[House Report 106-82]
[From the U.S. Government Publishing Office]
106th Congress Report
1st Session HOUSE OF REPRESENTATIVES 106-82
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MICROENTERPRISE FOR SELF-RELIANCE ACT OF 1999
_______
April 12, 1999.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Gilman, from the Committee on International Relations, submitted
the following
R E P O R T
[To accompany H.R. 1143]
[Including cost estimate of the Congressional Budget Office]
The Committee on International Relations, to whom was
referred the bill (H.R. 1143) to establish a program to provide
assistance for programs of credit and other financial services
for microenterprises in developing countries, and for other
purposes, having considered the same, report favorably thereon
without amendment and recommend that the bill do pass.
Background and Purpose
H.R. 1143, the Microenterprise for Self-Reliance Act of
1999 was introduced on March 17, 1999, by Messrs. Gilman,
Gejdenson, Houghton, Hall, and 21 other original cosponsors.
The bill provides authorization of appropriations, guides
microfinance policy, and establishes a new Microfinance Loan
Facility.
The Promise of Microenterprise Programs
Despite the growth of the world's economy, billions of
people in dozens of countries have incomes below one dollar per
day. The international development community has a number of
different ways to boost the incomes of poor people in
developing countries including support for infrastructure
projects, structural adjustments to the economy and free trade
initiatives. Starting in the early 1980s, microenterprise
development programs have become one of the most successful
ways the international community has to support the end of
poverty in the developing world. Unlike other assistance
programs, microenterprise lending programs reach the poorest of
the poor with credit that is repaid by individual bor-
rowers with interest. Microlending programs have demonstrated
that if structured correctly, poverty lending programs can help
lift the poorest members of society out of poverty, while
repaying their loans.
Dr. Muhammad Yunus of Bangladesh developed this method of
helping to end poverty in the early 1980s. He learned that
while loans made to poor individuals carried the high risks
traditionally associated with poverty lending, loans made by
Yunus to support groups, especially very poor women, were
repaid at rates of 95%-98%. This surprising innovation was the
secret that made micro lending programs work. Based on this
model, Dr. Yunus founded the Grameen bank in 1983. To date, the
bank has lent over $2 billion and is now one of the largest
financial institutions in Bangladesh.
Using the Grameen Bank and other microfinance models, the
international community has supported the start or expansion of
dozens of microfinance institutions. The most sophisticated of
these institutions, such as Bolivia's BancoSol, now have the
financial strength to raise capital directly from Wall Street.
Many other microfinance institutions are becoming the largest
lenders in their respective countries. These institutions have
shown that when properly administered, the poor are outstanding
credit risks who will lift themselves out of poverty.
U.S. Support for Microenterprise Programs
The United States supports microenterprise development
through multi- and bilateral programs. The multilateral program
is coordinated by the World Bank's Consultative Group to Assist
the Poorest (``CGAP''). As the number one donor to the
International Financial Institutions and the United Nations
development agencies, the U.S. can play a leading role in
mobilizing resources from other countries to support
microenterprise programs. CGAP now coordinates the activities
of 27 multi- and bilateral donors.
U.S. support for bilateral microenterprise programs is
managed by the Agency for International Development (``AID'').
AID defines a ``microenterprise'' as a firm with a total of 10
or fewer employees. Funding for programs to support such firms
averaged just over $100 million per year from FY 1990-1993. In
1994, AID joined with Congress and microenterprise groups to
launch the first Microenterprise Initiative. In the 1994
Initiative, AID committed to:
Maintain women and the poor as its primary emphasis,
particularly through support of poverty lending;
Help implementing organizations to reach greater
numbers of people;
Support institutional sustainability and financial
self-sufficiency among implementing organizations; and
Seek improved partnerships with local organizations.
During Fiscal Years 1994, 1995 and 1996, AID provided $137
million, $133 million and $111 million respectively to support
microenterprise projects.
In February of 1997, RESULTS Educational Fund , a U.S.
microcredit Non-Governmental Organization, called the first
Microcredit Summit in Washington. The heads of state and
agencies attending the summit called for ``the international
community to reach 100 million of the world's poorest families,
especially the women of those families, with credit for self-
employment and other financial and business services by the
year 2005.'' In June of 1997, the Administration, the Congress,
and the Microenterprise Coalition joined in a renewal of the
Microenterprise Initiative. AID committed to a number of
quantitative targets, including:
At least half of all microenterprise clients of the
institutions that AID supported would be women.
At least half of all the AID funds supporting
microfinance institutions would go to poverty lending.
At least two-thirds of the clients of AID-supported
microfinance will receive loans of less than $300.
The average repayment rates for microfinance
institutions receiving AID support will be 95% or
above.
Every AID-supported microfinance organization will
have a plan to reach full financial sustainability in a
reasonable period of time.
AID also committed to set a target of 15% per year growth
in the number of clients receivingservices. AID reports that
1.4 million poor clients had active loans with AID-supported
institutions, up 47% from levels in 1996. The average annual number of
clients served by AID is growing at a rate of 150% annually. AID also
reports that 67% of these loans were ``poverty'' loans, i.e., loans at
or below $300 for Africa, Latin America, the Caribbean and Asia and
$1,000 for Europe and the Newly Independent States.
