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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1463 Introduced in Senate (IS)]

106th CONGRESS
  1st Session
                                S. 1463

To establish a program to provide assistance for programs of credit and 
other financial services for microenterprises in developing countries, 
                        and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             July 29, 1999

 Mr. DeWine (for himself, Ms. Snowe, Mr. Torricelli, Ms. Collins, Mr. 
 Durbin, Mrs. Feinstein, Ms. Mikulski, Mr. Schumer, Mr. Bingaman, Mr. 
Chafee, and Mr. Kennedy) introduced the following bill; which was read 
        twice and referred to the Committee on Foreign Relations

_______________________________________________________________________

                                 A BILL

 
To establish a program to provide assistance for programs of credit and 
other financial services for microenterprises in developing countries, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Microenterprise for Self-Reliance 
Act of 1999''.

SEC. 2. FINDINGS AND DECLARATIONS OF POLICY.

    The Congress makes the following findings and declarations:
            (1) According to the World Bank, more than 1,200,000,000 
        people in the developing world, or one-fifth of the world's 
        population, subsist on less than $1 a day.
            (2) Over 32,000 of their children die each day from largely 
        preventable malnutrition and disease.
            (3)(A) Women in poverty generally have larger work loads 
        and less access to educational and economic opportunities than 
        their male counterparts.
            (B) Directly aiding the poorest of the poor, especially 
        women, in the developing world has a positive effect not only 
        on family incomes, but also on child nutrition, health and 
        education, as women in particular reinvest income in their 
        families.
            (4)(A) The poor in the developing world, particularly 
        women, generally lack stable employment and social safety nets.
            (B) Many turn to self-employment to generate a substantial 
        portion of their livelihood. In Africa, over 80 percent of 
        employment is generated in the informal sector of the self-
        employed poor.
            (C) These poor entrepreneurs are often trapped in poverty 
        because they cannot obtain credit at reasonable rates to build 
        their asset base or expand their otherwise viable self-
        employment activities.
            (D) Many of the poor are forced to pay interest rates as 
        high as 10 percent per day to money lenders.
            (5)(A) The poor are able to expand their incomes and their 
        businesses dramatically when they can access loans at 
        reasonable interest rates.
            (B) Through the development of self-sustaining microfinance 
        programs, poor people themselves can lead the fight against 
        hunger and poverty.
            (6)(A) On February 2-4, 1997, a global Microcredit Summit 
        was held in Washington, District of Columbia, to launch a plan 
        to expand access to credit for self-employment and other 
        financial and business services to 100,000,000 of the world's 
        poorest families, especially the women of those families, by 
        2005. While this scale of outreach may not be achievable in 
        this short-time frame, the realization of this goal could 
        dramatically alter the face of global poverty.
            (B) With an average family size of five, achieving this 
        goal will mean that the benefits of microfinance will thereby 
        reach nearly half of the world's more than 1,000,000,000 
        absolute poor people.
            (7)(A) Nongovernmental organizations, such as those that 
        comprise the Microenterprise Coalition (such as the Grameen 
        Bank (Bangladesh,) K-REP (Kenya), and networks such as Accion 
        International, the Foundation for International Community 
        Assistance (FINCA), and the credit union movement) are 
        successful in lending directly to the very poor.
            (B) Microfinance institutions such as BRAC (Bangladesh), 
        BancoSol (Bolivia), SEWA Bank (India), and ACEP (Senegal) are 
        regulated financial institutions that can raise funds directly 
        from the local and international capital markets.
            (8)(A) Microenterprise institutions not only reduce 
        poverty, but also reduce the dependency on foreign assistance.
            (B) Interest income on the credit portfolio is used to pay 
        recurring institutional costs, assuring the long-term 
