II

105TH CONGRESS

2D SESSION S. 2152

To establish a program to provide credit and other assistance for encouraging

microenterprises in developing countries, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 10, 1998

Mr. DURBIN (for himself, Ms. SNOWE, Mr. GORTON, Mr. WELLSTONE, Ms.

MIKULSKI, Mrs. FEINSTEIN, Mr. CHAFEE, Mrs. BOXER, Mrs. MURRAY,

Mr. GRASSLEY, Mr. WYDEN, Mr. BINGAMAN, Mr. KERRY, Mr. ROBB, Mr.

INOUYE, Mr. TORRICELLI, Mr. LEVIN, Mr. BUMPERS, Mr. JOHNSON, Mr.

DEWINE, Mr. KOHL, Ms. COLLINS, Mr. CLELAND, and Mr. MOYNIHAN)

introduced the following bill; which was read twice and referred to the

Committee on Foreign Relations

A BILL

To establish a program to provide credit and other assistance

for encouraging microenterprises in developing countries,

and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Microcredit for Self5 Sufficiency Act of 1998’’.
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1 SEC. 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—Congress makes the following find3 ings:

4 (1) More than 1,000,000,000 people in the de5 veloping world are living in severe poverty.

6 (2) According to the United Nations Children’s

7 Fund, the mortality for children under the age of 5

8 is 10 percent in all developing countries and nearly

9 20 percent in the poorest countries.

10 (3) Nearly 33,000 children die each day from

11 malnutrition and disease which is largely prevent12 able.

13 (4)(A) Women in poverty generally have larger

14 work loads and less access to educational and eco15 nomic opportunities than their male counterparts.

16 (B) Directly aiding the poorest of the poor, es17 pecially women, in the developing world has a posi18 tive effect not only on family incomes, but also on

19 child nutrition, health, and education, since women

20 tend to reinvest income in their families.

21 (5)(A) The poor in the developing world, par22 ticularly women, generally lack stable employment

23 and social safety nets.

24 (B) Many women turn to self-employment to

25 generate a substantial portion of their livelihood.
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1 (C) These poor entrepreneurs are often trapped

2 in poverty because they cannot obtain credit at rea3 sonable rates to build their asset base or expand

4 their otherwise viable self-employment activities.

5 (D) Many of the poor are forced to pay interest

6 rates as high as 10 percent per day to money lend7 ers.

8 (6)(A) On February 2–4, 1997, an inter9 national Microcredit Summit was held in Washing10 ton, D.C., to launch a plan to expand access to cred11 it for self-employment and other financial and busi12 ness services to 100,000,000 of the world’s poorest

13 families, especially the women of those families, by

14 2005.

15 (B) With an average of 5 people to a family,

16 achieving this goal will mean that the benefits of

17 microcredit will reach nearly half of the world’s more

18 than 1,000,000,000 absolute poor.

19 (7)(A) The poor are able to expand their in20 comes and their businesses dramatically when they

21 have access to loans at reasonable interest rates.

22 (B) Through the development of self-sustaining

23 microcredit programs, poor people themselves can

24 lead the fight against hunger and poverty.
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1 (8)(A) Nongovernmental organizations such as

2 the Grameen Bank, Accion International, and the

3 Foundation for International Community Assistance

4 (FINCA) have been successful in lending directly to

5 the very poor.

6 (B) These institutions generate repayment rates

7 averaging 95 percent or higher.

8 (9)(A) Microcredit institutions not only reduce

9 poverty, but also reduce the dependency on foreign

10 assistance.

11 (B) Interest income on a credit portfolio can be

12 used to pay recurring institutional costs, assuring

13 that the long-term development is sustained.

14 (10) Microcredit institutions leverage foreign

15 assistance resources because loans are recycled, gen16 erating new benefits to program participants.

17 (11) The development of sustainable micro18 credit institutions that provide credit and training,

19 and mobilize domestic savings, are critical to a glob20 al strategy of poverty reduction and broad-based

21 economic development.

22 (12)(A) In 1994, AID launched a Microenter23 prise Initiative in consultation with Congress.

24 (B) The Initiative was committed to expanding

25 funding for AID’s microenterprise programs, pro-
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1 vided funding of $137,000,000 for fiscal year 1994,

2 and set a goal that, by the end of fiscal year 1996,

3 half of all microenterprise resources would support

4 programs and institutions providing credit to the

5 poorest with loans under $300.

6 (C) In fiscal year 1996, total funding for micro7 enterprise activities fell to $111,000,000 of which

8 only 39 percent was used for programs benefiting

9 the poorest with loans under $300.

