[Congressional Record Volume 151, Number 118 (Tuesday, September 20, 2005)]
[Extensions of Remarks]
[Pages E1900-E1901]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




IMPLEMENTING THE MICROENTERPRISE RESULTS AND ACCOUNTABILITY ACT OF 2004

                                 ______
                                 

                       HON. CHRISTOPHER H. SMITH

                             of new jersey

                    in the house of representatives

                      Tuesday, September 20, 2005

  Mr. SMITH of New Jersey. Mr. Speaker, today I chaired a hearing 
examining the implementation of PL 108-484, the Microenterprise Results 
and Accountability Act of 2004.
  Earlier this year, I traveled to coastal areas of Indonesia, 
Thailand, and Sri Lanka which had been devastated by the tsunami. The 
destruction from those 50-foot-high waves was almost total, and the 
vast majority of individuals affected were fisherman and other working 
poor whose boats and nets and livelihoods had been completely swept 
away. While they gratefully received the emergency food, aid and 
shelter which our military and our USAID disaster relief teams so 
efficiently provided, in the medium term, what these folks really 
needed and wanted was a small loan to enable them to rebuild their 
businesses and become self-sufficient again.
  The same could be said of areas in our own country which have been 
devastated by Hurricane Katrina. While I am not aware of any microloan 
programs operating in New Orleans, having read Dr. Morduch's testimony 
which he will give later today, I do know that a microcredit group, 
Accion New York, serves over 6,000 customers in the New York 
metropolitan area.
  Whether here or abroad, I have long been a fan of microcredit 
programs because I have seen them work. The term ``foreign aid'' often 
has a bad connotation--and there are some good reasons why, too. Many 
times in the past, foreign aid was delivered in a topdown manner to 
corrupt governments and organizations, where it never really reached 
the intended recipients.
  Microenterprise, on the other hand, takes a totally different 
approach. It's a ``trickle-up'' approach that focuses on helping the 
poorest people on the planet build themselves up, little by little, 
into self-sufficiency by giving them access to financing. The success 
of microenterprise lending programs to empower entrepreneurs and 
borrowers in the developing world cannot be overstated.
  Over two million clients are currently benefiting from USAID-assisted 
programs that provide the necessary capital through small loans, 
usually of a few hundred dollars or less, for entrepreneurs to start 
and expand their own small businesses. It is estimated that 97 percent 
of microenterprise loans are successfully repaid and 70 percent go to 
women, who are often very vulnerable, subjected to abuse, and in need 
of economic opportunities in the developing world. Microenterprise is a 
key vehicle to assist victims of trafficking and to raise the social 
and economic status of women around the world.
  Microenterprise also complements the principles President Bush has 
outlined for more effective foreign aid through the Millennium 
Challenge Account, and is a key component for fulfilling the UN's 
Millennium Development Goals to eradicate world poverty by the year 
2015. Business owners assisted by micro-lending are not only able to 
increase their own incomes, but through their own efforts, they create 
jobs and help economies grow.
  Success stories from the beneficiaries of microenterprise are quite 
numerous. Take for example, Dorothy Eyiah from Ghana. Dorothy was 
resourceful, but she had no idea how she was going to support her AIDS-
stricken sister and family when she brought them into her home in 
Ghana. She used to support herself selling ice, but that wasn't going 
to pay for the food and medicines she now needed. She started praying. 
All doors seemed shut until Dorothy met some women within her village 
who were part of an Opportunity International Trust Bank. The Trust 
Bank could help her grow a small business--providing her with 
financing, training, support. Five loans later, Dorothy is the 
secretary of her Trust Bank and runs three businesses, employing nine 
people from her village. She is content. Her sister is comfortable, all 
the children are in school, and their needs are being met. ``God has 
been so good to me,'' she says.
  Success stories such as this are what microfinance and the 
Microenterprise Results and Accountability Act of 2004 are all about. 
By building the best possible microenterprise program, we will be able 
to reach the greatest possible number of poor people with services that 
truly have an impact on their lives. As we compare the effectiveness of 
various methods of implementing microcredit programs, success will be 
measured by the ability to reach very poor people and other underserved 
populations, including women, and by the kind of impact these programs 
have on poor families. We are concerned not only with the efficient 
delivery of financial services, but also with the

[[Page E1901]]

well-being of those who receive those services. We want to see poor 
people work their way out of poverty, increase their income, build 
their assets, and grow their businesses, and we also want to see them 
educate their children, achieve greater self-esteem, strengthen their 
families, and improve the quality of their lives.
  I introduced the Microenterprise Results and Accountability Act of 
2004 at the beginning of the 108th Congress, and the final product 
represents the culmination of months of hard work and discussion by 
Republicans and Democrats in both the House and Senate, members of the 
microenterprise community, and USAID, to build upon one of our most 
progressive and successful foreign aid programs.
  This legislation is primarily about ensuring better results, not 
authorizing additional money. A comprehensive GAO report completed in 
November 2003 revealed that oversight and accountability of 
microenterprise programs administered by USAID is weak, and that 
programs are not having the desired effect of reaching the very poor--
those earning less than the equivalent of $1/day--to the greatest 
extent possible.
  In response to those concerns, PL 108-484 builds-in accountability 
through a focus on cost-effectiveness and efficiency. The law 
establishes a dedicated Microenterprise Office within USAID which will 
approve strategic plans of field missions, establish a monitoring 
system in order to maximize the impact of programs and measure results, 
and coordinate preparation of a yearly report to Congress. The 
legislation also ensures that more funds go to the ``very poor'' 
through the development and implementation of easy-to-use, cost-
effective poverty assessment techniques. Identifying and targeting the 
poorest potential clients who would stand to benefit most from 
microenterprise loans has proven to be more difficult than originally 
anticipated. I am hopeful that once developed, these poverty assessment 
techniques may prove useful not only for microenterprise but also in 
other areas of our foreign aid.
  PL 108-484 also stipulates that USAID should emphasize the use of 
global microfinance networks and other non-profit private voluntary 
organizations in the implementation of microenterprise and microfinance 
programs. In the last two years, I am concerned that USAID has been 
shifting its focus away from non-profit organizations and networks to 
contractors in the implementation of the Agency's microenterprise 
program.
  While for-profit entities such as consulting firms are making 
excellent contributions in the areas of technical assistance, research 
and policy reform, global microfinance networks and non-profit private 
voluntary organizations have the operational experience and track 
record in microenterprise and microfinance service delivery to poor 
people. These organizations are able to get resources directly to 
clients, and are well positioned to reach the very poorest economically 
active entrepreneurs in the countries where they work. Further, such 
networks have built self-sustaining microfinance institutions that now 
cover, on average, almost all of their operating costs. More than $150 
million in earned revenue was captured by these institutions in 2002 to 
cover their operating costs, in addition to private donations that have 
added significant leverage to USAID's investments. These networks have 
excelled in rapidly developing microfinance institutions in volatile 
and risky situations, including during the early stages of a country's 
transition from war to peace.
  When we provide microloans for the developing world, we export values 
upon which our nation is based upon, including the ideal that if you 
work hard and dream big, you can succeed.

                          ____________________