99–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 107–453

MICROENTERPRISE ASSISTANCE REAUTHORIZATION

AMENDMENTS OF 2002

MAY 10, 2002.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. HYDE, from the Committee on International Relations,

submitted the following

R E P O R T

[To accompany H.R. 4073]

[Including cost estimate of the Congressional Budget Office]

The Committee on International Relations, to whom was referred the bill (H.R. 4073) to amend the Microenterprise for SelfReliance Act of 2000 and the Foreign Assistance Act of 1961 to increase assistance for the poorest people in developing countries

under microenterprise assistance programs under those Acts, and

for other purposes, having considered the same, reports favorably

thereon with an amendment and recommends that the bill as

amended do pass.

TABLE OF CONTENTS

Page

The Amendment ...................................................................................................... 2

Purpose and Summary ............................................................................................ 4

Background and Need for the Legislation ............................................................. 5

Committee Consideration ........................................................................................ 7

Votes of the Committee ........................................................................................... 7

Committee Oversight Findings ............................................................................... 8

New Budget Authority and Tax Expenditures ...................................................... 8

Congressional Budget Office Cost Estimate .......................................................... 8

Performance Goals and Objectives ......................................................................... 10

Constitutional Authority Statement ...................................................................... 10

Section-by-Section Analysis .................................................................................... 10

New Advisory Committees ...................................................................................... 12

Congressional Accountability Act ........................................................................... 12

Federal Mandates .................................................................................................... 12

Changes in Existing Law Made by the Bill, as Reported ..................................... 12

2

THE AMENDMENT

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. AMENDMENTS TO THE MICROENTERPRISE FOR SELF-RELIANCE ACT OF 2000.

(a) PURPOSES.—Section 103 of the Microenterprise for Self-Reliance Act of 2000

(Public Law 106–309) is amended—

(1) in paragraph (3), by striking ‘‘microentrepreneurs’’ and inserting ‘‘microenterprise households’’;

(2) in paragraph (4), by striking ‘‘and’’ at the end;

(3) in paragraph (5)—

(A) by striking ‘‘microfinance policy’’ and inserting ‘‘microenterprise policy’’;

(B) by striking ‘‘the poorest of the poor’’ and inserting ‘‘the very poor’’;

and

(C) by striking the period at the end and inserting ‘‘; and’’; and

(4) by adding at the end the following:

‘‘(6) to encourage the United States Agency for International Development

to develop, assess, and implement effective outreach methods and tools to ensure that all microenterprise assistance authorized under this title, and the

amendments made by this title, is used to assist the greatest absolute number

of economically viable clients among the very poor, and that at least 50 percent

of all microenterprise assistance authorized under this title, and the amendments made under this title, is used in support of programs or lines of service

that target the very poor.’’.

(b) DEFINITIONS.—Section 104 of such Act is amended—

(1) in paragraph (2), by striking ‘‘for microentrepreneurs’’ and inserting ‘‘to

microentrepreneurs and their households’’; and

(2) by adding at the end the following:

‘‘(5) VERY POOR; POOREST PEOPLE IN DEVELOPING COUNTRIES.—The terms

‘very poor’ and ‘poorest people in developing countries’ mean those persons living either in the bottom 50 percent below the poverty line as established by the

national government of the country or on less than the equivalent of $1 per

day.’’.

SEC. 2. AMENDMENTS TO THE MICRO- AND SMALL ENTERPRISE DEVELOPMENT CREDITS

PROGRAM UNDER THE FOREIGN ASSISTANCE ACT OF 1961.

(a) FINDINGS AND POLICY.—Section 108(a)(2) of the Foreign Assistance Act of

1961 (22 U.S.C. 2151f(a)(2)) is amended by striking ‘‘the development of the enterprises of the poor’’ and inserting ‘‘the access to financial services and the development of microenterprises’’.

(b) PROGRAM.—Section 108(b) of such Act (22 U.S.C. 2151f(b)) is amended to

read as follows:

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

is authorized to provide assistance to increase the availability of financial services

to microenterprise households lacking full access to credit, including through—

‘‘(1) loans and guarantees to microfinance institutions for the purpose of expanding the availability of savings and credit to poor and low-income households;

‘‘(2) training programs for microfinance institutions in order to enable them

to better meet the financial services needs of their clients; and

‘‘(3) training programs for clients in order to enable them to make better

use of credit, increase their financial literacy, and to better manage their enterprises.’’.

(c) ELIGIBILITY CRITERIA.—Section 108(c) of such Act (22 U.S.C. 2151f(c)) is

amended—

(1) in the first sentence of the matter preceding paragraph (1)—

(A) by striking ‘‘credit institutions’’ and inserting ‘‘microfinance institutions’’; and

(B) by striking ‘‘micro- and small enterprises’’ and inserting ‘‘microenterprise households’’; and

(2) in paragraphs (1) and (2), by striking ‘‘credit’’ each place it appears and

inserting ‘‘financial services’’.