During Fiscal Year (``FY'') 1997, AID spent $165 million to
support microfinance programs. In 1997, AID supported 481
microfinance activities in 62 countries with 70% of
microfinance resources to support credit other than
microfinance activities. Over one quarter of these institutions
report that they are covering all of their financial and
operational expenses. In FY 1998, funding dropped to $144
million. Congress, through language to accompany the FY 1999
appropriations conference report, directed that at least $135
million be spent to support microfinance institutions during FY
1999.
The Way Forward
Since the founding of the Grameen Bank, microenterprise
development activities have become a major part of the U.S.
foreign assistance program. From the first years of founding
microfinance institutions, AID and the Treasury Department
(overseeing multilateral programs) must now respond to the
transformation of microenterprise organizations into the medium
and large financial providers they have the potential to
become. As such, microfinance institutions need more than just
donor capital. They need policy reform to remove outdated
financial laws and regulations that work to prevent the
delivery of microfinance services. In addition, the removal of
interest rate restrictions and minimum funding requirements can
greatly reduce the ability of such programs to work.
The bill sets forth four major directions for the future of
microenterprise programs: $152 million in FY 2000 and $167
million in FY 2001 are authorized to be appropriated in grants
with a requirement that half of all microenterprise resources
shall be used for direct support of programs through
practitioner institutions that provide credit and other
financial services to the poorest with loans of $300 or less in
1995 U.S. dollars. A monitoring program is also established to
ensure that these programs are lifting the poorest of the poor
from poverty. Two million are authorized to be appropriated in
each of fiscal years 2000 and 2001 for the Micro- and Small
Enterprise Development (``MSED'') program at AID. A new
Microfinance Loan Facility is established to pool the risk and
support U.S. funded microfinance institutions to recover from
natural disasters, war, civil conflict or short-term financial
movements that threaten their long-term development. This is a
systemic response to previous crises involving microfinance
institutions in South Asia and Central America that were nearly
bankrupted by natural disasters killing or wounding many of
their client borrowers.
A new report by the President and in coordination with the
Administrator of AID, Secretary of the Treasury and Secretary
of State to review key innovations and institutions that would
be necessary to ensure the further growth of the microfinance
sector.
Committee Action
H.R. 1143 was introduced by Chairman Gilman on March 17,
1999, and was referred to the Committee on International
Relations, which marked up the bill in open session, pursuant
to notice, that same day. The Full Committee considered the
bill and agreed to a motion to favorably report the bill to the
House of Representatives, by voice vote. There were no
amendments.
Record Votes on Amendments and Motion to Report
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires that the results of each record vote
on an amendment or motion to report, together with the names of
those voting for or against, be printed in the committee
report. No record votes were taken during the consideration of
H.R. 1143.
Other Matters
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform Findings
Clause 3(c)(4) of rule XIII of the Rules of the House of
Representatives requires each committee report to contain a
summary of the oversight findings and recommendations made by
the Government Reform Committee pursuant to clause 4(c)(2) of
rule X of those Rules. The Committee on International Relations
has received no such findings or recommendations from the
Committee on Government Reform.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) ofthe Congressional Accountability Act.
Constitutional Authority Statement
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, the Committee cites the
following specific powers granted to the Congress in the
Constitution as authority for enactment of H.R. 1143 as
reported by the Committee: Article I, section 8, clause 1
(relating to providing for the common defense and general
welfare of the United States); Article I, section 8, clause 3
(relating to the regulation of commerce with foreign nations);
and Article I, section 8, clause 18 (relating to making all
laws necessary and proper for carrying into execution powers
vested by the Constitution in the government of the United
States).
Preemption Clarification
Section 423 of the Congressional Budget Act of 1974
requires the report of any committee on a bill or joint
resolution to include a committee statement on the extent to
which the bill or joint resolution is intended to preempt state
or local law. The Committee states that H.R. 1143 is not
intended to preempt any state or local law.
New Budget Authority and Tax Expenditures, Congressional Budget Office
Cost Estimate, and Federal Mandates Statements
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives requires each committee report that accompanies
a measure providing new budget authority, new spending
authority, or new credit authority or changing revenues or tax
expenditures to contain a cost estimate, as required by section
308(a)(1) of the Congressional Budget Act of 1974, as amended,
and, when practicable with respect to estimates of new budget
authority, a comparison of the estimated funding level for the
relevant program (or programs) to the appropriate levels under
current law.
Clause 3(d) of rule XIII of the Rules of the House of
Representatives requires committees to include their own cost
estimates in certain committee reports, which include, when
practicable, a comparison of the total estimated funding level
for the relevant program (or programs) with the appropriate
levels under current law.
Clause 3(c)(3) of rule XIII of the Rules of the House of
Representatives requires the report of any committee on a
measure which has been approved by the Committee to include a
cost estimate prepared by the Director of the Congressional
Budget Office, pursuant to section 403 of the Congressional
Budget Act of 1974, if the cost estimate is timely submitted.
Section 423 of the Congressional Budget Act requires the
report of any committee on a bill or joint resolution that
includes any Federal mandate to include specific information
about such mandates. The Committee states that H.R. 1143 does
not include any Federal mandate.
Congressional Budget Office Cost Estimate
The Committee adopts the cost estimate of the Congressional
Budget Office as its own submission of any new required
information with respect to H.R. 1143 on new budget authority,
new spending authority, new credit authority, or an increase or
decrease in the national debt. It also adopts the estimate of
Federal mandates prepared by the Director of the Congressional
Budget Office pursuant to section 423 of the Unfunded Mandates
Reform Act. The estimate and report which has been received is
set out below.
