[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2152 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 2152

   To establish a program to provide credit and other assistance for 
  encouraging microenterprises in developing countries, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 10, 1998

  Mr. Durbin (for himself, Ms. Snowe, Mr. Gorton, Mr. Wellstone, Ms. 
  Mikulski, Mrs. Feinstein, Mr. Chafee, Mrs. Boxer, Mrs. Murray, Mr. 
Grassley, Mr. Wyden, Mr. Bingaman, Mr. Kerry, Mr. Robb, Mr. Inouye, Mr. 
Torricelli, Mr. Levin, Mr. Bumpers, Mr. Johnson, Mr. DeWine, Mr. Kohl, 
 Ms. Collins, Mr. Cleland, and Mr. Moynihan) introduced the following 
  bill; which was read twice and referred to the Committee on Foreign 
                               Relations

_______________________________________________________________________

                                 A BILL


 
   To establish a program to provide credit and other assistance for 
  encouraging microenterprises in developing countries, and for other 
                               purposes.

    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 ``Microcredit for Self-Sufficiency Act 
of 1998''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress makes the following findings:
            (1) More than 1,000,000,000 people in the developing world 
        are living in severe poverty.
            (2) According to the United Nations Children's Fund, the 
        mortality for children under the age of 5 is 10 percent in all 
        developing countries and nearly 20 percent in the poorest 
        countries.
            (3) Nearly 33,000 children die each day from malnutrition 
        and disease which is largely preventable.
            (4)(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, since women tend to reinvest income in their 
        families.
            (5)(A) The poor in the developing world, particularly 
        women, generally lack stable employment and social safety nets.
            (B) Many women turn to self-employment to generate a 
        substantial portion of their livelihood.
            (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.
            (6)(A) On February 2-4, 1997, an international Microcredit 
        Summit was held in Washington, D.C., 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.
            (B) With an average of 5 people to a family, achieving this 
        goal will mean that the benefits of microcredit will reach 
        nearly half of the world's more than 1,000,000,000 absolute 
        poor.
            (7)(A) The poor are able to expand their incomes and their 
        businesses dramatically when they have access to loans at 
        reasonable interest rates.
            (B) Through the development of self-sustaining microcredit 
        programs, poor people themselves can lead the fight against 
        hunger and poverty.
            (8)(A) Nongovernmental organizations such as the Grameen 
        Bank, Accion International, and the Foundation for 
        International Community Assistance (FINCA) have been successful 
        in lending directly to the very poor.
            (B) These institutions generate repayment rates averaging 
        95 percent or higher.
            (9)(A) Microcredit institutions not only reduce poverty, 
        but also reduce the dependency on foreign assistance.
            (B) Interest income on a credit portfolio can be used to 
        pay recurring institutional costs, assuring that the long-term 
        development is sustained.
            (10) Microcredit institutions leverage foreign assistance 
        resources because loans are recycled, generating new benefits 
        to program participants.
            (11) The development of sustainable microcredit 
        institutions that provide credit and training, and mobilize 
        domestic savings, are critical to a global strategy of poverty 
        reduction and broad-based economic development.
            (12)(A) In 1994, AID launched a Microenterprise Initiative 
        in consultation with Congress.
            (B) The Initiative was committed to expanding funding for 
        AID's microenterprise programs, provided funding of 
        $137,000,000 for fiscal year 1994, and set a goal that, by the 
        end of fiscal year 1996, half of all microenterprise resources 
        would support programs and institutions providing credit to the 