(d) ADDITIONAL REQUIREMENT.—Section 108(d) of such Act (22 U.S.C. 2151f(d))

is amended by striking ‘‘micro- and small enterprise programs’’ and inserting ‘‘programs for microenterprise households’’.

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(e) AVAILABILITY OF FUNDS.—Section 108(f)(1) of such Act (22 U.S.C. 2151f(f)(1))

is amended by striking ‘‘for each of fiscal years 2001 and 2002’’ and inserting ‘‘for

each of fiscal years 2001 through 2004’’.

(f) CONFORMING AMENDMENT.—Section 108 of such Act (22 U.S.C. 2151f) is

amended in the heading to read as follows:

‘‘SEC. 108. MICROENTERPRISE DEVELOPMENT CREDITS.’’.

SEC. 3. AMENDMENTS TO THE MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE PROGRAM UNDER THE FOREIGN ASSISTANCE ACT OF 1961.

(a) FINDINGS AND POLICY.—Section 131(a) of the Foreign Assistance Act of 1961

(22 U.S.C. 2152a(a)) is amended to read as follows:

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

‘‘(1) access to financial services and the development of microenterprise are

vital factors 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 facilitate access to financial services and assist the development of microenterprise in developing countries;

‘‘(3) access to financial services and the development of microenterprises

can be supported by programs providing credit, savings, training, technical assistance, business development services, and other financial and non-financial

services; and

‘‘(4) given the relatively high percentage of populations living in rural areas

of developing countries, and the combined high incidence of poverty in rural

areas and growing income inequality between rural and urban markets, microenterprise programs should target both rural and urban poor.’’.

(b) AUTHORIZATION.—Section 131(b) of such Act (22 U.S.C. 2152a(b)) is

amended—

(1) in paragraph (3)—

(A) in the first sentence of the matter preceding subparagraph (A), by

striking ‘‘targeted to very poor entrepreneurs’’ and all that follows and inserting ‘‘used in support of programs or lines of service under which 50 percent or more of the incoming or prospective clients are initially very poor.’’;

and

(B) in subparagraph (A)(i) , by striking ‘‘entrepreneurs’’ and inserting

‘‘clients’’; and

(2) in paragraph (4)(D)—

(A) in clause (i), by striking ‘‘very small loans’’ and inserting ‘‘financial

services to poor entrepreneurs’’; and

(B) in clause (ii), by striking ‘‘microfinance’’ and inserting ‘‘microenterprise’’.

(c) MONITORING SYSTEM.—Section 131(c) of such Act (22 U.S.C. 2152a(c)) is

amended by striking paragraph (4) and inserting the following:

‘‘(4) adopts the widespread use of proven and effective poverty assessment

tools to successfully identify the very poor and ensure that they receive needed

microenterprise credits, loans, and assistance.’’

(d) DEVELOPMENT AND APPLICATION OF POVERTY MEASUREMENT METHODS.—

Section 131 of such Act (22 U.S.C. 2152a) is amended—

(1) by redesignating subsections (d) and (e) as subsections (e) and (f), respectively; and

(2) by inserting after subsection (c) the following:

‘‘(d) DEVELOPMENT AND CERTIFICATION OF POVERTY MEASUREMENT METHODS;

APPLICATION OF METHODS.—

‘‘(1) DEVELOPMENT AND CERTIFICATION.—(A) The Administrator of the

United States Agency for International Development, in consultation with appropriate microfinance institutions, microenterprise institutions, and other appropriate entities shall develop no fewer than two low-cost methods for measuring the poverty levels of the current or prospective clients of microenterprise

organizations for purposes of assistance under this section. In developing such

methods, the Administrator shall give consideration to methods already in use

by practitioner institutions.

‘‘(B) The Administrator shall field-test the methods developed under this

paragraph, and as part of the testing, institutions and programs may use these

methods on a voluntary basis to demonstrate their ability to reach the very

poor.

‘‘(C) Not later than October 1, 2004, the Administrator shall, from among

the low-cost poverty measurement methods developed under this paragraph,

certify no fewer than two of such methods as approved methods for measuring

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the poverty levels of the current or prospective clients of microenterprise organizations for purposes of assistance under this section.

‘‘(2) APPLICATION.—Beginning on and after October 1, 2004, assistance furnished under this section to a program or to a line of service within an institution shall qualify, in whole or in part, as targeted assistance to the very poor

if one or more of the measurement methods approved under paragraph (1), or

one or more of the measurement methods approved in accordance with paragraph (1) after October 1, 2004, verifies that at least 50 percent of the incoming

or prospective clients of the program or line of service are initially among the

very poor.’’.

(e) LEVEL OF ASSISTANCE.—Section 131(e) of such Act, as redesignated by subsection (d), is amended by inserting ‘‘and $175,000,000 for fiscal year 2003 and

$200,000,000 for fiscal year 2004’’ after ‘‘fiscal years 2001 and 2002’’.