U.S. Congress,
Congressional Budget Office,
Washington, DC, March 24, 1999.
Hon. Benjamin A. Gilman,
Chairman, Committee on International Relations,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office (CBO)
has prepared the enclosed cost estimate for H.R. 1143, the
Microenterprise for Self-Reliance Act of 1999.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Joseph C.
Whitehill.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 1143--Microenterprise for Self-Reliance Act of 1999
Summary: H.R. 1143 would authorize grants and loans to
capitalize institutions that would make very small loans to the
poor in developing countries. It would also authorize training
and technical assistance to customers and managers of such
institutions. In addition, the bill would create a loan
facility that would offer subsidized loans to such institutions
should they face bankruptcy due to natural disasters, wars, or
severe financial crisis. CBO estimates that appropriation of
the authorized amounts would result in additional outlays of
$291 million over the next five years. Because H.R. 1143 would
not affect direct spending or receipts, pay-as-you-go
procedures would not apply.
The bill contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would not affect the budgets of state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1143 is shown in the following table.
The costs of this legislation fall within budget function 150
(international affairs).
Basis of estimate: Under current law, the Administration
provides grants and loans to small-scale financial institutions
through several different programs. H.R. 1143 would authorize
additional appropriations of $152 million in 2000 and $167
million in 2001 for grants and $2 million in 2000 and 2001 for
the administrative costs and credit subsidies for
microenterprise programs. The estimate assumes that the
authorized amounts would be appropriated for each year and that
outlays would follow historical patterns for similar programs.
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
----------------------------------------------------------------
2000 2001 2002 2003 2004
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SPENDING SUBJECT TO APPROPRIATION
Authorization level............................ 159 174 0 0 0
Estimated outlays.............................. 12 89 114 50 26
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H.R. 1143 would also create a loan facility to assist U.S.-
sponsored, microfinance institutions that face bankruptcy due
to natural disaster, war, or severe national financial crisis.
The bill would authorize up to $5 million annually for
subsidized loans in 2000 and 2001. Funds for the facility would
be in addition to the amounts specifically authorized by the
bill. CBO estimates that the facility would spend $9 million
over the next five years, assuming appropriation of the
authorized amounts.
Intergovernmental and private-sector impact: H.R. 1143
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Estimate prepared by: Federal Costs: Joseph C. Whitehill
Impact on State, Local, and Tribal Governments: Leo Lex Impact
on the Private Sector: Lesley Frymier.
Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
Section-by-Section Analysis
Section 1. Short title
This section provides the short title for the act will be
the ``Microenterprise for Self-Reliance Act of 1999''.
Sec. 2. Findings and declarations of policy
This section contains 18 findings updated from H.R. 1129
(which the House passed during the 105th Congress) on the
demand for microenterprise credits, the success with past
programs and the need for their expansion in the developing
world.
Sec. 3. Purposes
This section sets forth five main purposes of the Act.
While microenterprise development programs have become an
important part of the U.S. foreign assistance program, the
Committee believes that the success of these programs should
bring their operations and expansion into the forefront of the
U.S. assistance effort.
The Committee also takes the commitments made by AID at the
1994 and 1997 Microenterprise Initiatives very seriously and
has used these commitments as the basis for working with the
Administration. The Committee also has heard clear testimony
and reviewed evidence that U.S. NGOs and indigenous
nongovernmental organization intermediaries are the key
partners our assistance programs require to provide credit,
savings, training and technical services to microentrepreneurs.
The Committee believes that one of the key requirements in
this legislation is the requirement to increase the amount of
assistance devoted to credit activities designed to reach the
poorest sector in developing countries, and to improve the
access of the poorest, particularly women, to microenterprise
credit in developing countries. The Committee notes that in
various countries throughout the world, the extension of credit
to women has been one of the most successful aspects of
microfinance programs. As microfinance institutions help to
break down the barriers to credit for women, they unlock a vast
potential for productivity long suppressed in many societies.
The Committee believes that under the leadership of the
President, AID, the Department of the Treasury and the
Department of State should better coordinate policy to support
the microfinance sector. The Committee notes and applauds the
interest and involvement of the First Lady in supporting
microfinance projects and urges the President to take a strong
lead in coordinating key cabinet departments and agencies in
promoting microfinance institutions. The Committee notes that
in addition to funding, policy changes designed by AID and
encouraged by the State and Treasury Departments are crucial to
the future development of the microfinance sector.
Sec. 4. Microenterprise development grant assistance
This section adds a new section to the Foreign Assistance
Act of 1961 (as amended) (``FAA'') to authorize appropriations
for grants and govern the use of all microenterprise resources.
Subsection (a) includes findings that note the development
of microenterprise is a vital factor in the stable growth of
developing countries and in the development of free, open, and
equitable international economic systems; that it is therefore
in the best interest of the United States to assist the
development of microenterprises in developing countries; and
the support of microenterprise can be served by programs
providing credit, savings, training, and technical assistance.
In the U.S. economy, small businesses fitting AID's definition
of a microenterprise employ a significant portion, if not the
majority, of Americans. By supporting the development of
microenterprises, the Committee seeks to have foreign
assistance programs help developing countries move away from
basing their economies on large state-owned enterprises to the
dynamic and innovative micro- and small business economy that
has served the U.S. so well.