        sustainability of development assistance.
            (9) Microfinance institutions leverage foreign assistance 
        resources because loans are recycled, generating new benefits 
        to program participants.
            (10)(A) The development of sustainable microfinance 
        institutions that provide credit and training, and mobilize 
        domestic savings, are critical components to a global strategy 
        of poverty reduction and broad-based economic development.
            (B) In the efforts of the United States to lead the 
        development of a new global financial architecture, 
        microenterprise should play a vital role. The recent shocks to 
        international financial markets demonstrate how the financial 
        sector can shape the destiny of nations. Microfinance can serve 
        as a powerful tool for building a more inclusive financial 
        sector which serves the broad majority of the world's 
        population including the very poor and women and thus generate 
        more social stability and prosperity.
            (C) Over the last two decades, the United States has been a 
        global leader in promoting the global microenterprise sector, 
        primarily through its development assistance programs at the 
        United States Agency for International Development. 
        Additionally, the United States Department of the Treasury and 
        the Department of State have used their authority to promote 
        microenterprise in the development programs of international 
        financial institutions and the United Nations.
            (11)(A) In 1994, the United States Agency for International 
        Development launched the ``Microenterprise Initiative'' in 
        partnership with the Congress.
            (B) The initiative committed to expanding funding for the 
        microenterprise programs of the Agency, and set a goal that, by 
        the end of fiscal year 1996, half of all microenterprise 
        resources would support programs and institutions that provide 
        credit to the poorest, with loans under $300.
            (C) In order to achieve the goal of the microcredit summit, 
        increased investment in microcredit institutions serving the 
        poorest will be critical.
            (12) Providing the United States share of the global 
        investment needed to achieve the goal of the microcredit summit 
        will require only a small increase in United States funding for 
        international microcredit programs, with an increased focus on 
        institutions serving the poorest.
            (13)(A) In order to reach tens of millions of the poorest 
        with microcredit, it is crucial to expand and replicate 
        successful microcredit institutions.
            (B) These institutions need assistance in developing their 
        institutional capacity to expand their services and tap 
        commercial sources of capital.
            (14) Nongovernmental organizations have demonstrated 
        competence in developing networks of local microfinance 
        institutions and other assistance delivery mechanisms so that 
        they reach large numbers of the very poor, and achieve 
        financial sustainability.
            (15) Recognizing that the United States Agency for 
        International Development has developed very effective 
        partnerships with nongovernmental organizations, and that the 
        Agency will have fewer missions to carry out its work, the 
        Agency should place priority on investing in those 
        nongovernmental network institutions that meet performance 
        criteria through the central funding mechanisms of the Agency.
            (16) By expanding and replicating successful microcredit 
        institutions, it should be possible to create a global 
        infrastructure to provide financial services to the world's 
        poorest families.
            (17)(A) The United States can provide leadership to other 
        bilateral and multilateral development agencies as such 
        agencies expand their support to the microenterprise sector.
            (B) The United States should seek to improve coordination 
        among G-7 countries in the support of the microenterprise 
        sector in order to leverage the investment of the United States 
        with that of other donor nations.
            (18) Through increased support for microenterprise, 
        especially credit for the poorest, the United States can 
        continue to play a leadership role in the global effort to 
        expand financial services and opportunity to 100,000,000 of the 
        poorest families on the planet.