(f) DEFINITIONS.—Section 131(f) of such Act, as redesignated by subsection (d),

is amended by adding at the end the following:

‘‘(5) VERY POOR; POOREST PEOPLE IN DEVELOPING COUNTRIES.—The terms

‘very poor’ and ‘poorest people in developing countries’ mean those persons living either in the bottom 50 percent below the poverty line as established by the

national government of the country or on less than the equivalent of $1 per

day.’’.

SEC. 4. REPORT TO CONGRESS.

Not later than July 1, 2004, the Administrator of the United States Agency for

International Development shall submit to Congress a report that contains—

(1) a description of the interim poverty measurement methods developed

and implemented pursuant to section 131(d)(1) of the Foreign Assistance Act of

1961, as added by section 3(d);

(2) an analysis of the results of the application of such interim poverty

measurement methods to sustainable poverty-focused programs under such section; and

(3) a description of the proposed final poverty measurement methods to be

implemented beginning on October 1, 2004, in accordance with section 131(d)(2)

of such Act, as added by section 3(d).

PURPOSE AND SUMMARY

H.R. 4073, a bill making amendments to the Microenterprise and

Self-Reliance Act of 2000 and the Foreign Assistance Act of 1961,

as amended, (FAA), as reported out of the Committee on International Relations, reauthorizes and increases authorized funding

levels for microenterprise programs under the authority of the Administrator of the U.S. Agency for International Development. The

bill amends the Purposes and Definitions sections of the Microenterprise and Self-Reliance Act of 2000, and also amends the

Findings and Policy, Eligibility Criteria, Additional Requirement,

and Availability of Funds subsections of Section 108 of the FAA

(concerning the Microenterprise Development Credits program).

The bill also makes amendments to the Findings and Policy, Authorization, Monitoring System and Definition subsections of Section 131 of the FAA (concerning the Microenterprise Development

Grant Assistance program), adds an additional subsection on Poverty Measurement (Section 131(d)), and also requires a report to

Congress concerning the implementation of this subsection. Specifically, H.R. 4073 reauthorizes microenterprise grant assistance for

an additional 2 years, through FY2004, providing authorization for

$175 million in 2003 and $200 million in 2004

The goals and objectives of this legislation are to amend the

Microenterprise and Self-Reliance Act of 2000 and the Foreign Assistance Act of 1961 to reauthorize microenterprise assistance, to

better focus assistance on the very poor, and to make definitional

and other amendments to update language of both acts concerning

rural lending, the provision of financial services, and the developVerDate 11-MAY-2000 00:19 May 11, 2002 Jkt 099006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6601 E:\HR\OC\HR453.XXX pfrm12 PsN: HR453
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ment and application of poverty measurement tools for the purpose

of ensuring U.S. microenterprise assistance reaches the very poor.

BACKGROUND AND NEED FOR THE LEGISLATION

The Microenterprise for Self-Reliance Act of 2000 (PL 106–309)

authorized U.S. microenterprise programs under the authority of

the Administrator of the U.S. Agency for International Development (USAID). PL 106–309 authorized these programs for an initial 2-year period, which expires on September 30, 2002. Mr. Smith

of New Jersey and Mr. Roemer each introduced bills to reauthorize

microenterprise programs, and H.R. 4073 as reported represents a

compromise draft that incorporates significant aspects of each bill.

H.R. 4073 would increase U.S. funding to $175 million in FY2003

and $200 million in FY2004, and makes a number of important

definitional changes.

In reauthorizing the Microenterprise for Self-Reliance Act, the

Committee has provided significant increases in authorized funding

levels for microenterprise development grant programs in recognition of the effectiveness of these programs, the unmet need for

credit, savings and other business and financial services among

millions of poor people, and the capacity of microenterprise development programs globally to put additional resources to good use.

The Committee recognizes the valuable contributions that

USAID has made to the development and expansion of financiallysustainable microenterprise institutions during the initial authorization period. The amendments in H.R. 4073 are intended to encourage USAID to apply an equal level of creativity and innovation

to promote outreach to the very poor. By designating at least 50

percent of all assistance to programs or lines of service that target

the very poor, the Committee seeks to encourage microenterprise

institutions to develop and expand programs that specifically target

the very poor. While recognizing that poor people at all levels of

poverty require greater access to financial and non-financial microenterprise development services, the Committee emphasizes that

all microenterprise assistance authorized by H.R. 4073 should be

used to assist the greatest possible number of the very poor. In

support of this goal, the 50 percent of funds designated for programs or lines of services targeting the very poor shall be considered as a minimum, and not a maximum.

The Committee intends that the term ‘‘program and lines of service’’ should include not only the provision of direct financial services but also other programs that serve the very poor by building

capacity and reducing poverty. The Committee further intends that

the term ‘‘program and lines of service’’ shall include those povertyfocused services within larger institutions. This provision ensures

that poverty-focused services within larger institutions can be eligible to receive resources targeted to the very poor, even if the institution as a whole does not serve a majority of very poor clients.