Subsection (b)(1) authorizes the President to provide grant
assistance for programs to increase the availability of credit
and other services to microenterprises lacking full access to
capital and training through four major approaches--(A) grants
to microfinance institutions for the purpose of expanding the
availability of credit, savings, and other financial services
to microentrepreneurs; (B) training, technical assistance, and
other support for microenterprises to enable them to make
better use of credit, to better manage their enterprises, and
to increase their income and build their assets; (C) capacity
building for microfinance institutions in order to enable them
to better meet the credit and training needs of
microentrepreneurs; and (D) policy and regulatory programs at
the country level that improve the environment for microfinance
institutions that serve the poor and very poor.
The Committee notes that last year Congress created a
technical assistance program at the Department of the Treasury
to help developing countries and countries in transition with
monetary and regulatory affairs. The Committee strongly
encourages the Treasury Department to include offers of
assistance for policy reform and prudent regulation of the
microfinance sector in its discussions with potential
recipients of such aid. The Committee believes that analysis
and elimination of policy barriers to microfinance and the
proper regulation of such institutions will be key factors in
the growth of the microfinance sector in the next decade.
Subsection (b)(2) requires that the assistance authorized
pass through organizations that have a capacity to develop and
implement microenterprise programs, including particularly
United States and indigenous private and voluntary
organizations, United States and indigenous credit unions and
cooperative organizations, other indigenous governmental and
nongovernmental organizations; or business development
services, including indigenous craft programs. The Committee
notes the particular expertise of the members of the
Microenterprise Coalition and its partners overseas in
delivering this form of assistance.
Subsection (b)(3) is in many ways one of the key provisions
of this legislation. This section draws on a long heritage from
the 1994 and 1997 Initiatives, the Microcredit Summit and the
Administration-supported House-passed versions of H.R. 386 in
the 104th Congress and H.R. 1129 in the 105th Congress. The
subsection provides that in carrying out sustainable poverty-
focused programs referred to above, 50 percent of all
microenterprise resources shall be used for direct support of
programs under this subsection through practitioner
institutions that provide credit and other financial services
to the poorest with loans of $300 or less in 1995 United States
dollars and can cover their costs of credit programs with
revenue from lending activities or that demonstrate the
capacity to do so in a reasonable time period.
The Committee intends that the term ``poverty lending
programs'' should refer to programs which directly support
credit and other financial services for the poorest with loans
of $300 or less in 1995 U.S. dollars. While the Committee is
clearly and purposefully restrictive on its use of the $300
average loan limit, it seeks to be expansive on what the
Administration may use to count toward this ceiling. The
Committee intends that the Administration may include all
Development Assistance, Economic Support Fund (``ESF''), SEED
Act and Freedom Support Act resources dedicated to supporting
such programs. In addition, the Administration may also count
P.L. 480, deobligate/reobligate, local currency and counterpart
trust funds used to support such programs. The Administration
may also reasonably and conservatively pro-rate the portion of
training, technical assistance, capacity building, policy and
regulatory support that went to poverty lending programs. For
example, if the Administration were to support a K-REP effort
to remove regulatory restrictions on the microfinance sector
and K-REP used 50% of its resources to directly prove services
and credit to poverty lending services, then the Administration
would be able to count 50% of the funds spent to support
towards the requirement in this section.
Subsection (b)(4) provides that the President should
continue support for central mechanisms and missions that
provide technical support for field missions; strengthen the
institutional development of the intermediary organizations
described above, share information relating to the provision of
assistance authorized above between such field missions and
intermediary organizations; and support the development of
nonprofit global microfinance networks, including credit union
systems, that are able to deliver very small loans through a
vast grassroots infrastructure based on market principles and
act as wholesale intermediaries providing a range of services
to microfinance retail institutions, including financing,
technical assistance, capacity building and safety and
soundness accreditation.
Subsection (b)(5) provides that assistance provided under
this subsection may only be used to support microenterprise
programs and may not be used to support programs not directly
related to the purposes described in paragraph (1).
Subsection (c) establishes a monitoring system to maximize
the sustainable development impact of the assistance authorized
under subsection (a)(1). It directs AID's Administrator
toestablish a monitoring system that will accomplish four basic tasks.
First, under this bill as under the current law of the Government
Performance and Review Act (``GPRA'' or the ``Results Act''), AID must
establish performance goals for such assistance and expresses such
goals in an objective and quantifiable form, to the extent feasible.
The Committee has been concerned in the past that AID has been unable
to measure its support for poverty-lending programs. Under this
section, the Committee is clearly directing AID to measure the impact
of such programs, especially on lifting the very poorest from poverty.
This subsection also establishes performance indicators to be used in
measuring or assessing the achievement of the goals and objectives of
such assistance. The Committee believes that one of the key measures
will be loans made and repaid in amounts of $300 or less in 1995
dollars. Next, the subsection requires AID to provide a basis for
recommendations for adjustments to such assistance to enhance the
sustainable development impact of such assistance, particularly the
impact of such assistance on the very poor, particularly poor women.
Finally, the subsection contemplates reforms and room for improving
measurement systems by directing AID to report periodically on
adjustments to measures for reaching the poorest of the poor, including
proposed legislation containing amendments to improve paragraph (3).
While the Committee is very interested in any new and more effective
changes that can be made to measure the impact of these programs on the
poorest of the poor, the Committee directs that AID should focus its
initial reporting resources on measuring its support for poverty
lending programs.