poorest with loans under $300.
            (C) In fiscal year 1996, total funding for microenterprise 
        activities fell to $111,000,000 of which only 39 percent was 
        used for programs benefiting the poorest with loans under $300.
            (D) Increased investment in microcredit institutions 
        serving the poorest is critical to achieving the Microcredit 
        Summit's goal.
            (E) AID's funding for microenterprise activities in the 
        developing world should be expanded to $160,000,000 for fiscal 
        year 1999 to parallel the growing capacity of microcredit 
        institutions in the developing world.
            (13) Providing the United States share of the global 
        investment needed to achieve the goal of the Microcredit Summit 
        will require only a modest increase in United States funding 
        for international microcredit programs, with an increased focus 
        on institutions serving the poorest.
            (14)(A) In order to reach tens of millions of the poorest 
        with microcredit, it is crucial to expand and replicate 
        successful microcredit institutions.
            (B) Microcredit institutions need assistance in developing 
        their institutional capacity to expand their services and tap 
        commercial sources of capital.
            (15) PVOs and other nongovernmental organizations have 
        demonstrated competence in developing networks of local 
        microcredit institutions that can reach large numbers of the 
        very poor, and help the very poor achieve financial 
        sustainability.
            (16) Since AID has developed very effective partnerships 
        with PVOs and other nongovernmental organizations, AID should 
        place a priority on investing in PVOs and other nongovernmental 
        organizations through AID's central funding mechanisms.
            (17) By expanding and replicating successful microcredit 
        institutions, AID should be able to assure the creation of a 
        global infrastructure to provide financial services to the 
        world's poorest families.
            (18)(A) AID can provide leadership among bilateral and 
        multilateral development aid agencies as such agencies expand 
        their support of microenterprise for the poorest.
            (B) AID should seek to improve the coordination of efforts 
        at the operational level to promote the best practices for 
        providing financial services to the poor and to ensure that 
        adequate institutional capacity is developed.
    (b) Purposes.--The purposes of this Act are--
            (1) to provide for the continuation and expansion of AID's 
        commitment to develop microcredit institutions;
            (2) to make microenterprise development the centerpiece of 
        the overall economic growth strategy of AID;
            (3) to support and develop the capacity of United States 
        PVOs, and other international nongovernmental organizations to 
        provide credit, savings, and training services to 
        microentrepreneurs; and
            (4) to increase the amount of assistance devoted to 
        providing access to credit for the poorest sector in developing 
        countries, particularly women.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) AID.--The term ``AID'' means the United States Agency 
        for International Development.
            (2) Microcredit, microenterprise, poverty lending; poverty 
        lending portion of mixed programs; mixed programs.--The terms 
        ``microcredit'', ``microenterprise'', ``poverty lending portion 
        of mixed programs'', and ``mixed programs'' have the meaning 
        given such terms under the 1994 Microenterprise Initiative of 
        AID.
            (3) PVOs and other nongovernmental organizations.--The term 
        ``PVOs and other nongovernmental organizations'' means--
                    (A) private voluntary organizations (including 
                cooperative organizations), and
                    (B) international, regional, or national 
                nongovernmental organizations,
        that are active in the region or country where the project is 
        located and that have the capacity to develop and implement 
        microenterprise programs that are oriented toward working 
        directly with the poor, especially the poorest and women.

