Short title

This Act may be cited as the

Microfinance and Microenterprise Enhancement Act of 2011

Findings

Congress makes the following findings: (1)A growing body of research shows that, where markets are inclusive and income gaps are relatively small, growth translates into poverty reduction much more quickly, efficiently, and sustainably. (2)Microenterprises, including smallholder and pastoral farms, are important actors in most developing economies and contribute significantly to employment generation, food security, and family financial stability. (3)Microfinance institutions and providers have played an increasingly important role in enabling micro-entrepreneurs to graduate from extreme poverty to sustainable living patterns through financial services such as micro-credit, savings, and micro-insurance, as well as skills development, business mentoring, value-chain linkages, and facilitation of producer groups. (4)Congress has demonstrated its support for microenterprise development assistance programs through the enactment of three comprehensive microenterprise laws. Support for microenterprise and microfinance remains a key tenet of foreign assistance programs under the Foreign Assistance Act of 1961 (22 U.S.C. 2151 et seq.), including pursuant to the following Acts: (A)The Microenterprise for Self-Reliance Act of 2000 (title I of Public Law 106–309; 114 Stat. 1079). (B)Public Law 108–31 (117 Stat. 775). (C)The Microenterprise Results and Accountability Act of 2004 (Public Law 108–484; 118 Stat. 3922). (5)Microcredit alone is insufficient to sustainably reduce poverty and facilitate inclusive economic growth. In addition to access to credit, poor households need savings tools to build assets, mitigate risks, increase social capital, enhance skills, and integrate into competitive, growing value-chains, as well as to access good-quality health and education services. (6)Over the last three decades, the United States Agency for International Development has made microenterprise development an important feature of its programming and has continually sought to enhance the positive impact of investments on poor households. In fiscal year 2010, the United States Agency for International Development provided not less than $262,000,000 in funding for microenterprise development in at least 64 countries through at least 145 diverse implementing partners, including private voluntary organizations, nongovernmental organizations, banks and enterprise development service providers, benefitting over 1,600,000 microentrepreneurs and 1,900,000 savers. (7)New approaches are essential to keep pace with global technology, not only to alleviate poverty, but also to sustainably reduce poverty by linking poor households to economic opportunities so that they can contribute to and benefit from economic growth in their countries. (8)Public funding for microfinance and microenterprise should be available to benefit the poor in all countries, and, in particular, among countries with a high concentration of the very poor.

Sense of Congress on targeted and effective programming

It is the sense of Congress that the United States Agency for International Development should continue and expand programming in microfinance that adheres to the following principles and basic considerations: (1)The United States Agency for International Development should advance access to economic opportunities for very poor and vulnerable populations, including orphans and vulnerable children, single mothers, those affected by HIV/AIDS, those affected by regional conflict, and the food insecure to ensure that the poorest are included and benefit from broad-based economic growth. (2)To the greatest extent possible, the United States Agency for International Development should set clear country or regional funding targets based on greatest need, as evidenced by poverty indicators and should strive to fill a gap in unmet demand by the very poor for financial services. (3)The United States Agency for International Development should place special emphasis on aiding poor women, who constitute a substantial portion of microentrepreneurs and who face a wide range of disadvantages, as a means of promoting financial self-reliance, empowering gender equality, including land rights and access, and bringing a host of development benefits to families through improved nutrition, health, and education. (4)The United States Agency for International Development should ensure that providers of financial services benefitting from United States Agency for International Development assistance adhere to client protection principles, such as the Client Protection Principles of the Smart Campaign, and take concrete steps to protect clients from potentially harmful financial products and to support equitable and fair treatment, including— (A)avoidance of over-indebtedness; (B)transparent and responsible pricing; (C)appropriate collection practices; (D)mechanisms for redress of grievances; and (E)privacy of client data. (5)The United States Agency for International Development should encourage providers of financial services benefitting from assistance programs to provide cost-effective services and make steady progress toward full financial sustainability as a means to achieve large-scale impact and institutional viability, while also maintaining focus on their target population of poor micro-entrepreneurs and smallholder farmers. (6)The United States Agency for International Development should strive to increase access to financial services to poor and very poor, rural, and other underserved populations by supporting a diverse range of financial intermediaries, including nongovernmental organizations and private and state-owned banks; postal and savings banks and savings and credit cooperatives; voluntary savings associations; member-owned community organizations; and other non-bank intermediaries, such as mobile network operators, finance, and insurance companies. (7)The United States Agency for International Development should promote and make use of existing technologies that show promise for lowering costs, managing risks, and rapidly scaling up access to financial products and services, including mobile phones, smart phones, tablets, point-of-sale devices linked to smart cards, automatic teller machines (ATMs), geographic information system (GIS) mapping, and cloud computing, among other information and communication technologies (ICT). (8)The United States Agency for International Development should make efforts to identify and support smaller, community-led partner organizations, including local collectives and consortia.