Subsection (d) authorizes $152,000,000 for fiscal year 2000
and $167,000,000 for fiscal year 2001 to carry out this
section. Originally, the Committee considered higher funding
sums for these highly successful programs but chose these
funding levels as realistic, achievable and amply justified by
the demonstrated success of microenterprise programs.
Sec. 5. Micro- and small enterprise development credits
Section 5 rewrites section 108 of the FAA to directly
authorize AID's current Micro- and small Enterprise Development
(``MSED'') program. Section 108 had become outdated and was no
longer utilized by AID. This section sets into permanent law
the current guidance and policy regarding assistance for micro-
and slightly larger small enterprises.
Subsection (a) contains findings and policies that are
self-explanatory. Subsection (b) authorizes the President to
carry out the policy set forth in subsection (a), through three
delivery mechanisms: (1) loans and guarantees to credit
institutions for the purpose of expanding the availability of
credit to micro- and small enterprises, (2) training programs
for lenders in order to enable them to better meet the credit
needs of microentrepreneurs and (3) training programs for
microentrepreneurs in order to enable them to make better use
of credit and to better manage their enterprises.
Subsection (c) requires the Administrator of AID to
establish criteria for determining which entities described in
the subsection above are eligible to carry out activities, with
respect to micro- and small enterprises, assisted under this
section. There are five criteria: (1) the extent to which the
recipients of credit from the entity do not have access to the
local formal financial sector, (2) the extent to which the
recipients of credit from the entity are among the poorest
people in the country, (3) the extent to which the entity is
oriented toward working directly with poor women, (4) the
extent to which the entity recovers its cost of lending to the
poor, and (5) the extent to which the entity implements a plan
to become financially sustainable.
Subsection (d) limits this assistance to support micro- and
small enterprise programs and may not be used to support
programs not directly related to the purposes described in
subsection (b).
Subsection (e) authorizes the currently appropriated levels
of $1,500,000 for each of the fiscal years 2000 and 2001 to
carry out this section. Under Credit Reform, these amounts
authorized to be appropriated will be made available for the
subsidy cost, as defined in section 502(5) of the Federal
Credit Reform Act of 1990. In addition $500,000 is authorized
to be appropriated for each of the fiscal years 2000 and 2001
for the cost of administrative expenses in carrying out this
section.
Sec. 6. Microfinance Loan Facility
This section establishes a new Microfinance Loan Facility
to pool and manage the risk from natural disasters, war or
civil conflict, national financial crisis, or short-term
financial movements that threaten the long-term development of
United States-supported microfinance institutions. For some
time, the Committee has been concerned about the security of
microfinance institutions and their ability to continue
operations in the face of large natural catastrophes or man-
made disasters. Recently, AID has rescued several microfinance
institutions in the Subcontinent or Latin America who were
threatened with bankruptcy caused by natural disasters. In
short, it is hard to run a bank whose clients are dead or
displaced by a calamity. The Committee commends AID on these ad
hoc rescue packages but seeks a more systemic approach to the
security of microfinance institutions already supported by the
U.S. taxpayer. With a more systemic approach to the security of
microfinance institutions responding to calamity, the past work
of AID and the support of the taxpayer will be protected. In
addition, once microfinance institutions can be restored after
a calamity, then these institutions can play a key role in
recovery efforts.
Subsection (a) establishes such a facility to pool and
manage the risk from natural disasters, war or civil conflict,
national financial crisis, or short-term financial movements
that threaten the long-term development of United States-
supported microfinance institutions. Subsection (b) establishes
a supervisory board of the facility composed of the following
representatives appointed by the President not later than 180
days after the date of the enactment: (A) 1 representative from
the Department of the Treasury, (B) 1 representative from the
Department of State, (C) 1 representative from the Agency for
International Development, (D) 2 United States citizens from
United States nongovernmental organizations that operate United
States-sponsored microfinance activities.
The Committee believes that these two last appointees
should be appointed from the largest andmost experienced U.S.
microfinance institutions. They will also serve for terms of 2 years.
The AID Administrator will serve as Chairman of the board
with an additional vote. The Committee understands that the
board will largely represent members of the Administration with
only two out of the six members from outside organizations.
Subsection (c) provides that the board may make
disbursements from the Facility to United States-sponsored
microfinance institutions to prevent the bankruptcy of such
institutions caused by (A) natural disasters, (B) national wars
or civil conflict, and (C) national financial crisis or other
short term financial movements that threaten the long-term
development of United States-supported microfinance
institutions.
Such disbursements shall be made as concessional loans that
are repaid maintaining the real value of the loan to
microfinance institutions that demonstrate the capacity to
resume self-sustained operations within a reasonable time
period. The Facility shall provide for loan losses with each
loan disbursed. The Committee understands that the best way to
rescue a microfinance institution is to lend it money, not to
loan it. Nevertheless, the structure of the Facility does not
provide for the full cost recovery of its operations and that
it may need to be replenished from time to time.
In order to closely supervise the operation of the Facility
in its first years, during each of the fiscal years 2001 and
2002, funds may not be made available from the Facility until
15 days after notification of the availability has been
provided to the congressional committees specified in section
634A of this Act in accordance with the procedures applicable
to reprogramming notifications under that section.
Subsection (d) also requires a report not later than 60
days after the date on which the last representative to the
board is appointed pursuant to subsection (b), the chairman of
the board shall prepare and submit to the appropriate
congressional committees a report on the policies, rules, and
regulations of the Facility.
