[House Report 108-459]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-459

======================================================================



 
         MICROENTERPRISE RESULTS AND ACCOUNTABILITY ACT OF 2004

                                _______
                                

 April 2, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hyde, from the Committee on International Relations, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3818]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on International Relations, to whom was 
referred the bill (H.R. 3818) to amend the Foreign Assistance 
Act of 1961 to improve the results and accountability of 
microenterprise development assistance programs, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.

                           TABLE OF CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     7
Background and Need for the Legislation..........................     8
Hearings.........................................................    17
Committee Consideration..........................................    17
Summary of Amendments............................................    17
Vote of the Committee............................................    18
Committee Oversight Findings.....................................    18
New Budget Authority and Tax Expenditures........................    18
Congressional Budget Office Cost Estimate........................    18
Performance Goals and Objectives.................................    20
Constitutional Authority Statement...............................    20
Section-by-Section Analysis......................................    20
New Advisory Committees..........................................    24
Congressional Accountability Act.................................    24
Federal Mandates.................................................    24
Changes in Existing Law Made by the Bill, as Reported............    24
Dissenting Views.................................................    37

                             The Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Microenterprise Results and 
Accountability Act of 2004''.

SEC. 2. FINDINGS AND POLICY.

    Congress finds and declares the following:
            (1) Congress has demonstrated its support for 
        microenterprise development assistance programs through the 
        enactment of two comprehensive microenterprise laws:
                    (A) The Microenterprise for Self-Reliance Act of 
                2000 (title I of Public Law 106-309; 114 Stat. 1082).
                    (B) Public Law 108-31 (an Act entitled ``An Act to 
                amend the Microenterprise for Self-Reliance Act of 2000 
                and the Foreign Assistance Act of 1961 to increase 
                assistance for the poorest people in developing 
                countries under microenterprise assistance program 
                under those Acts, and for other purposes'', approved 
                June 17, 2003).
            (2) The United States Agency for International Development, 
        the agency responsible for implementing microenterprise 
        development assistance programs authorized under sections 108 
        and 131 of the Foreign Assistance Act of 1961 (22 U.S.C. 2151f 
        and 2152a), is not presently organized to adequately 
        coordinate, implement, and monitor such programs, as evidenced 
        by the late submission by the Agency of the report required by 
        section 108 of the Microenterprise for Self-Reliance Act of 
        2000.
            (3) The Comptroller General, in a report dated November 
        2003, found that the United States Agency for International 
        Development has met some, but not all, of the key objectives of 
        such microenterprise development assistance programs.
            (4) The Comptroller General's report found, among other 
        things, the following:
                    (A) Microenterprise development assistance 
                generally can help alleviate some impacts of poverty, 
                improve income levels and quality of life for borrowers 
                and provide poor individuals, workers, and their 
                families with an important coping mechanism.
                    (B) Although studies and academic analyses funded 
                by the United States Agency for International 
                Development have found that microenterprise activities 
                generally serve the poor clustered around the poverty 
                line, few loans appear to be reaching the very poor.
                    (C) Microenterprise development assistance programs 
                of the United States Agency for International 
                Development have encouraged women's participation in 
                microfinance projects and, according to data of the 
                Agency, women have comprised two-thirds or more of the 
                micro-loan clients in Agency-funded microenterprise 
                projects since 1997.
            (5)(A) The Comptroller General's report recommends that the 
        Administrator of the United States Agency for International 
        Development review the Agency's ``microenterprise results 
        reporting'' system with the goal of ensuring that its annual 
        reporting is complete and accurate.
            (B) Specifically, the Administrator should review and 
        reconsider the methodologies used for the collection, analysis, 
        and reporting of data on annual spending targets, outreach to 
        the very poor, sustainability of microfinance institutions, and 
        the contribution of Agency's funding to the institutions it 
        supports.

SEC. 3. MICROENTERPRISE DEVELOPMENT ASSISTANCE.

     Chapter 2 of part I of the Foreign Assistance Act of 1961 (22 
U.S.C. 2166 et seq.) is amended by inserting after title V the 
following new title:

           ``TITLE VI--MICROENTERPRISE DEVELOPMENT ASSISTANCE

``SEC. 251. FINDINGS AND POLICY.