Such institutions are eligible to receive those resources targeted to

the very poor if those institutions develop particular lines of service

under which 50 percent or more of the incoming or prospective clients are initially very poor.

H.R. 4073 requires USAID, in consultation with the microenterprise community, to develop ‘‘poverty measurement methods’’ in

order to enable microenterprise organizations to identify which of

6

their prospective clients meet the definition of ‘‘very poor.’’ Section

131(b)(3) of the Foreign Assistance Act currently requires that 50

percent of all microenterprise assistance be targeted to very poor

entrepreneurs (defined as those living in the bottom 50 percent

below the poverty line). Because it is expensive and technically difficult to ‘‘measure’’ poverty of potential clients, USAID has used

loan size when measuring implementation agency compliance with

the 50 percent requirement. Many academics and practitioners do

not agree that loan size is a valid proxy, nor are they in agreement

on how best to measure poverty (income alone is not considered a

valid indicator). H.R. 4073 will require that by October 1, 2004, the

Administrator certify no fewer than two low-cost methods for measuring the poverty levels of the current or prospective clients of

microenterprise organizations. The bill also requires that after October 1, 2004, the Administrator use these new methods to determine which programs meet the criteria of targeting the ‘‘very poor.’’

The Committee has expanded the definition of the very poor to

include those severely poor people living on less than $1 per day

and has provided clear guidance to USAID for the development and

use of cost-efficient practical poverty measurement tools that can

be applied by practitioner organizations. The Committee has included language that directs that beginning on October 1, 2004, at

least half of all microenterprise development grant resources shall

go to programs that can demonstrate by use of a USAID-certified

poverty measurement method that 50 percent or more of their incoming or prospective clients are initially very poor. This change

creates substantially greater incentive for USAID to find and support financially-sustainable lines of microenterprise development

service that favor the very poor, while allowing up to half of the

funding to support other lines of service that serve poor people who

are somewhat better-off. The Committee expects that this provision

will provide a clearer, more meaningful guideline that will create

substantially stronger incentive for USAID and its grantees to

push the frontiers of microenterprise development to include more

of the very poor than are currently being reached by USAID supported microenterprise development programs and services.

The Committee has also broadened the definition of microenterprise development services in recognition of the importance of delivering both financial and non-financial services to the poor, and

has emphasized the importance of providing these services to rural

as well as urban areas, given the concentrations of poverty often

found in rural areas.

The Committee recognizes that USAID has included some incentives for poverty outreach in its procurement process. However,

after a review of the current procurement guidelines, the Committee finds that the current incentives and guidelines are inadequate to encourage innovation and support the rapid expansion of

financial services to the very poor and others currently underserved or excluded from microenterprise programs. H.R. 4073 addresses these inadequacies by requiring the development of poverty-measurement methods. The Committee hopes that these methods will enable microenterprise institutions to demonstrably reach

the greatest number of the very poor with sustainable and cost-efficient programs.

7

The Committee recognizes that microfinance networks are efficient vehicles for rapidly expanding access to financial services by

the poor. These networks build new microfinance institutions in

underserved areas and provide technical assistance, systems support, quality control, and research. Microfinance networks also

raise substantial private-sector funding assistance for their partner

microfinance institutions around the world. Investing in microfinance networks is an efficient and appropriate use of U.S. government foreign assistance. The Committee strongly encourages analysis from USAID on how the establishment of an ‘‘Accelerated

Growth Fund’’ would assist in the promotion of microenterprise

networks. In the Microenterprise for Self-Reliance Act of 2000,

Congress requested the Administration to prepare a report assessing the need and structure for an Accelerated Growth Fund within

180 days of the enactment of the Act. USAID is currently delinquent in submitting the report, which has prevented the Committee from properly evaluating proposals to capitalize such a fund

in the reauthorization process. The Committee expects that the report will be forthcoming in the near future, and seeks to work with

the Administration and the microenterprise development community to develop and establish an Accelerated Growth Fund in the

future, if appropriate.

The Committee recognizes that credit unions in developing countries are vital delivery channels for financial services to the very

poor. USAID should continue supporting the approach used by the

World Council of Credit Unions (WOCCU) for the delivery of microenterprise services. WOCCU’s approach builds safe and sound financial institutions and provides additional capacity in credit

unions to meet members’ savings and loans, microenterprise loans,

and education needs. The Committee intends that the term ‘‘program and lines of service’’ shall include the types of cost-efficient,

sustainable programs that build capacity and reduce poverty, such

as those implemented by the World Council of Credit Unions.