Subsection (e) contains placeholder language describing the
general thrust and direction of the Committee regarding the
funding sources of the Facility. The Committee understands that
the Chairman and Ranking Minority Member will offer final
language on the funding for this Facility that is acceptable to
the Administration when this bill is considered on the House.
Sec. 7. Report relating to future development of microfinance
institutions
This section is intended to lay a foundation for the future
development of the microfinance sector. Subsection (a) requires
the President, in consultation with the AID Administrator, the
Secretary of State, and the Secretary of the Treasury, to
prepare and transmit to the appropriate congressional
committees a report on the most cost-effective methods for
increasing the access ofpoor people to credit, other financial
services, and related training.
Subsection (b) provides that the contents of the report
shall contain: First, how the President will jointly develop a
comprehensive strategy for advancing the global microenterprise
sector in a way that maintains market principles while assuring
that the very poor, particularly women, obtain access to
financial services. The Committee is concerned that as the
microfinance sector grows, the Administration should develop a
comprehensive strategy to foster the enabling environment and
funding for such institutions.
Second, the subsection requires guidelines and
recommendations for--
(A) Instruments to assist microenterprise networks to
develop multi-country and regional microlending
programs. The Committee believes that networks can be
the key to the development of this sector in the next
decade.
(B) Technical assistance to foreign governments,
foreign central banks and regulatory entities to
improve the policy environment for microfinance
institutions, and to strengthen the capacity of
supervisory bodies to supervise microcredit
institutions. Having authorized the start of the
Treasury Technical Assistance Program, the Committee
encourages the Treasury Department to include
assistance for the regulation and development of the
microfinance sector in its review of possible
assistance that can be offered under this program.
(C) The potential for federal chartering of United
States-based international microfinance network
institutions, including proposed legislation. The
Committee would like to review the advantages Fannie
Mae had in the use of its federal charter and the
potential such an arrangement might have for the
development of the microfinance sector.
(D) Instruments to increase investor confidence in
microcredit institutions which would strengthen the
long-term financial position of the microcredit
institutions and attract capital from private sector
entities and individuals, such as a rating system for
microcredit institutions and local credit bureaus. The
Committee was impressed with the achievement of
Bolivia's BancoSol and its development of independent
access to private capital markets.
(E) An agenda for integrating microfinance into
United States foreign policy initiatives seeking to
develop and strengthen the global finance sector. The
Committee believes that under GPRA, the development of
microfinance institutions should become a key part of
the State Department and AID performance plans.
(F) Innovative instruments to attract funds from the
capital markets, such as instruments for leveraging
funds from the local commercial banking sector, and the
securitization of microloan portfolios.
Sec. 8. United States Agency for International Development as global
leader and coordinator of bilateral and multilateral
microenterprise assistance activities
This section contains findings and a sense of the Congress
that the development of the microfinance sector should be
included in multilateral discussions and institutions such as
the International Fund for Agricultural Development (IFAD) and
the United Nations Development Program (UNDP). The section also
calls on the Secretary of the Treasury to instruct each United
States Executive Director of the Multilateral Development Banks
(MDBs) to advocate the development of a coherent and
coordinated strategy to support the microenterprise sector and
an increase of multilateral resource flows for the purposes of
building microenterprise retail and wholesale intermediaries.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
FOREIGN ASSISTANCE ACT OF 1961
* * * * * * *
PART I
Chapter 1--Policy; Development Assistance Authorizations
* * * * * * *
[Sec. 108. Private Sector Revolving Fund.--(a) The Congress
finds that the development of private enterprise, including
cooperatives, is a vital factor in the stable growth of
developing countries and in the development and stability of a
free, open, and equitable international economic system. It is
therefore in the best interests of the United States to assist
the development of the private sector in developing countries
and to engage the United States private sector in that process.
In order to promote such private sector development, the
President is authorized to establish a revolving fund account
in the United States Treasury. All funds deposited in such
account shall, notwithstanding any provision in an
appropriation Act to the contrary, be free from fiscal year
limitations.
[(b) Of the funds made available under this chapter in each
of the fiscal years 1986 and 1987, up to $18,000,000 may be
deposited in this account. Such funds used in accordance with
the policies and authorities of this section shall be in
addition to other funds available for private sector activities
under other authorities in this Act. Any reflows and income
arising from activities carried out pursuant to this section,
including loan repayments and fee income (as provided in
subsection (e) of this section), shall be deposited into the
revolving fund and remain available to carry out the purposes
of this section. All funds in such account may be invested in
obligations of the United States.
[(c)(1) The agency primarily responsible for administering
this part is authorized to use the funds maintained in this
revolving fund account to furnish assistance in furtherance of
the policy of subsection (a) on such terms and conditions as it
may determine. Amounts in the revolving fund account shall be
available for obligation for assistance under this section only
to such extent as may be provided in advance in appropriation
Acts. Assistance may be provided under this section without
regard to sections 604(a) and 620(r) of this Act.
[(2) Assistance under this section may be provided only to
support private sector activities which--
[(A) are consistent with the United States
development assistance policies set forth in section
102 of this Act and with the development priorities of
the host country;
[(B) are the types of activities for which assistance
may be provided under sections 103 through 106 of this
Act;
[(C) will have a demonstration effect;
[(D) will be innovative;
[(E) are financially viable;
[(F) will maximize the development impact appropriate
to the host country, particularly in employment and the
use of appropriate technology; and
[(G) are primarily directed to making available to
small business enterprises and cooperatives necessary
support and services which are not otherwise generally
available.