    ``Congress finds and declares the following:
            ``(1) Access to financial services and the development of 
        microenterprise are vital factors 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 facilitate access to financial services and assist 
        the development of microenterprise in developing countries.
            ``(3) Access to financial services and the development of 
        microenterprises can be supported by programs providing credit, 
        savings, training, technical assistance, business development 
        services, and other financial services.
            ``(4) Given the relatively high percentage of populations 
        living in rural areas of developing countries, and the combined 
        high incidence of poverty in rural areas and growing income 
        inequality between rural and urban markets, microenterprise 
        programs should target both rural and urban poor.
            ``(5) Microenteprise programs have been successful and 
        should continue to empower vulnerable women in the developing 
        world. Such programs should take into account the risks faced 
        by women who are potential victims of severe forms of 
        trafficking and the need for assistance for women who become 
        victims of severe forms of trafficking, as provided for in 
        section 106(a)(1) of the Trafficking Victims Protection Act of 
        2000 (22 U.S.C. 7104(a)(1); Public Law 106-386).
            ``(6) Given that microenterprise programs have been 
        successful in empowering disenfranchised groups such as women, 
        microenterprise programs should also target populations 
        disenfranchised due to race or ethnicity in countries where a 
        strong relationship between poverty and race or ethnicity has 
        been demonstrated, such as countries in Latin America.

``SEC. 252. AUTHORIZATION; IMPLEMENTATION; TARGETED ASSISTANCE.

    ``(a) Authorization.--The President is authorized to provide 
assistance on a grant basis for programs in developing countries to 
increase the availability of credit, savings, and other services to 
microenterprises lacking full access to capital, training, technical 
assistance, and business development services, through--
            ``(1) grants to microfinance institutions for the purpose 
        of expanding the availability of credit, savings, and other 
        financial services to microentreprise clients;
            ``(2) grants to microenterprise institutions for the 
        purpose of training, technical assistance, and business 
        development services for microenterprises to enable them to 
        make better use of credit, to better manage their enterprises, 
        to conduct market analysis and product development for 
        expanding domestic and international sales, particularly to 
        United States markets, and to increase their income and build 
        their assets;
            ``(3) capacity-building for microenterprise institutions in 
        order to enable them to better meet the credit, savings, and 
        training needs of microentreprise clients; and
            ``(4) policy and regulatory programs at the country level 
        that improve the environment for microentreprise clients and 
        microenterprise institutions that serve the poor and very poor.
    ``(b) Implementation.--
            ``(1) Office of microenterprise development.--
                    ``(A) Establishment.--There is established within 
                the Agency an Office of Microenterprise Development, 
                which shall be headed by a Director who shall be 
                appointed by the Administrator and who should possess 
                technical expertise and ability to offer leadership in 
                the field of microenterprise development.
                    ``(B) Duties.--The Office shall coordinate and be 
                responsible for the provision of assistance under this 
                title.
            ``(2) Assistance through grants to eligible 
        organizations.--Assistance under subsection (a) shall be 
        provided through grants executed, approved, or reviewed by the 
        Office to eligible implementing partner organizations that have 
        a capacity to develop and implement microenterprise programs.
            ``(3) Review and approval.--With respect to assistance 
        under subsection (a) that is furnished through field missions 
        of the Agency, the Office shall be responsible for--
                    ``(A) reviewing or approving each grant agreement 
                prior to obligation of funds under the agreement in 
                order to ensure that activities to be carried out using 
                such funds are efficacious, technically sound, and 
                suitable for the economic and security climate of the 
                country or region where the activities will be 
                conducted; and
                    ``(B) approving microenterprise development 
                components of strategic plans of missions, bureaus, and 
                offices of the Agency.
    ``(c) Targeted Assistance.--In carrying out sustainable poverty-
focused programs under subsection (a), 50 percent of all 
microenterprise resources shall be targeted to very poor clients, 
defined as those individuals living in the bottom 50 percent below the 
poverty line as established by the national government of the country. 
Specifically, such resources shall be used for--
            ``(1) support of programs under this section through 
        practitioner institutions that--
                    ``(A) provide credit and other financial services 
                to clients who are very poor, with loans in 1995 United 
                States dollars of--
                            ``(i) $1,000 or less in the Europe and 
                        Eurasia region;
                            ``(ii) $400 or less in the Latin America 
                        region; and
                            ``(iii) $300 or less in the rest of the 
                        world; and
                    ``(B) can cover their costs in a reasonable time 
                period; or
            ``(2) demand-driven business development programs that 
        achieve reasonable cost recovery that are provided to clients 
        holding poverty loans (as defined by the regional poverty loan 
        limitations in paragraph (1)(A)), whether they are provided by 
        microfinance institutions or by specialized business 
        development services providers.
    ``(d) Support for Central Mechanisms.--The Administrator should 
increase the use of central mechanisms through microenterprise, 
microfinance, and practitioner institutions in the implementation of 
this title.

``SEC. 253. MONITORING SYSTEM.