The Committee supports the use of debt financing instruments

for use as loan capital, as microfinance organizations mature and

move away from donor dependence. To stimulate collaboration with

the commercial banking sector and encourage their participation,

government assistance is necessary. Instruments such as the Development Credit Authority (DCA) and the Overseas Private Investment Corporation (OPIC) will stimulate the participation of the

private and government financial sectors in providing resources for

economic development.

COMMITTEE CONSIDERATION

On April 25, 2002, the Committee on International Relations

marked up the bill, H.R. 4073, pursuant to notice, in open session.

The Committee adopted an amendment in the nature of a substitute offered by Mr. Smith of New Jersey. The Committee, a

quorum being present, agreed by voice vote to a motion made by

Chairman Hyde to favorably report the bill, as amended, to the

House of Representatives.

VOTES OF THE COMMITTEE

There were no recorded votes during the consideration of the bill.

8

COMMITTEE OVERSIGHT FINDINGS

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

House of Representatives, the Committee reports that 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.

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of House Rule XIII is inapplicable because this legislation does not provide new budgetary authority or increased tax

expenditures.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

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

House of Representatives, the Committee sets forth, with respect to

the bill, H.R.4073, the following estimate and comparison prepared

by the Director of the Congressional Budget Office under section

402 of the Congressional Budget Act of 1974:

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, May 1, 2002.

Hon. HENRY J. HYDE, Chairman,

Committee on International Relations,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4073, a bill to amend the

Microenterprise for Self-Reliance Act of 2000 and the Foreign Assistance Act of 1961 to increase assistance for the poorest people

in developing countries under microenterprise assistance programs

under those acts, and for other purposes.

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

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

can be reached at 226–2840.

Sincerely,

DAN L. CRIPPEN, Director.

Enclosure

cc: Honorable Tom Lantos

Ranking Democratic Member

H.R. 4073—A bill to amend the Microenterprise for Self-Reliance

Act of 2000 and the Foreign Assistance Act of 1961 to increase

assistance for the poorest people in developing countries under

microenterprise assistance programs under those acts, and for

other purposes

SUMMARY

H.R. 4073 would authorize the appropriation of $175 million in

2003 and $200 million in 2004 for grants and credits to microenterprise development programs, or programs that would provide access to financial services to poor persons in developing countries.

The bill would place emphasis on assistance to persons living withVerDate 11-MAY-2000 00:19 May 11, 2002 Jkt 099006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6601 E:\HR\OC\HR453.XXX pfrm12 PsN: HR453
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in the bottom 50 percent below a country’s poverty line or living

on less than the equivalent of $1 per day. CBO estimates that implementing H.R. 4073 would cost $328 million over the 2003–2007

period, assuming the appropriation of the authorized amounts. Because the bill would not affect direct spending or receipts, pay-asyou-go procedures would not apply.

H.R. 4073 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. 4073 is shown in the following table. The estimate assumes this legislation will be enacted

by the beginning of 2003, that the specified amounts will be appropriated before the start of each fiscal year, and that outlays will

follow historical spending patterns. The costs of this legislation fall

within budget function 150 (international affairs).

[By fiscal year, in millions of dollars]

2002 2003 2004 2005 2006 2007

SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law for

Microenterprise Assistance Programs:

Budget Authority 1 ...................................................... 155 0 0 0 0 0

Estimated Outlays ...................................................... 131 118 66 34 18 10

Proposed Changes:

Authorization Level ..................................................... 0 175 200 0 0 0

Estimated Outlays ...................................................... 0 23 91 113 67 34

Spending Under H.R. 4073 for

Microenterprise Assistance Programs:

Authorization Level 1 ................................................... 155 175 200 0 0 0

Estimated Outlays ...................................................... 131 141 157 147 85 44

1 The 2002 level is the amount appropriated for that year.

PAY-AS-YOU-GO CONSIDERATIONS:

None.

INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

H.R. 4073 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 (226–2840)

Impact on State, Local, and Tribal Governments: Elyse Goldman

(225–3220)

Impact on the Private Sector: Paige Piper/Bach (226–2940)

ESTIMATE APPROVED BY:

Peter H. Fontaine

Deputy Assistant Director for Budget Analysis

10

PERFORMANCE GOALS AND OBJECTIVES

The goals and objectives of this legislation are to amend the

Microenterprise and Self-Reliance Act of 2000 and the Foreign Assistance Act of 1961 to reauthorize microenterprise assistance and

to make amendments to update language of both acts concerning

rural lending, the provision of financial services, and the

devleopment and application of poverty measurement tools for the

purpose of ensuring U.S. microenterprise assistance reaches the

very poor.

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds the authority for this legislation in article I, section 8, clause 18 of the Constitution (relating

to making all laws necessary and proper for carrying into execution

powers vested by the Constitution in the government of the United

States).

SECTION-BY-SECTION ANALYSIS AND DISCUSSION

Section 1. Amendments to the Microenterprise for Self-Reliance Act

of 2000.