SEC. 3. PURPOSES.

    The purposes of this Act are--
            (1) to make microenterprise development an important 
        element of United States foreign economic policy and 
        assistance;
            (2) to provide for the continuation and expansion of the 
        commitment of the United States Agency for International 
        Development to the development of microenterprise institutions 
        as outlined in its 1994 Microenterprise Initiative;
            (3) to support and develop the capacity of United States 
        and indigenous nongovernmental organization intermediaries to 
        provide credit, savings, training and technical services to 
        microentrepreneurs;
            (4) 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; and
            (5) to encourage the United States Agency for International 
        Development to coordinate microfinance policy, in consultation 
        with the Department of the Treasury and the Department of 
        State, and to provide global leadership in promoting 
        microenterprise for the poorest among bilateral and 
        multilateral donors.

SEC. 4. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.

    Chapter 1 of part I of the Foreign Assistance Act of 1961 (22 
U.S.C. 2151 et seq.) is amended--
            (1) by redesignating the second section 129 (as added by 
        section 4 of the Torture Victims Relief Act of 1998 (Public Law 
        105-320)) as section 130; and
            (2) by adding at the end the following new section:

``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;
            ``(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--
            ``(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. 5. MICRO- AND SMALL ENTERPRISE DEVELOPMENT CREDITS.

    Section 108 of the Foreign Assistance Act of 1961 (22 U.S.C. 2151f) 
is amended to read as follows:

``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.
    ``(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. 6. MICROFINANCE LOAN FACILITY.

    Chapter 1 of part I of the Foreign Assistance Act of 1961 (22 
U.S.C. 2151 et seq.), as amended by this Act, is further amended by 
adding the following new 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 short-
term 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, or (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.
    ``(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) Availability of funds to cover subsidy costs.--Of the 
        funds made available to carry out this part for fiscal years 
        2000 and 2001, up to $5,000,000 may be made available to cover 
        the subsidy cost (as defined in section 502(5) of the Federal 
        Credit Reform Act of 1990) to carry out this section for each 
        such fiscal year. In addition, of such amount for each fiscal 
        year, up to $______________ may be made available for 
        administrative expenses in carrying out this section.
            ``(2) Applicable authorities.--The provisions of section 
        107A(d) of the Foreign Assistance Act of 1961 (as contained in 
        section 306 of H.R. 1486, as reported to the House of 
        Representatives on May 9, 1997) shall be applicable to 
        assistance provided under this section, except that paragraphs 
        (5) through (8) thereof shall not apply.
            ``(3) Relation to other amounts available.--Amounts made 
        available under paragraph (1) are in addition to amounts 
        available to carry out this section under any other provision 
        of law.
    ``(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 or any subsequent 
        fiscal year.''.

SEC. 7. REPORT RELATING TO FUTURE DEVELOPMENT OF MICROFINANCE 
              INSTITUTIONS.

    (a) Report.--Not later than 180 days after the date of the 
enactment of this Act, the President, in consultation with the 
Administrator of the United States Agency for International 
Development, the Secretary of State, and the Secretary of the Treasury, 
shall 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.
    (b) Contents.--The report described in subsection (a)--
            (1) should include how the President, in consultation with 
        the Administrator of the United States Agency for International 
        Development, the Secretary of State, and the Secretary of the 
        Treasury, 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; and
            (2) shall provide guidelines and recommendations for--
                    (A) instruments to assist microenterprise networks 
                to develop multi-country and regional microlending 
                programs;
                    (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;
                    (C) the potential for federal chartering of United 
                States-based international microfinance network 
                institutions, including proposed legislation;
                    (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;
                    (E) an agenda for integrating microfinance into 
                United States foreign policy initiatives seeking to 
                develop and strengthen the global finance sector; and
                    (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.
    (c) Appropriate Congressional Committees Defined.--In this section, 
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.

SEC. 8. UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT AS GLOBAL 
              LEADER AND COORDINATOR OF BILATERAL AND MULTILATERAL 
              MICROENTERPRISE ASSISTANCE ACTIVITIES.

    (a) Findings and Policy.--The Congress finds and declares that--
            (1) the United States can provide leadership to other 
        bilateral and multilateral development agencies as such 
        agencies expand their support to the microenterprise sector; 
        and
            (2) the United States should seek to improve coordination 
        among G-7 countries in the support of the microenterprise 
        sector in order to leverage the investment of the United States 
        with that of other donor nations.
    (b) Sense of the Congress.--It is the sense of the Congress that--
            (1) the Administrator of the United States Agency for 
        International Development and the Secretary of State should 
        seek to support and strengthen the effectiveness of 
        microfinance activities in United Nations agencies, such as the 
        International Fund for Agricultural Development (IFAD) and the 
        United Nations Development Program (UNDP), which have provided 
        key leadership in developing the microenterprise sector; and
            (2) the Secretary of the Treasury should 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.
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