    ``(a) Establishment.--In order to maximize the sustainable 
development impact of assistance authorized under section 252(a), the 
Administrator of the Agency, acting through the Director of the Office, 
shall establish a monitoring system that meets the requirements of 
subsection (b).
    ``(b) Requirements.--The requirements referred to in subsection (a) 
are the following:
            ``(1) The monitoring system establishes performance goals 
        for the assistance and expresses such goals in an objective and 
        quantifiable form, to the extent feasible.
            ``(2) The monitoring system establishes performance 
        indicators to be used in measuring or assessing the achievement 
        of the performance goals described in paragraph (1) and the 
        objectives of the assistance authorized under section 252.
            ``(3) The monitoring system provides a basis for 
        recommendations for adjustments to the assistance to enhance 
        the sustainability and the impact of the assistance, 
        particularly the impact of such assistance on the very poor, 
        particularly poor women.
            ``(4) The monitoring system adopts the widespread use of 
        proven and effective poverty assessment tools to successfully 
        identify the very poor and ensure that they receive adequate 
        access to microenterprise loans, savings, and assistance.

``SEC. 254. DEVELOPMENT AND CERTIFICATION OF POVERTY MEASUREMENT 
                    METHODS; APPLICATION OF METHODS.

    ``(a) Development and Certification.--
            ``(1) In general.--The Administrator of the Agency, in 
        consultation with microenterprise institutions and other 
        appropriate organizations, shall develop no fewer than two low-
        cost methods for eligible implementing partner organizations to 
        use to assess the poverty levels of their current or 
        prospective clients. The Administrator shall develop poverty 
        indicators that correlate with the circumstances of the very 
        poor.
            ``(2) Field testing.--The Administrator shall field-test 
        the methods developed under paragraph (1). As part of the 
        testing, institutions and programs may use the methods on a 
        voluntary basis to demonstrate their ability to reach the very 
        poor.
            ``(3) Certification.--Not later than October 1, 2004, the 
        Administrator shall, from among the low-cost poverty 
        measurement methods developed under paragraph (1), certify no 
        fewer than two such methods as approved methods for measuring 
        the poverty levels of current or prospective clients of 
        microenterprise institutions for purposes of assistance under 
        section 252.
    ``(b) Application.--The Administrator shall require that, with 
reasonable exceptions, all eligible implementing partner organizations 
applying for microenterprise assistance under this title use one of the 
certified methods, beginning not later than October 1, 2005, to 
determine and report the poverty levels of current or prospective 
clients.

``SEC. 255. AUTHORIZATION OF APPROPRIATIONS; ADDITIONAL AUTHORITIES.

    ``(a) Authorization of Appropriations.--There are authorized to be 
appropriated to the President to carry out this subtitle $200,000,000 
for fiscal year 2005 and such sums as may be necessary for fiscal year 
2006.
    ``(b) Additional Authorities.--(1) Amounts appropriated pursuant to 
the authorization of appropriations under subsection (a)--
            ``(A) may be referred to as the `Microenterprise 
        Development Assistance Account';
            ``(B) shall be allocated to the Office, and upon approval 
        by the Director of the Office, may be reallocated to field 
        missions of the Agency in furtherance of the purposes of this 
        title;
            ``(C) are authorized to remain available until expended; 
        and
            ``(D) are in addition to amounts otherwise available for 
        such purposes.
    ``(2) Notwithstanding any other provision of law, amounts made 
available for assistance for microenterprise development assistance 
under any provision of law other than this title may be provided to 
further the purposes of this title. To the extent assistance described 
in the preceding sentence is provided in accordance with such sentence, 
the Administrator of the Agency shall include, as part of the report 
required under section 258, a detailed description of such assistance 
and, to the extent applicable, the information required by paragraphs 
(1) through (10) of subsection (b) of such section with respect to such 
assistance.''.

SEC. 4. MICROENTERPRISE DEVELOPMENT CREDITS.

    (a) Transfer.--Section 108 of the Foreign Assistance Act of 1961 
(22 U.S.C. 2151f) is hereby--
            (1) transferred from chapter 1 of part I of the Foreign 
        Assistance Act of 1961 to title VI of chapter 2 of part I of 
        such Act (as added by section 3 of this Act); and
            (2) inserted after section 255 of the Foreign Assistance 
        Act of 1961.
    (b) Redesignation.--Title VI of chapter 2 of part I of the Foreign 
Assistance Act of 1961 is amended by redesignating section 108 (as 
added by subsection (a)) as section 256.
    (c) Conforming Amendments.--Title VI of chapter 2 of part I of the 
Foreign Assistance Act of 1961 is amended--
            (1) by inserting after the title heading the following:

                   ``Subtitle A--Grant Assistance'';

            (2) by inserting after section 255 the following:

                 ``Subtitle B--Credit Assistance''; and

            (3) in section 256 (as redesignated by subsection (b))--
                    (A) in the matter preceding paragraph (1) of 
                subsection (c), by striking ``Administrator of the 
                agency primarily responsible for administering this 
                part'' and inserting ``Administrator of the Agency''; 
                and
                    (B) in subsection (f)(1)--
                            (i) by striking ``section 131'' and 
                        inserting ``this part''; and
                            (ii) by striking ``2001 through 2004'' and 
                        inserting ``2005 and 2006''.