10 (D) Increased investment in microcredit institu11 tions serving the poorest is critical to achieving the

12 Microcredit Summit’s goal.

13 (E) AID’s funding for microenterprise activities

14 in the developing world should be expanded to

15 $160,000,000 for fiscal year 1999 to parallel the

16 growing capacity of microcredit institutions in the

17 developing world.

18 (13) Providing the United States share of the

19 global investment needed to achieve the goal of the

20 Microcredit Summit will require only a modest in21 crease in United States funding for international

22 microcredit programs, with an increased focus on in23 stitutions serving the poorest.
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1 (14)(A) In order to reach tens of millions of the

2 poorest with microcredit, it is crucial to expand and

3 replicate successful microcredit institutions.

4 (B) Microcredit institutions need assistance in

5 developing their institutional capacity to expand

6 their services and tap commercial sources of capital.

7 (15) PVOs and other nongovernmental organi8 zations have demonstrated competence in developing

9 networks of local microcredit institutions that can

10 reach large numbers of the very poor, and help the

11 very poor achieve financial sustainability.

12 (16) Since AID has developed very effective

13 partnerships with PVOs and other nongovernmental

14 organizations, AID should place a priority on invest15 ing in PVOs and other nongovernmental organiza16 tions through AID’s central funding mechanisms.

17 (17) By expanding and replicating successful

18 microcredit institutions, AID should be able to as19 sure the creation of a global infrastructure to pro20 vide financial services to the world’s poorest families.

21 (18)(A) AID can provide leadership among bi22 lateral and multilateral development aid agencies as

23 such agencies expand their support of microenter24 prise for the poorest.
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1 (B) AID should seek to improve the coordina2 tion of efforts at the operational level to promote the

3 best practices for providing financial services to the

4 poor and to ensure that adequate institutional ca5 pacity is developed.

6 (b) PURPOSES.—The purposes of this Act are—

7 (1) to provide for the continuation and expan8 sion of AID’s commitment to develop microcredit in9 stitutions;

10 (2) to make microenterprise development the

11 centerpiece of the overall economic growth strategy

12 of AID;

13 (3) to support and develop the capacity of

14 United States PVOs, and other international non15 governmental organizations to provide credit, sav16 ings, and training services to microentrepreneurs;

17 and

18 (4) to increase the amount of assistance de19 voted to providing access to credit for the poorest

20 sector in developing countries, particularly women.

21 SEC. 3. DEFINITIONS.

22 In this Act:

23 (1) AID.—The term ‘‘AID’’ means the United

24 States Agency for International Development.
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1 (2) MICROCREDIT, MICROENTERPRISE, POV2 ERTY LENDING; POVERTY LENDING PORTION OF

3 MIXED PROGRAMS; MIXED PROGRAMS.—The terms

4 ‘‘microcredit’’, ‘‘microenterprise’’, ‘‘poverty lending

5 portion of mixed programs’’, and ‘‘mixed programs’’

6 have the meaning given such terms under the 1994

7 Microenterprise Initiative of AID.

8 (3) PVOS AND OTHER NONGOVERNMENTAL OR9 GANIZATIONS.—The term ‘‘PVOs and other non10 governmental organizations’’ means—

11 (A) private voluntary organizations (in12 cluding cooperative organizations), and

13 (B) international, regional, or national

14 nongovernmental organizations,

15 that are active in the region or country where the

16 project is located and that have the capacity to de17 velop and implement microenterprise programs that

18 are oriented toward working directly with the poor,

19 especially the poorest and women.

20 SEC. 4. MICROENTERPRISE ASSISTANCE.

21 (a) AUTHORIZATION.—

22 (1) IN GENERAL.—The President, acting

23 through the Administrator of AID, is authorized to

24 establish programs to provide credit and other as25 sistance for microenterprises in developing countries.
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1 (2) USE OF PVOs AND OTHER NONGOVERN2 MENTAL ORGANIZATIONS.—Programs to provide

3 credit for microenterprises and related activities

4 under this section shall be carried out primarily by

5 United States PVOs and other United States and

6 indigenous nongovernmental organizations, including

7 credit unions, cooperative organizations, and other

8 private financial intermediaries.

9 (b) ELIGIBILITY CRITERIA.—The Administrator of

10 AID shall establish criteria for determining which entities

11 described in subsection (a)(2) are eligible to carry out the

12 purposes described in section 2(b). Such criteria shall in13 clude the following:

14 (1) The extent to which the recipients of credit

15 from the entity lack access to the local formal finan16 cial sector.

17 (2) The extent to which the recipients of credit

18 from the entity are among the poorest people in the

19 country.

20 (3) The extent to which the entity is oriented

21 toward working directly with poor women.

22 (4) The extent to which the entity is imple23 menting a plan to become financially self-reliant by

24 charging realistic interest rates to its borrowers.