Sense of Congress on expanded integrated approaches

It is the sense of Congress that the next generation of programming in microfinance and microenterprise development should advance holistic, integrated strategies that focus on the myriad financial and non-financial needs, including nutrition, health, and education, of households, as well as the functioning of enterprises, markets, and their inter-relationships in the economy.

Household-based approaches

(a)

Responsive financial services

The Administrator of the United States Agency for International Development shall promote responsive financial services to meet the diverse needs of poor households for cash flow management and asset accumulation by supporting the development of savings, remittances, and money transfer services. (b)

Consumption smoothing, risk aggregation, and mitigation

The Administrator of the United States Agency for International Development shall promote tools that aggregate risks, mitigate shocks, and smooth consumption, such as insurance and savings deposit services, so that the poor can better manage, cope with, and recover from expected and unexpected income fluctuations and crises like family emergencies and crop failures. (c)

Partners

The Administrator of the United States Agency for International Development shall identify and support partners that support informal savings-led and asset building approaches to microfinance, including organizations that work to provide linkages between savings-led groups to institutions in the formal financial sector. (d)

Social protection programs

Because some people are too poor or otherwise unable to make use of microfinance or microenterprise development services without special assistance to prepare them for participation, the Administrator of the United States Agency for International Development should identify and support organizations that link social protection programs, including food assistance, cash or asset transfers, life and livelihood skills development, and health and nutrition education, with microfinance services, savings services, and business development services. Such linkages should attempt to enable poor people to stabilize food consumption, survive extreme poverty, develop sustainable livelihoods, and take advantage of economic opportunities.

Enterprise and market-based approaches

(a)

Interventions

The Administrator of the United States Agency for International Development shall align household-level interventions for the poor with interventions that catalyze more inclusive markets and link the poor to expanding economic opportunities. (b)

Development of financial products

The Administrator of the United States Agency for International Development shall support the development of a range of financial products adapted to the needs of enterprises, including working capital for inputs, labor, and production services; long-term asset finance; and agriculture, animal husbandry, and rural enterprise loans. Such products should be provided through a diversity of financing schemes, including financiers along the value chain such as input suppliers, traders, and processors. (c)

Support for agriculture specific tools

The Administrator of the United States Agency for International Development shall support microfinance institutions and providers that are using agriculture-specific tools, including— (1)household profiling, crop analysis, and land mapping; (2)diversification of loan portfolio to include a variety of sectors and crops; (3)linkages to extension and formal financial services; and (4)linking farmers to clients and larger supply chains. (d)

Linked approaches

To ensure that the poor are not left out of economic growth strategies, the Administrator of the United States Agency for International Development shall focus investments on linking microenterprises into global, regional, and local value chains where they have a comparative advantage. The Agency should consider issues such as the business enabling environment, market competitiveness, inter-firm cooperation, firm-level upgrading, and the relationships between firms that create incentives or disincentives for investing in improved performance or upgrading. (e)

Support for small- and medium-Sized enterprises

The Administrator of the United States Agency for International Development should consider support for small- and medium-sized enterprises as a means to improve productivity and competitiveness in key subsectors in which large numbers of poor micro-entrepreneurs participate, as well as to strengthen the channels, such as employment, by which the benefits of growth are transmitted to the poor.

Measuring and reporting results

(a)

Modification of poverty assessment tools

The Administrator of the United States Agency for International Development shall modify the Poverty Assessment Tools (PATs) of the Agency so that partner organizations can use them for expanded data management purposes. (b)

Alternatives to poverty assessment tools

Notwithstanding any other provision of law, not later than one year after the date of the enactment of this Act, the Administrator of the United States Agency for International Development shall identify and approve alternatives to the Poverty Assessment Tools, such as those commonly used within the industry and development community.

Financial access and Microenterprise Innovation Fund

(a)

Establishment

The Administrator of the United States Agency for International Development is authorized to utilize one percent of the Agency’s development assistance account budget for fiscal years 2013 through 2017 for the creation of a financial access and microenterprise innovation challenge fund. (b)

Use of fund

The fund established under this section shall be used to— (1)identify, test, and support cost-effective and innovative products and technologies that improve the delivery of financial services to the poor and very poor, particularly in rural locations; (2)identify, test, and support new microfinance and microenterprise products, services, and delivery systems that show potential to become cost-effective at large scale; and (3)help transition such methods and technologies to widespread adoption. (c)

Grants

The financial access and microenterprise innovation challenge fund shall make grants to organizations and companies, including those interested in eventual commercialization. Where appropriate, grants should reward or require recipients to substantially invest their own funds. The mechanisms may include challenge grants that require recipients to match grant funds with their own funds in minimum ratios and bounties for achievement of targets, such as the number of poor customers reached.