SEC. 5. UNITED STATES MICROFINANCE LOAN FACILITY.

    (a) Transfer.--Section 132 of the Foreign Assistance Act of 1961 
(22 U.S.C. 2152b) is hereby--
            (1) transferred from chapter 1 of part I of the Foreign 
        Assistance Act of 1961 to title VI of chapter 2 of part I of 
        such Act (as added by section 3 of this Act); and
            (2) inserted after section 256 of the Foreign Assistance 
        Act of 1961 (as added by section 4 of this Act).
    (b) Redesignation.--Title VI of chapter 2 of part I of the Foreign 
Assistance Act of 1961 is amended by redesignating section 132 (as 
added by subsection (a)) as section 257.
    (c) Conforming Amendments.--Title VI of chapter 2 of part I of the 
Foreign Assistance Act of 1961 is amended--
            (1) by inserting after section 256 the following:

     ``Subtitle C--United States Microfinance Loan Facility''; and

            (2) in section 257 (as redesignated by subsection (b))--
                    (A) in subsection (b)(3), by striking ``2001 and 
                2002'' and inserting ``2005 and 2006'';
                    (B) in the matter preceding subparagraph (A) of 
                subsection (d)(1), by striking ``the fiscal year 2001'' 
                and inserting ``each of the fiscal years 2005 and 
                2006''; and
                    (C) by striking subsection (e).

SEC. 6. MISCELLANEOUS PROVISIONS.

    Title VI of chapter 2 of part I of the Foreign Assistance Act of 
1961 (as added by section 3 of this Act and amended by sections 4 and 5 
of this Act) is further amended by adding at the end the following new 
subtitle:

                 ``Subtitle D--Miscellaneous Provisions

``SEC. 258. REPORT.

    ``(a) In General.--Not later than December 31, 2005, and each 
December 31 thereafter, the Administrator of the Agency shall submit to 
the appropriate congressional committees a report that contains a 
detailed description of the implementation of this title for the 
previous fiscal year.
    ``(b) Contents.--The report shall contain the following:
            ``(1) The number of grants provided under section 252, with 
        a listing of--
                    ``(A) the amount of each grant;
                    ``(B) the name of each implementing partner 
                organization; and
                    ``(C) a listing of the number of countries 
                receiving assistance authorized by sections 252.
            ``(2) The results of the monitoring system required under 
        section 253.
            ``(3) The process of developing and applying poverty 
        assessment procedures required under section 254.
            ``(4) The percentage of assistance furnished under section 
        252 that was allocated to the very poor based on the data 
        collected using the certified methods required by section 254.
            ``(5) The absolute number of the very poor reached with 
        assistance furnished under section 252.
            ``(6) The amount of assistance provided under section 252 
        through central mechanisms.
            ``(7) The name of each country that receives assistance 
        under section 256 and the amount of such assistance.
            ``(8) An estimate of the percentage of beneficiaries of 
        assistance under this title who are women, including, to the 
        extent practicable, the percentage of these women who have been 
        victims of sex trafficking, as well as information on efforts 
        to provide assistance under this title to women who have been 
        victims of severe forms of trafficking or who were previously 
        involved in prostitution.
            ``(9) Any additional information relating to the provision 
        of assistance authorized by this title, including the use of 
        the poverty measurement tools required by section 254, or 
        additional information on assistance provided by the United 
        States to support microenterprise development under this title 
        or any other provision of law.
            ``(10) An estimate of the percentage of beneficiaries of 
        assistance under this title in countries where a strong 
        relationship between poverty and race or ethnicity has been 
        demonstrated.
    ``(c) Limitation.--The content of the report required by this 
section shall be produced by the Office established under section 
252(b)(1), and shall be made available for free electronic distribution 
through such Office.

``SEC. 259. DEFINITIONS.