In determining whether an enterprise is a small business
enterprise, the agency primarily responsible for administering
this part shall take into consideration the enterprise's total
net fixed assets and number of employees, together with the
relevant definition utilized by the host country government and
the International Bank for Reconstruction and Development and
other international organizations.
[(3)(A) Not more than $3,000,000 may be made available under
this section to support any one project.
[(B) Not more than 50 per centum of the financial support for
any project may be provided under this section, and a
substantial portion of the financial support for a project
assisted under this section must be provided by sources within
the host country.
[(C) Not more than 20 per centum of the assets of the
revolving fund account under this section may be used to
support projects in any one country.
[(D) In order to maximize the impact on institution building,
loans under this section shall be made primarily to
intermediary entities which provide necessary support and
services for private sector activities.
[(E) Loans under this section shall be at or near the
interest rate otherwise available to the recipient.
[(d)(1) If at any time the assets of the revolving fund
account exceeds $100,000,000, the President shall remit the
amount in excess of $100,000,000 to the United States Treasury.
[(2) As used in this section, ``assets'' includes amounts in
the revolving fund account plus the value of investments made
with amounts from the fund plus the current value of
outstanding obligations under loans under this section.
[(3) In addition to the requirement of paragraph (1), at the
end of any fiscal year, the agency primarily responsible for
administering this part may determine that amounts in the
revolving fund are sufficient to permit the remittance to the
United States Treasury of an amount equal to a portion or the
total amount of appropriated funds deposited in the revolving
fund. Any such remittance shall be deemed to be a decrease in
the appropriated funds in the revolving fund. After remittance
has been made of an amount equal to the total amount of
appropriated funds, the revolving fund shall consist and be
deemed to consist entirely of nonappropriated funds.
[(e) A fee may be charged, where appropriate, in carrying out
activities with funds from the revolving fund authorized in
this section. The amount of any such fee shall be determined by
the agency primarily responsible for administering this part.
[(f) In the event the revolving fund is terminated, all
unobligated money in the fund at the time of such termination
shall be transferred to and become part of the miscellaneous
receipts account of the Treasury.
[(g) As part of its annual congressional presentation
documents submitted to the Congress, the agency primarily
responsible for administering this part shall include a
description of projects proposed to be funded from the
revolving fund account for that fiscal year. To the extent that
projects are proposed for funding which are not contained in
the annual congressional presentation documents, at least
fifteen days' advance notification shall be provided to the
Congress in accordance with section 634A of this Act.
[(h) Not later than December 31 of each year, the President
shall submit a comprehensive report which details all projects
funded under this section during the previous fiscal year, all
reflows to the revolving fund account, a status report on all
projects currently contained in the fund's portfolio. Such
reports shall include, but not be limited to, information
regarding numbers and kinds of beneficiaries reached, amounts
and kinds of benefits provided by the funded projects to
targeted populations, and a justification for projects within
the context of the goals and objectives of the United States
development assistance program.
[(i)(1) To carry out the purposes of subsection (a), in
addition to the other authorities set forth in this section,
the agency primarily responsible for administering this part is
authorized to issue guarantees on such terms and conditions as
it shall determine assuring against losses incurred in
connection with loans made to projects that meet the criteria
set forth in subsection (c). The full faith and credit of the
United States is hereby pledged for the full payment and
performance of such guarantees.
[(2) Loans guaranteed under this subsection shall be on such
terms and conditions as the agency may prescribe, except for
the following:
[(A) The agency shall issue guarantees only when it
is necessary to alleviate a credit market imperfection.
[(B) Loans guaranteed shall provide for complete
amortization within a period not to exceed ten years
or, if the principal purpose of the guaranteed loan is
to finance the construction or purchase of a physical
asset with a useful life of less than ten years, within
a period not to exceed such useful life.
[(C) No loan guaranteed to any one borrower may
exceed 50 percent of the cost of the activity to be
financed, or $3,000,000, whichever is less, as
determined by the agency.
[(D) No loan may be guaranteed unless the agency
determines that the lender is responsible and that
adequate provision is made for servicing the loan on
reasonable terms and protecting the financial interest
of the United States.
[(E) The fees earned from the loan guarantees issued
under this subsection shall be deposited in the
revolving fund account as part of the guarantee reserve
established under paragraph (5) of this subsection.
Fees shall be assessed at a level such that the fees
received, plus the funds from the revolving fund
account placed in the guarantee reserve satisfy the
requirements of paragraph (5). Fees shall be reviewed
every twelve months to ensure that the fees assessed on
new loan guarantees are at the required level.
[(F) Any guarantee shall be conclusive evidence that
such guarantee has been properly obtained, and that the
underlying loan as contracted qualifies for such
guarantee. Except for fraud or material
misrepresentation for which the parties seeking payment
under such guarantee are responsible, such guarantee
shall be presumed to be valid, legal, and enforceable.
[(G) The agency shall determine that the standards
used by the lender for assessing the credit risk of new
and existing guaranteed loans are reasonable. The
agency shall require that there be a reasonable
assurance of repayment before credit assistance is
extended.
[(H) Commitments to guarantee loans may be made by
the agency only to the extent that the total loan
principal, any part of which is guaranteed, will not
exceed the amount specified in annual appropriations
Acts.