SEC. 4. MICROENTERPRISE ASSISTANCE.

    (a) Authorization.--
            (1) In general.--The President, acting through the 
        Administrator of AID, is authorized to establish programs to 
        provide credit and other assistance for microenterprises in 
        developing countries.
            (2) Use of pvos and other nongovernmental organizations.--
        Programs to provide credit for microenterprises and related 
        activities under this section shall be carried out primarily by 
        United States PVOs and other United States and indigenous 
nongovernmental organizations, including credit unions, cooperative 
organizations, and other private financial intermediaries.
    (b) Eligibility Criteria.--The Administrator of AID shall establish 
criteria for determining which entities described in subsection (a)(2) 
are eligible to carry out the purposes described in section 2(b). Such 
criteria shall include the following:
            (1) The extent to which the recipients of credit from the 
        entity lack 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 is implementing a plan 
        to become financially self-reliant by charging realistic 
        interest rates to its borrowers.
    (c) Funding Levels for Fiscal Year 1999.--
            (1) In general.--Of the amounts made available to carry out 
        chapter 1 of part I of the Foreign Assistance Act of 1961 (22 
        U.S.C. 2151 et seq.), not less than $160,000,000 of the funds 
        made available for fiscal year 1999 shall be used to provide 
        assistance under this Act. The funds authorized under the 
        preceding sentence shall be in addition to any funds made 
        available in fiscal year 1999 for microenterprise activities in 
        the former Soviet Union and Eastern Europe pursuant to the 
        FREEDOM Support Act and any funds for special assistance 
        initiatives within Europe, the newly independent states of the 
        Former Soviet Union, Asia, and the Near East.
            (2) Additional requirements.--
                    (A) Poverty lending.--Of the funds made available 
                under paragraph (1), not less than $80,000,000 shall be 
                used to support poverty lending.
                    (B) Support of pvos and other nongovernmental 
                organizations.--Of the funds made available under 
                paragraph (1), not less than $35,000,000 shall be 
                provided through the central funding mechanisms of AID 
                for support of United States PVOs and United States and 
                indigenous nongovernmental organizations.
                    (C) Matching grant program.--Of the funds made 
                available under paragraph (1), not less than 
                $10,000,000 shall be used for the private voluntary 
                organizations matching grant program of AID for support 
                of United States PVOs.
            (3) Definitions.--For purposes of this subsection--
                    (A) To support poverty lending.--The term ``to 
                support poverty lending'' means--
                            (i) funds lent to members of the poverty 
                        target population (as defined in subparagraph 
                        (B)) in low-income countries in amounts 
                        equivalent to $300 or less in 1997 United 
                        States dollars; and
                            (ii) funds used for institutional 
                        development of an entity described in 
                        subsection (a)(2), that is engaged in--
                                    (I) making loans of $300 or less in 
                                1997 United States dollars to members 
                                of the poverty target population; or
                                    (II) the poverty lending portion of 
                                a mixed program.
                    (B) Poverty target population.--The term ``poverty 
                target population'' means the poorest 50 percent of 
                those individuals living below the poverty line, 
                defined by the national government of the foreign 
                country to which funds are being provided.

SEC. 5. PROGRAM PERFORMANCE CRITERIA.

    (a) Strengthening of Appropriate Mechanisms.--The Administrator of 
AID shall--
            (1) strengthen appropriate mechanisms, including mechanisms 
        for central microenterprise programs, for the purpose of 
        strengthening the institutional development of the entities 
        described in section 4(a)(2); and
            (2) develop and strengthen appropriate mechanisms for the 
        purpose of gathering and disseminating the best practice for 
        targeting microcredit to the poorest segment of the population.
    (b) Monitoring System.--In order to sustain the impact of the 
assistance authorized under section 4, the Administrator of AID shall 
establish a monitoring system that--
            (1) establishes performance goals for such assistance and 
        expresses such goals in an objective and quantifiable form;
            (2) establishes performance systems or indicators to 
        measure the extent to which projects are achieving such goals; 
        and
            (3) provides a basis for recommendations for adjustments to 
        such assistance to enhance the benefit of such assistance for 
        the very poor, particularly women.
    (c) Additional Monitoring Requirements.--As a part of the 
monitoring system established under subsection (b), the Administrator 
of AID--
            (1) using data provided by lending institutions, shall 
        monitor the actual amount of microenterprise credit and the 
        number of loans made available to the poverty target population 
        as a result of each project or program carried out pursuant to 
        this Act;
            (2) using data provided by lending institutions, shall 
        monitor the amount of funding provided pursuant to this Act 
        which is allocated to organizations engaged in making loans of 
        under $300 to the poverty target population, or to the poverty 
        lending portion of mixed programs;
            (3) shall report to Congress annually on the progress in 
        implementing AID's institutional plan of action to achieve the 
        Microcredit Summit goal of expanding access to credit and other 
        financial and business services to 100,000,000 of the world's 
        poorest families, especially the women in those families, by 
        2005; and
            (4) shall include a summary of the information collected 
        under paragraphs (1) and (2) in AID's annual presentation to 
        Congress.
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