    `` In this title:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Agency.
            ``(2) Agency.--The term `Agency' means the United States 
        Agency for International Development.
            ``(3) 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.
            ``(4) Business development services.--The term `business 
        development services' means support for the growth of 
        microenterprises through training, technical assistance, 
        marketing assistance, improved production technologies, and 
        other related services.
            ``(5) Director.--The term `Director' means the Director of 
        the Office.
            ``(6) Eligible implementing partner organization.--The term 
        `eligible implementing partner organization' means an entity 
        eligible to receive assistance under this title which is--
                    ``(A) a United States or an indigenous private 
                voluntary organization;
                    ``(B) a United States or an indigenous credit 
                union;
                    ``(C) a United States or an indigenous cooperative 
                organization;
                    ``(D) an indigenous governmental or nongovernmental 
                organization;
                    ``(E) a microenterprise institution;
                    ``(F) a microfinance institution; or
                    ``(G) a practitioner institution.
            ``(7) Microenterprise institution.--The term 
        `microenterprise institution' means a not-for-profit entity 
        that provides services, including microfinance, training, or 
        business development services, for microentreprise clients in 
        foreign countries.
            ``(8) Microfinance institution.--The term `microfinance 
        institution' means a not-for-profit entity or a regulated 
        financial intermediary that directly provides, or works to 
        expand, the availability of credit, savings, and other 
        financial services to microentreprise clients in foreign 
        countries.
            ``(9) Microfinance network.--The term `microfinance 
        network' means an affiliated group of practitioner institutions 
        that provides services to its members, including financing, 
        technical assistance, and accreditation, for the purpose of 
        promoting the financial sustainability and societal impact of 
        microenterprise assistance.
            ``(10) Office.--The term `Office' means the Office of 
        Microenterprise Development established under section 
        252(b)(1).
            ``(11) Practitioner institution.--The term `practitioner 
        institution' means a not-for-profit entity or a regulated 
        financial intermediary, including a microfinance network, that 
        provides services, including microfinance, training, or 
        business development services, for microentreprise clients, or 
        provides assistance to microenterprise institutions in foreign 
        countries.
            ``(12) Private voluntary organization.--The term `private 
        voluntary organization' means a not-for-profit entity that--
                    ``(A) engages in and supports activities of an 
                economic or social development or humanitarian nature 
                for citizens in foreign countries; and
                    ``(B) is incorporated as such under the laws of the 
                United States, including any of its states, territories 
                or the District of Columbia, or of a foreign country.
            ``(13) United states-supported microfinance institution.--
        The term `United States-supported microfinance institution' 
        means a financial intermediary that has received funds made 
        available under this part for fiscal year 1980 or any 
        subsequent fiscal year.
            ``(14) Very poor.--The term `very poor' means those 
        individuals--
                    ``(A) living in the bottom 50 percent below the 
                poverty line established by the national government of 
                the country in which those individuals live; or
                    ``(B) living on less than the equivalent of $1 per 
                day.''.

SEC. 7. REPEALS.

    (a) Foreign Assistance Act of 1961.--Section 131 of the Foreign 
Assistance Act of 1961 (22 U.S.C. 2152a) is hereby repealed.
    (b) Public Law 108-31.--
            (1) In general.--Section 4 of Public Law 108-31 (22 U.S.C. 
        2151f note) is amended by striking subsection (b).
            (2) Conforming amendment.--Section 4 of Public Law 108-31 
        is amended by striking ``(a)'' and all that follows through 
        ``Not later'' and inserting ``Not later''.

SEC. 8. REFERENCES.

    Any reference in a law, regulation, agreement, or other document of 
the United States to section 108, 131, or 132 of the Foreign Assistance 
Act of 1961 shall be deemed to be a reference to subtitle B of title VI 
of chapter 2 of part I of the Foreign Assistance Act of 1961, subtitle 
A of title VI of chapter 2 of part I of such Act, or subtitle C of 
title VI of chapter 2 of part I of such Act, respectively.

                          Purpose and Summary

    The purpose of ``The Microenterprise Results and 
Accountability Act of 2004'' (H.R. 3818) is to authorize 
microenterprise development assistance for foreign countries 
for the fiscal years 2005 and 2006, and to establish important 
reforms to promote accountability and effectiveness of such 
programs, as administered by the U.S. Agency for International 
Development (USAID).
    H.R. 3818 will consolidate a variety of existing 
microenterprise authorities of the Foreign Assistance Act of 
1961 (including sections 108, 131, and 132) into a single new 
title VI in chapter 2 of Part I of such act.
    The legislation will also place responsibility for carrying 
out the new title with a re-established ``Office of 
Microenterprise Development Assistance'' within USAID. 
Currently, microenterprise programs are designed and managed 
primarily by the various field missions of the Agency, guided 
by a small work unit that receives data from the field and 
provides technical assistance when requested, but that has 
minimal oversight with respect to the efficacy or 
appropriateness of such programs.
    The reforms of H.R. 3818 were prompted by a recent report 
of the General Accounting Office, dated November 2003, and by 
Committee oversight on the Agency's implementation of 
microenterprise development programs.

