which the

last representative to the board is appointed pursuant to subsection

(b), the chairman of the board shall prepare and submit to the appropriate congressional committees a report on the policies, rules,

and regulations of the Facility.

(e) FUNDING.—(1) Not more than $5,000,000 of amounts made

available to carry out sections 103 through 106 of this Act for each

of the fiscal years 2000 and 2001 may be made available to carry

out this section for each such fiscal year.

(2) Amounts made available under paragraph (1) are in addition

to amounts available under other provisions of law to carry out this

section.

(f) DEFINITIONS.—In this section:

(1) APPROPRIATE CONGRESSIONAL COMMITTEES.—The term

‘‘appropriate congressional committees’’ means the Committee

on International Relations of the House of Representatives and

the Committee on Foreign Relations of the Senate.

(2) UNITED STATES-SUPPORTED MICROFINANCE INSTITUTION.— The term ‘‘United States-supported microfinance institution’’

means a financial intermediary that has received funds made

available under this Act for fiscal year 1980 and each subsequent fiscal year.

* * * * * * *

Æ