This section amends the Purposes and Definitions subsections of

the act. Specifically, it amends some of the terminology used in

these sections, reflecting developments in the microenterprise industry. The word ‘‘microentrepreneur’’ is changed to ‘‘microenterprise household,’’ a modification requested by the Microenterprise

Coalition and endorsed by USAID. This section also strikes the

term ‘‘microfinance policy’’ and replaces it with ‘‘microenterprise

policy.’’ This section strikes the phrase ‘‘poorest of the poor,’’ and

replaces it with the phrase ‘‘the very poor,’’ which is defined later

in this section. This section adds an additional subparagraph to the

Purposes subsection, one that encourages USAID ‘‘to develop, assess and implement effective outreach tools and methods’’ to ensure

that microenterprise assistance is used ‘‘to assist the greatest absolute number of economically viable clients among the very poor,

and that at least 50 percent of all microenterprise assistance’’ is

used ‘‘in support of programs or lines of service that target the very

poor.’’ In the Definitions subsection, ‘‘very poor’’ is defined as ‘‘those

persons living either in the bottom 50 percent below the poverty

line as established by the national government of the country, or

on less than the equivalent of $1 per day.’’

Section 2. Amendments to the Micro- and Small Enterprise Development Credits Program under the Foreign Assistance Act of

1961.

This section amends Section 108(a) of the FAA to update terminology by adding the concept of ‘‘financial services.’’ Section 108(b)

amended to authorize the President ‘‘to provide assistance to increase the availability of financial services to microenterprise

households lacking full access to credit.’’ This section also authorizes the appropriation of $1,500,000 for each of fiscal years 2003

and 2004, the current level for the program. This section also

11

amends the name of subject program to the ‘‘Microenterprise Development Credits’’ program.

Section 3. Amendments to the Microenterprise Development Grant

Assistance Program under the Foreign Assistance Act of 1961.

This section amends Section 131(a) of the FAA by stressing the

importance of rural development and the access to financial services. This section also amends Section 131(b) of the FAA by requiring that ‘‘50 percent of all microenterprise resources shall be used

in support of programs or lines of service under which 50 percent

or more of the incoming or prospective clients are initially very

poor.’’ This represents a change from current law which requires

that 50 percent of microenterprise resources be targeted to ‘‘very

poor entrepreneurs.’’ This change is based on the proposition that

recipient microenterprise institutions (as grantees) should demonstrate ex ante their commitment to reaching out to the ‘‘very

poor,’’ and that the Administrator should establish special criteria

in accordance with this amendment to ensure that microenterprise

institutions target the ‘‘very poor.’’ By establishing this new target that 50 percent of total funding

to go to programs or services that can verify that at least 50 percent of their incoming clients are very poor, this section addresses

a major shortcoming of existing U.S. microenterprise programs.

The current target that ‘‘50 percent of Microenterprise Development resources go to the poor’’ cannot be measured cost-effectively,

and USAID has never made an attempt to prospectively link this

target to grant-making decisions. The current target is unenforceable and provides little incentive for USAID or its grantees to find

and support financially-sustainable lines of service that favor the

very poor. In contrast, the target in this section of H.R. 4073 is

both measurable with low-cost methods and enforceable through

linkage to grant-making decisions, and will provide substantial

new incentive for outreach to the very poor.

This section also amends Section 131(c) of the FAA by requiring

the Administrator to ‘‘adopt the widespread use of proven and effective poverty assessment tools to successfully identify the very

poor and ensure that they receive needed microenterprise credits,

loans and assistance.’’ This section adds a new subsection (d), entitled ‘‘Development and Certification of Poverty Measurement Methods; Application of Methods’’ which addresses Congressional concerns that USAID and microenterprise institutions need to find

more accurate and representative methods for measuring the poverty of current and prospective clients. This new subsection requires the Administrator of USAID , in consultation with appropriate microfinance institutions, to ‘‘develop no fewer than two lowcost methods for measuring the poverty levels of the current or prospective clients of microenterprise organizations’’ and that the Administrator ‘‘give consideration to methods already in use by practitioner institutions.’’ This subsection requires the Administrator to

field-test the methods developed, and provides that microenterprise

institutions and programs may use these methods on a voluntary

basis to determine their ability to reach the very poor. This subsection further requires the Administrator to certify ‘‘no fewer than

two of such methods as approved methods for measuring the poverty levels of the current or prospective clients of microenterprise

12

organizations’’ no later than October 1, 2004. This section further

requires that beginning on an after October 1, 2004, assistance furnished to a program or to a line of service within an institution

shall qualify, in whole or in part, as targeted assistance to the very

poor if one or more of the approved poverty measurement methods

‘‘verifies that at least 50 percent of the incoming or prospective clients of the program or line of service are initially among the very

poor.’’ This subsection authorizes assistance in the amount of $175

million for 2003 and $200 million for 2004.

Section 4. Report.

This section requires that the Administrator submit a report to

Congress no later than July 1, 2004, concerning the development,

application, and analysis of interim poverty measurement methods

required under Section 3 above.