[(3) To the extent that fees are not sufficient as specified
under paragraph (2)(E) to cover expected future liabilities,
appropriations are authorized to maintain an appropriate
reserve.
[(4) The losses guaranteed under this subsection may be in
dollars or in other currencies. In the case of loans in
currencies other than dollars, the guarantees issued shall be
subject to an overall payment limitation expressed in dollars.
[(5) The agency shall segregate in the revolving fund account
and hold as a reserve an amount estimated to be sufficient to
cover the agency's expected net liabilities on the loan
guarantees outstanding under this subsection; except that the
amount held in reserve shall not be less than 25 percent of the
principal amount of the agency's outstanding contingent
liabilities on such guarantees. Any payments made to discharge
liabilities arising from the loan guarantees shall be paid
first out of the assets in the revolving fund account and next
out of other funds made available for this purpose.]
SEC. 108. MICRO- AND SMALL ENTERPRISE DEVELOPMENT CREDITS.
(a) Findings and Policy.--The Congress finds and declares
that--
(1) the development of micro- and small enterprises
are a vital factor in the stable growth of developing
countries and in the development and stability of a
free, open, and equitable international economic
system; and
(2) it is, therefore, in the best interests of the
United States to assist the development of the
enterprises of the poor in developing countries and to
engage the United States private sector in that
process.
(b) Program.--To carry out the policy set forth in subsection
(a), the President is authorized to provide assistance to
increase the availability of credit to micro- and small
enterprises lacking full access to credit, including through--
(1) loans and guarantees to credit institutions for
the purpose of expanding the availability of credit to
micro- and small enterprises;
(2) training programs for lenders in order to enable
them to better meet the credit needs of
microentrepreneurs; and
(3) training programs for microentrepreneurs in order
to enable them to make better use of credit and to
better manage their enterprises.
(c) Eligibility Criteria.--The Administrator of the United
States Agency for International Development shall establish
criteria for determining which entities described in subsection
(b) are eligible to carry out activities, with respect to
micro- and small enterprises, assisted under this section. Such
criteria may include the following:
(1) The extent to which the recipients of credit from
the entity do not have access to the local formal
financial sector.
(2) The extent to which the recipients of credit from
the entity are among the poorest people in the country.
(3) The extent to which the entity is oriented toward
working directly with poor women.
(4) The extent to which the entity recovers its cost
of lending to the poor.
(5) The extent to which the entity implements a plan
to become financially sustainable.
(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. [129.] 130. ASSISTANCE FOR VICTIMS OF TORTURE.
(a) In General.--The President is authorized to provide
assistance for the rehabilitation of victims of torture.
(b) Eligibility for Grants.--Such assistance shall be
provided in the form of grants to treatment centers and
programs in foreign countries that are carrying out projects or
activities specifically designed to treat victims of torture
for the physical and psychological effects of the torture.
(c) Use of Funds.--Such assistance shall be available--
(1) for direct services to victims of torture; and
(2) to provide research and training to health care
providers outside of treatment centers or programs
described in subsection (b), for the purpose of
enabling such providers to provide the services
described in paragraph (1).
SEC. 131. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.
(a) Findings and Policy.--The Congress finds and declares
that--
(1) the development of microenterprise is a vital
factor in the stable growth of developing countries and
in the development of free, open, and equitable
international economic systems;
(2) it is therefore in the best interest of the
United States to assist the development of
microenterprises in developing countries; and
(3) the support of microenterprise can be served by
programs providing credit, savings, training, and
technical assistance.
(b) Authorization.--(1) In carrying out this part, the
President is authorized to provide grant assistance for
programs to increase the availability of credit and other
services to microenterprises lacking full access to capital and
training through--
(A) grants to microfinance institutions for the
purpose of expanding the availability of credit,
savings, and other financial services to
microentrepreneurs;
(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. 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, and (C) national financial crisis or other short term
financial movements that threaten the long-term development of
United States-supported microfinance institutions. Such
disbursements shall be made as concessional loans that are
repaid maintaining the real value of the loan to microfinance
institutions that demonstrate the capacity to resume self-
sustained operations within a reasonable time period. The
Facility shall provide for loan losses with each loan
disbursed.
(2) During each of the fiscal years 2001 and 2002, funds may
not be made available from the Facility until 15 days after
notification of the availability has been provided to the
congressional committees specified in section 634A of this Act
in accordance with the procedures applicable to reprogramming
notifications under that section.
(d) Report.--Not later than 60 days after the date on which
the last representative to the board is appointed pursuant to
subsection (b), the chairman of the board shall prepare and
submit to the appropriate congressional committees a report on
the policies, rules, and regulations of the Facility.
(e) Funding.--(1) Not more than $5,000,000 of amounts made
available to carry out sections 103 through 106 of this Act for
each of the fiscal years 2000 and 2001 may be made available to
carry out this section for each such fiscal year.
(2) Amounts made available under paragraph (1) are in
addition to amounts available under other provisions of law to
carry out this section.
(f) Definitions.--In this section:
(1) Appropriate congressional committees.--The term
``appropriate congressional committees'' means the
Committee on International Relations of the House of
Representatives and the Committee on Foreign Relations
of the Senate.
(2) United states-supported microfinance
institution.--The term ``United States-supported
microfinance institution'' means a financial
intermediary that has received funds made available
under this Act for fiscal year 1980 and each subsequent
fiscal year.
* * * * * * *