                Background and Need for the Legislation

    Congress has demonstrated its support for microenterprise 
development assistance programs through the enactment of two 
important laws during the 107th Congress and the 108th 
Congress: The Microenterprise for Self-Reliance Act of 2000 
(title I of Public Law 106-309; 114 Stat. 1082) and Public Law 
108-31 (an act entitled `An Act to amend the Microenterprise 
for Self-Reliance Act of 2000 and the Foreign Assistance Act of 
1961 to increase assistance for the poorest people in 
developing countries under microenterprise assistance program 
under those Acts, and for other purposes', approved June 17, 
2003). The latter bill authorizes microenterprise assistance 
through fiscal year 2004.
    Microenterprise development assistance is one of the great 
success stories of the United States foreign aid program. 
USAID, the agency responsible for implementing microenterprise 
development assistance programs authorized under sections 108 
and 131 of the Foreign Assistance Act of 1961 (22 U.S.C. 2151f 
and 2152a), recognized many years ago the potential of this 
development approach as a way of boosting incomes for the poor. 
USAID has been a leader in building an industry which today 
reaches millions of poor microentrepreneurs, many of whom have 
worked their way out of poverty as a direct result of USAID's 
support.
    Microenterprise is a development tool that consistently 
receives broad bipartisan support from Congress. Members have 
enthusiastically embraced such programs because of a consistent 
track record of results.
    Microenterprise programs are popular in part because they 
provide loans for poor entrepreneurs in the developing world to 
help them start-up and expand their own small businesses. 
Microenterprise programs also build financial institutions to 
assist microentrepreneurs over the course of their lives, in 
business and society.
    Microenterprise has been seen as an effective means of 
empowering the poor and expanding their economic earnings 
potential, as well as the business and social networks that 
provide security in the face of crisis. It is based on a 
``hand-up,'' rather than a ``hand-out'' philosophy.
    Microenterprise allows poor people to protect, diversify 
and increase their income sources, and thus access a path out 
of poverty and hunger. It is an obvious fact that the large 
numbers of poor living on less than a dollar a day must 
increase their household income in order to alter the tide of 
global poverty and achieve the Millennium Development Goals. 
What is less obvious is that unlike the developed world, most 
of employment in the developing world is generated through 
self-employment.
    The Consultative Group to Assist the Poorest (CGAP) draws 
on data from around the developing world that demonstrate how 
millions of microenterprise clients are able to make business 
investments to increase their household incomes, build assets, 
improve the health of their families, keep their children in 
school and reduce their economic vulnerability to crises such 
as civil conflict and HIV/AIDS.
    Not only do microenterprise clients provide for themselves 
and their families, they often employ several employees and 
make a significant contribution to developing trade in their 
local economies. The most common form of business in 
microenterprise is local trading. Trading between villages, 
secondary towns, and cities, is fundamental to developing a 
consumer market in a developing country and building a 
foundation for trade with international markets.
    The success of microenterprise development programs has led 
to an understanding of the importance of an even broader range 
of financial services for poor and very poor people. Such well-
established programs as microbusiness loans and training have 
now been successfully augmented to incorporate a range of 
financial services and products including education, housing, 
consumption, and emergency loans; microinsurance; remittances; 
and, most significantly, savings. In fact, the poor have long 
valued and made excellent use of savings products, and recent 
advances in the microfinance field have made safe, accessible 
savings services more widely available, thus enabling the poor 
to manage crises and save for important events.
    For all of these reasons, the Committee enthusiastically 
supports microenterprise and microfinance development programs. 
The Committee is concerned, however, with the manner in which 
these programs are currently implemented and managed by USAID.
    Despite the program's successes, a recent report by the 
Comptroller General highlighted problems with the 
implementation of existing programs. Having reviewed the report 
and discussed it at great length with GAO officials who 
conducted the study, the Committee believes that USAID is not 
presently organized to adequately coordinate, implement, and 
monitor such programs.
    The Committee believes that improvements in the management 
of microenterprise programs are essential to help fight poverty 
and secure economic opportunity, self-sufficiency, and growth 
in the developing world.
    H.R. 3818 is intended to address Committee concerns about 
the current management and implementation of such programs.
    Currently, there is no official account for microenterprise 
within USAID, no centralized accountability for microenterprise 
funds, and the Agency has contracted out an inappropriately 
large portion of the program to consulting firms and other for-
profit contractors. USAID's own recent assessment showed that 
during fiscal year 2002, out of $165 million provided directly 
to microenterprise organizations, nearly $30 million went to 
consultants. [No consolidated data for fiscal year 2003 was 
available from USAID at the time this report was filed.]
    Numerous worthwhile established organizations that have the 
capacity and expertise to deliver services directly to poor 
clients are locked out of the process when the Agency uses 
``task orders'' against ``indefinite quantity contracts'' with 
for-profit enterprises.
    The Committee believes that there is a role for for-profit 
contractors and consultants, but that the Agency should 
demonstrate the cost-effectiveness and sustainability of such 
approaches, and that the Agency should maintain prime and 
direct responsibility for distributing grants. Awarding 
contracts for the distribution of grants results in an 
unnecessarily high level of overhead expenses and a partial 
disengagement by the Agency from the operation of such 
programs.
    The Comptroller General, in a report dated November 2003, 
found that USAID has met some, but not all, of the key 
objectives of such microenterprise development assistance 
programs. The report found that microenterprise programs are 
indeed helping poor people expand their businesses, but found 
that a lack of coordination and reporting in the USAID is 
hampering results.
    The Comptroller General's report found, among other things, 
the following:

         LMicroenterprise development assistance 
        generally can help alleviate some impacts of poverty, 
        improve income levels and quality of life for borrowers 
        and provide poor individuals, workers, and their 
        families with an important coping mechanism.

         LAlthough studies and academic analyses funded 
        by the United States Agency for International 
        Development have found that microenterprise activities 
        generally serve the poor clustered around the poverty 
        line, few loans appear to be reaching the very poor.

         LMicroenterprise development assistance 
        programs of the United States Agency for International 
        Development have encouraged women's participation in 
        microfinance projects and, according to data of the 
        Agency, women have comprised two-thirds or more of the 
        micro-loan clients in Agency-funded microenterprise 
        projects since 1997.

    The Comptroller General's report recommends that the 
Administrator of USAID review the Agency's 'microenterprise 
results reporting' system with the goal of ensuring that its 
annual reporting is complete and accurate.
    Specifically, the report recommends that the Administrator 
should review and reconsider the methodologies used for the 
collection, analysis, and reporting of data on annual spending 
targets, outreach to the very poor, sustainability of 
microfinance institutions, and the contribution of Agency's 
funding to the institutions it supports.
    Given the relatively high percentage of populations living 
in rural areas of developing countries, and the combined high 
incidence of poverty in rural areas and growing income 
inequality between rural and urban markets, the Committee 
believes microenterprise programs should target both rural and 
urban poor.
    The Committee also believes that microenterprise programs 
have been successful and should continue to empower vulnerable 
women in the developing world. The Committee encourages USAID 
to report on the specific ways that women's needs have been 
considered in the design and implementation of programs. In 
order to get a complete understanding of the impact of 
microenterprise programs on women, reports on client outreach, 
client impact, and program performance should be disaggregated 
by gender.
    Microenterprise programs should take into account the risks 
faced by women who are potential victims of severe forms of 
trafficking and the need for assistance for women who become 
victims of severe forms of trafficking, as provided for in 
section 106(a)(1) of the Trafficking Victims Protection Act of 
2000 (22 U.S.C. 7104(a)(1); Public Law 106-386).
    When people first learn of microenterprise, it is the 
sustainable approach to self-help at the grassroots that they 
often first note. Yet, not only do microenterprise institutions 
help to transform the economic viability of families, they can 
also deliver these social benefits on an ongoing, permanent 
basis and on a large scale.
    Since standard repayment rates are over 93%, many 
microenterprise institutions leverage start-up capital from 
donors with other capital borrowed from commercial sources. 
Microenterprise thus offers the potential for a self-propelling 
cycle of sustainability and growth.
    In a handful of developing countries around the world, the 
microfinance sector has grown to become the dominant part of 
the financial sector in terms of market penetration, while the 
commercial banking sector serves a niche market for the upper 
tier of the economy.
    In Uganda, Kyrgyzstan and Bolivia, microfinance 
institutions are reaching two to five times as many clients as 
the commercial banking sector. The demand among the poor for 
microfinance services in these countries is vast, and the 
governments of such countries have restructured national 
banking laws to accommodate the growth of microfinance 
institutions.
    Such countries have realized that microfinance institutions 
are a key building block in fostering a broad-based 
architecture in the financial sector so that large numbers of 
the working poor and middle class have access to financial 
services.
    It is extremely important to note the large-scale impact 
that microfinance is having on certain national financial 
sectors. Economic pluralism sews the seeds for greater 
democracy in a society. Broad access to financial services must 
be better understood as an essential precursor to broad-based 
economic development and for greater democracy.
    The Committee notes that the field of microenterprise and 
microfinance, in addition to successfully providing assistance 
to those poor clients who seek to build a microenterprise, has 
also expanded to provide assistance to poor people in need of 
financial services such as credit, savings, and insurance.
    The Committee recognizes the importance of providing 
microfinance assistance to these additional clients in need of 
financial and other services but who are currently underserved 