NEW ADVISORY COMMITTEES

H.R. 4073 does not establish or authorize any new advisory committees.

CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 4073 does not apply to the legislative branch.

FEDERAL MANDATES

H.R. 4073 imposes no Federal mandates.

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 italics,

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

MICROENTERPRISE FOR SELF-RELIANCE ACT OF 2000

(Public Law 106–309)

* * * * * * *

TITLE I—MICROENTERPRISE FOR SELFRELIANCE ACT OF 2000

* * * * * * *

SEC. 103. PURPOSES.

The purposes of this title are— (1) * * *

* * * * * * *

(3) to support and develop the capacity of United States

and indigenous nongovernmental organization intermediaries

to provide credit, savings, training, technical assistance, and

business development services to ømicroentrepreneurs¿ microenterprise households;

13

(4) to emphasize financial services and substantially increase the amount of assistance devoted to both financial services and complementary business development services designed to reach the poorest people in developing countries, particularly women; øand¿

(5) to encourage the United States Agency for International Development to coordinate ømicrofinance policy¿

microenterprise policy, in consultation with the Department of

the Treasury and the Department of State, and to provide global leadership among bilateral and multilateral donors in promoting microenterprise for the øpoorest of the poor.¿ the very

poor; and

(6) to encourage the United States Agency for International

Development to develop, assess, and implement effective outreach methods and tools to ensure that all microenterprise assistance authorized under this title, and the amendments made

by this title, is used to assist the greatest absolute number of

economically viable clients among the very poor, and that at

least 50 percent of all microenterprise assistance authorized

under this title, and the amendments made under this title, is

used in support of programs or lines of service that target the

very poor.

SEC. 104. DEFINITIONS.

In this title:

(1) * * *

(2) MICROENTERPRISE INSTITUTION.—The term ‘‘microenterprise institution’’ means an institution that provides services,

including microfinance, training, or business development services, øfor microentrepreneurs¿ to microentrepreneurs and their

households.

* * * * * * *

(5) VERY POOR; POOREST PEOPLE IN DEVELOPING COUNTRIES.—The terms ‘‘very poor’’ and ‘‘poorest people in developing

countries’’ mean those persons living either in the bottom 50

percent below the poverty line as established by the national

government of the country or on less than the equivalent of $1

per day.

* * * * * * *

FOREIGN ASSISTANCE ACT OF 1961

* * * * * * *

PART I

CHAPTER 1—POLICY; DEVELOPMENT ASSISTANCE AUTHORIZATIONS

* * * * * * *

øSEC. 108. MICRO- AND SMALL ENTERPRISE DEVELOPMENT CREDITS.¿

SEC. 108. MICROENTERPRISE DEVELOPMENT CREDITS.

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

(1) * * *

14

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

States to assist øthe development of the enterprises of the

poor¿ the access to financial services and the development of

microenterprises in developing countries and to engage the

United States private sector in that process.

ø(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—

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

enterprises;

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

to better meet the credit needs of microentrepreneurs; and

ø(3) training programs for microentrepreneurs in order to

enable them to make better use of credit and to better manage

their enterprises.¿

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

(a), the President is authorized to provide assistance to increase the

availability of financial services to microenterprise households lacking full access to credit, including through—

(1) loans and guarantees to microfinance institutions for

the purpose of expanding the availability of savings and credit

to poor and low-income households;

(2) training programs for microfinance institutions in order

to enable them to better meet the financial services needs of

their clients; and

(3) training programs for clients in order to enable them to

make better use of credit, increase their financial literacy, and

to better manage their enterprises.

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

primarily responsible for administering this part shall establish criteria for determining which øcredit institutions¿ microfinance institutions described in subsection (b)(1) are eligible to carry out activities, with respect to ømicro- and small enterprises¿ microenterprise

households, assisted under this section. Such criteria may include

the following:

(1) The extent to which the recipients of øcredit¿ financial

services from the entity do not have access to the local formal

financial sector.

(2) The extent to which the recipients of øcredit¿ financial

services from the entity are among the poorest people in the

country.

* * * * * * *

(d) ADDITIONAL REQUIREMENT.—Assistance provided under this

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

programs¿ programs for microenterprise households and may not

be used to support programs not directly related to the purposes

described in subsection (b).

* * * * * * *

(f ) AVAILABILITY OF FUNDS.—

(1) IN GENERAL.—Of the amounts authorized to be available to carry out section 131, there are authorized to be availVerDate 11-MAY-2000 00:19 May 11, 2002 Jkt 099006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6601 E:\HR\OC\HR453.XXX pfrm12 PsN: HR453
15

able $1,500,000 øfor each of fiscal years 2001 and 2002¿ for

each of fiscal years 2001 through 2004 to carry out this section.

* * * * * * *

SEC. 131. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.