25 (c) FUNDING LEVELS FOR FISCAL YEAR 1999.—
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1 (1) IN GENERAL.—Of the amounts made avail2 able to carry out chapter 1 of part I of the Foreign

3 Assistance Act of 1961 (22 U.S.C. 2151 et seq.),

4 not less than $160,000,000 of the funds made avail5 able for fiscal year 1999 shall be used to provide as6 sistance under this Act. The funds authorized under

7 the preceding sentence shall be in addition to any

8 funds made available in fiscal year 1999 for micro9 enterprise activities in the former Soviet Union and

10 Eastern Europe pursuant to the FREEDOM Sup11 port Act and any funds for special assistance initia12 tives within Europe, the newly independent states of

13 the Former Soviet Union, Asia, and the Near East.

14 (2) ADDITIONAL REQUIREMENTS.—

15 (A) POVERTY LENDING.—Of the funds

16 made available under paragraph (1), not less

17 than $80,000,000 shall be used to support pov18 erty lending.

19 (B) SUPPORT OF PVOs AND OTHER NON20 GOVERNMENTAL ORGANIZATIONS.—Of the

21 funds made available under paragraph (1), not

22 less than $35,000,000 shall be provided

23 through the central funding mechanisms of AID

24 for support of United States PVOs and United
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1 States and indigenous nongovernmental organi2 zations.

3 (C) MATCHING GRANT PROGRAM.—Of the

4 funds made available under paragraph (1), not

5 less than $10,000,000 shall be used for the pri6 vate voluntary organizations matching grant

7 program of AID for support of United States

8 PVOs.

9 (3) DEFINITIONS.—For purposes of this sub10 section—

11 (A) TO SUPPORT POVERTY LENDING.—The

12 term ‘‘to support poverty lending’’ means—

13 (i) funds lent to members of the pov14 erty target population (as defined in sub15 paragraph (B)) in low-income countries in

16 amounts equivalent to $300 or less in

17 1997 United States dollars; and

18 (ii) funds used for institutional devel19 opment of an entity described in subsection

20 (a)(2), that is engaged in—

21 (I) making loans of $300 or less

22 in 1997 United States dollars to

23 members of the poverty target popu24 lation; or
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1 (II) the poverty lending portion

2 of a mixed program.

3 (B) POVERTY TARGET POPULATION.—The

4 term ‘‘poverty target population’’ means the

5 poorest 50 percent of those individuals living

6 below the poverty line, defined by the national

7 government of the foreign country to which

8 funds are being provided.

9 SEC. 5. PROGRAM PERFORMANCE CRITERIA.

10 (a) STRENGTHENING OF APPROPRIATE MECHA11 NISMS.—The Administrator of AID shall—

12 (1) strengthen appropriate mechanisms, includ13 ing mechanisms for central microenterprise pro14 grams, for the purpose of strengthening the institu15 tional development of the entities described in sec16 tion 4(a)(2); and

17 (2) develop and strengthen appropriate mecha18 nisms for the purpose of gathering and disseminat19 ing the best practice for targeting microcredit to the

20 poorest segment of the population.

21 (b) MONITORING SYSTEM.—In order to sustain the

22 impact of the assistance authorized under section 4, the

23 Administrator of AID shall establish a monitoring system

24 that—
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1 (1) establishes performance goals for such as2 sistance and expresses such goals in an objective and

3 quantifiable form;

4 (2) establishes performance systems or indica5 tors to measure the extent to which projects are

6 achieving such goals; and

7 (3) provides a basis for recommendations for

8 adjustments to such assistance to enhance the bene9 fit of such assistance for the very poor, particularly

10 women.

11 (c) ADDITIONAL MONITORING REQUIREMENTS.—As

12 a part of the monitoring system established under sub13 section (b), the Administrator of AID—

14 (1) using data provided by lending institutions,

15 shall monitor the actual amount of microenterprise

16 credit and the number of loans made available to the

17 poverty target population as a result of each project

18 or program carried out pursuant to this Act;

19 (2) using data provided by lending institutions,

20 shall monitor the amount of funding provided pursu21 ant to this Act which is allocated to organizations

22 engaged in making loans of under $300 to the pov23 erty target population, or to the poverty lending por24 tion of mixed programs;
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1 (3) shall report to Congress annually on the

2 progress in implementing AID’s institutional plan of

3 action to achieve the Microcredit Summit goal of ex4 panding access to credit and other financial and

5 business services to 100,000,000 of the world’s poor6 est families, especially the women in those families,

7 by 2005; and

8 (4) shall include a summary of the information

9 collected under paragraphs (1) and (2) in AID’s an10 nual presentation to Congress.

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