On July 27, House International Relations Subcommittee on Africa, Global Human Rights, and International Operations held a hearing to review the progress of U.S. microenterprise initiatives since the implementation of the Microenterprise Results and Accountability Act of 2004 (P.L. 108-484).
Subcommittee Chair Christopher Smith (R-NJ) said, “The sum of $58 does not sound like a great deal to most of us in the developed world, but this is precisely the amount that helped change forever the life of Janet Korutaro, a widow from Nsike Village, Uganda.” He explained that Ms. Korutaro used a $58 loan to start a modest grocery business in her home. With this and two other loans of $115 and $171, Ms. Korutaro now expects to have enough money for her children’s education and to build a small house. “Similar microloans have benefited over 5.8 million other clients of USAID [U.S. Agency for International Development]-assisted microprograms in FY2005,” Rep. Smith stated. “The result is clear — microenterprise has the power to dramatically change lives for the better.”
USAID Bureau for Economic Growth Agriculture and Trade Assistant Administrator Jacqueline Schafer reviewed the agency’s FY2005 achievements: $211 million obligated for microenterprise development supported 435 institutions in 68 countries; 5.8 million loan clients and 6.4 million savings clients were assisted through financial institutions receiving USAID microenterprise funds; and 61 percent of the clients were women. She added that “$15 million of USAID’s microenterprise funding in FY2005 assisted victims of trafficking in persons and women who are particularly vulnerable to other forms of exploitation and violence.” Concerning the mandate that half of USAID microenterprise funds reach the “very poor,” those in the bottom 50 percent of persons living below their country’s poverty line or those living on less than $1 a day, Ms. Schafer said that the lack of tools for assessing poverty has made this goal difficult to achieve. The agency is confident, however, that in FY2005, “37 percent of financial services funding, and 18 percent of enterprise development funding, benefited the very poor.” To increase service to very poor clients, Ms. Schafer noted, “Intra-agency working groups are identifying, testing and disseminating interventions that work for specific client segments that have a higher incidence of poverty, such as youth, refugees and internally displaced persons, and residents of conflict-affected zones, remote rural communities, and areas with high HIV/AIDS incidence.”
To achieve “innovative, comprehensive, and integrated approaches to sustainable economic growth with poverty reduction,” Ms. Shafer said that a new Financial Integration, Economic Leveraging, Broad-Based Dissemination (FIELDSupport) Leader with Associates funding mechanism was established. With a ceiling of $350 million over five years, FIELD-Support is “designed respond to the economic security needs of special populations, such as families hurt by civil conflict and natural disaster, and communities hit hard by HIV/AIDS and other health issues; as well as address the livelihood and enterprise needs of difficult-to-reach clientele such as the poor in remote rural areas, youth, women, refugees, and internally displaced persons.”
Responding to Rep. Smith’s question as to whether USAID microenterprise programs are sufficiently integrated, Ms. Shafer replied that integration is increasing. She cited programs in Afghanistan and Iraq as examples, noting that there is a great demand for microenterprise programs in countries that are rebuilding. She also said that USAID is working with women in development programs for victims of trafficking and HIV/AIDS.
Joe Mwangi-Kioi, director of Monitoring and Evaluation at the Grameen Foundation (GF) U.S.A., pointed out that “not only are the poor bankable, but that lending to them employing microfinance methodologies proved them to be better customers than traditional commercial bank borrowers.” He said that repayment rates reach 98 percent compared to 60 to 70 percent in the commercial bank sector. Mr. Mwangi-Kioi described his organization’s collaboration with the Lift Above Poverty Organization (LAPO), a Nigerian nongovernmental organization. Funded by USAID, in three years GF enabled LAPO to increase its number of borrowers from 18,000 to 44,000 and to achieve financial self-sustainability. Affirming that “we are still only scratching the surface of the opportunity to scale up microfinance,” Mr. Mwangi-Kioi proposed that “microfinance, natural resource management, health, AIDS, and the MCA [Millennium Challenge Account]” should be integrated into foreign policy goals; that the State Department should “include economic growth and microfinance in each of its country plans;” and that “USAID should dedicate additional and increasing resources to microfinance.”
Applauding the “power of daring to think small,” Opportunity International Senior Vice President Susy Cheston stated, “Thirty to fifty million people today — mostly women — have access to microfinance services, yet 300 to 500 million people — mostly women — are still excluded from basic financial services and yet could benefit from them…Expansion to reach 500 million has its challenges, but they can be overcome.” Ms. Cheston stressed the “potential for microfinance and microenterprise programs to interact with other programs, such as natural resource management, AIDS, avian flu, and malaria.” She described the experience of Opportunity International, which received a grant under the President’s Emergency Plan for AIDS Relief: “We are not a health or AIDS organization and we are not trying to be. However, we found that, as a microfinance organization, we can use our infrastructure to provide prevention and awareness training to our clients — mostly women who are hard to reach through other more formal channels.” Ms. Cheston also commended USAID for its use of incentives, citing the example of six Egyptian microfinance institutions that increased their women clients by 34 percent in two years because USAID “strongly encouraged its long-time grantees to add a new group-lending product specifically designed for women.”
Woller Associates President Gary Woller disagreed with a legislative focus on the “very poor,” arguing that “the purpose of enterprise support is ‘private sector development,’ or in other words, facilitation of the emergence of a dynamic and growing private sector that provides, among other things, jobs, opportunities, and a decent standard of living for low-income persons.” He encouraged the subcommittee to “support continued innovation and experimentation,” particularly by “expanding outreach to rural areas.”