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

that—

ø(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;

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

to assist the development of microenterprises in developing

countries; and

ø(3) the support of microenterprise can be served by programs providing credit, savings, training, technical assistance,

and business development services.¿

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

(1) access to financial services and the development of

microenterprise are vital factors 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 facilitate access to financial services and assist the development of microenterprise in developing countries;

(3) access to financial services and the development of

microenterprises can be supported by programs providing credit, savings, training, technical assistance, business development

services, and other financial and non-financial services; and

(4) given the relatively high percentage of populations living in rural areas of developing countries, and the combined

high incidence of poverty in rural areas and growing income inequality between rural and urban markets, microenterprise programs should target both rural and urban poor.

(b) AUTHORIZATION.—

(1) * * *

* * * * * * *

(3) TARGETED ASSISTANCE.—In carrying out sustainable

poverty-focused programs under paragraph (1), 50 percent of

all microenterprise resources shall be øtargeted to very poor

entrepreneurs, defined as those living in the bottom 50 percent

below the poverty line as established by the national government of the country.¿ used in support of programs or lines of

service under which 50 percent or more of the incoming or prospective clients are initially very poor. Specifically, such resources shall be used for— (A) direct support of programs under this subsection

through practitioner institutions that— (i) provide credit and other financial services to

øentrepreneurs¿ clients who are very poor, with loans

in 1995 United States dollars of— (I) * * *

* * * * * * *

16

(4) SUPPORT FOR CENTRAL MECHANISMS.—The President

should continue support for central mechanisms and missions,

as appropriate, that— (A) * * *

* * * * * * *

(D) support the development of nonprofit global microfinance networks, including credit union systems, that—

(i) are able to deliver øvery small loans¿ financial

services to poor entrepreneurs through a significant

grassroots infrastructure based on market principles;

and

(ii) act as wholesale intermediaries providing a

range of services to ømicrofinance¿ microenterprise retail institutions, including financing, technical assistance, capacity-building, and safety and soundness accreditation.

* * * * * * *

(c) MONITORING SYSTEM.—In order to maximize the sustainable development impact of the assistance authorized under subsection (b)(1), the Administrator of the agency primarily responsible for administering this part shall establish a monitoring system that—

(1) * * *

* * * * * * *

ø(4) provides a basis for recommendations for adjustments

to measures for reaching the poorest of the poor, including proposed legislation containing amendments to enhance the sustainable development impact of such assistance, as described

in paragraph (3).¿

(4) adopts the widespread use of proven and effective poverty assessment tools to successfully identify the very poor and

ensure that they receive needed microenterprise credits, loans,

and assistance.

(d) DEVELOPMENT AND CERTIFICATION OF POVERTY MEASURE- MENT METHODS; APPLICATION OF METHODS.— (1) DEVELOPMENT AND CERTIFICATION.—(A) The Administrator of the United States Agency for International Development, in consultation with appropriate microfinance institutions, microenterprise institutions, and other appropriate entities shall develop no fewer than two low-cost methods for measuring the poverty levels of the current or prospective clients of

microenterprise organizations for purposes of assistance under

this section. In developing such methods, the Administrator

shall give consideration to methods already in use by practitioner institutions.

(B) The Administrator shall field-test the methods developed under this paragraph, and as part of the testing, institutions and programs may use these methods on a voluntary

basis to demonstrate their ability to reach the very poor.

(C) Not later than October 1, 2004, the Administrator shall,

from among the low-cost poverty measurement methods developed under this paragraph, certify no fewer than two of such

methods as approved methods for measuring the poverty levels

17

of the current or prospective clients of microenterprise organizations for purposes of assistance under this section.

(2) APPLICATION.—Beginning on and after October 1, 2004,

assistance furnished under this section to a program or to a

line of service within an institution shall qualify, in whole or

in part, as targeted assistance to the very poor if one or more

of the measurement methods approved under paragraph (1), or

one or more of the measurement methods approved in accordance with paragraph (1) after October 1, 2004, verifies that at

least 50 percent of the incoming or prospective clients of the program or line of service are initially among the very poor.

ø(d)¿ (e) LEVEL OF ASSISTANCE.—Of the funds made available

under this part, the FREEDOM Support Act, and the Support for

East European Democracy (SEED) Act of 1989, including local currencies derived from such funds, there are authorized to be available $155,000,000 for each of the fiscal years 2001 and 2002 and

$175,000,000 for fiscal year 2003 and $200,000,000 for fiscal year

2004, to carry out this section.

ø(e)¿ (f) DEFINITIONS.—In this section:

(1) * * *

* * * * * * *

(5) VERY POOR; POOREST PEOPLE IN DEVELOPING COUNTRIES.—The terms ‘‘very poor’’ and ‘‘poorest people in developing

countries’’ mean those persons living either in the bottom 50

percent below the poverty line as established by the national

government of the country or on less than the equivalent of $1

per day.

* * * * * * *

Æ