by the commercial banking systems in their country.
    Access to financial services and the development of 
microenterprises can also be supported by programs providing 
training, the development of social capital, technical 
assistance, and business development services. H.R. 3818 
stresses the importance of all of these approaches.
    The World Bank estimates that less than 1 percent of the 4 
billion people living on less than $3 a day have access to 
financial services. The Committee recognizes that USAID has 
been at the forefront of international donors in this area 
through its microfinance program, and has championed a best-
practices agenda that focuses on building strong retail 
financial service providers that can reach tens of thousands of 
poor clients in a sustainable way.
    Historically, USAID's strategic partners for building best-
practice microfinance institutions have been the global non-
profit microfinance networks such as Accion, FINCA, Freedom 
from Hunger, Grameen Foundation, Opportunity International, and 
the World Council of Credit Unions, as well as cooperative and 
private voluntary organizations such as ACDI, Catholic Relief 
Services, Save the Children and World Vision.
    Global microfinance networks and other non-profit private 
voluntary organizations have the operational experience and 
track record in microenterprise and microfinance service 
delivery to poor people. The Committee recognizes that for-
profit entities such as consulting firms have supplemented the 
work of the networks and the non-profits by making excellent 
contributions in the areas of technical assistance, research 
and policy reform. However, the Committee believes that for-
profit consulting firms do not have a comparative advantage in 
delivering microfinance services directly to poor people.
    With the support of USAID, eight of the leading 
microfinance networks report having developed over 250 
microfinance institutions reaching over 2.5 million clients. In 
Uganda and Bolivia for example, the best-practice institutions 
were all developed through networks: Centenary Rural 
Development Bank, FINCA Uganda, PRIDE Uganda, Uganda 
Microfinance Union, Uganda Women Finance Trust, FOCCAS, Faulu 
Bancosol, FIE, Prodem, Promujer, Caja los Andes, and Crecer. On 
the other hand, consulting firms have been responsible for a 
much smaller number of microfinance institutions. Moreover, 
they do not report their data systematically in the 
MicroBanking Bulletin, a publication designed to promote public 
disclosure in the results of microfinance institutions.
    The Committee is concerned that programs administered 
directly by contractors or consulting firms fail to get 
sufficient resources to clients. For example, in a program in 
El Salvador in which there were two USAID field staff members 
fully trained and experienced in microenterprise, USAID awarded 
a contract to a large for-profit enterprise to implement the 
entire microenterprise program, which included distributing 
grants to nongovernmental organizations and cooperatives. This 
approach of contracting out the countrywide management of a 
microenterprise program is increasingly being used by USAID in 
lieu of direct program management. Such approaches seem neither 
cost-effective nor efficient.
    Microfinance networks and other non-profit implementing 
partners leverage resources from international donors such as 
the United States with other donations, debt financing and 
equity investments. Moreover, microfinance networks and non-
profit implement programs at cost. For-profit entities such as 
consulting firms add a profit to the execution of the project 
and do not typically bring additional funding to the table. 
While for-profit entities have historically played a 
constructive role in the provision of specialized technical 
assistance in support of microenterprise development, such 
entities often do not alone have the core competency, 
organizational track record, or structure to mobilize all the 
inputs to build sustainable microenterprise institutions that 
can provide services to large numbers of poor people.
    The Committee recognizes that USAID's microenterprise 
program has flourished in the past by playing to the 
comparative strengths of both non-profit and for-profit 
entities. Accion, FINCA, Opportunity International, Freedom 
from Hunger, World Vision, World Relief, Catholic Relief 
Services and CARE have built and now support more than 250 
microfinance institutions in 75 countries, including some of 
the poorest and most unstable countries in the world. In 2002, 
such networks loaned approximately $1.1 billion to 
approximately 2.5 million clients. Such networks estimate that 
they loaned more than $3 billion over the last 5 years.
    Networks 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.
    Networks and other non-profit partners are committed for 
the long haul to making local financial institutions self-
sustaining, even after USAID assistance ceases. Contractors and 
consulting firms, on the other hand, stop their program once 
the contract ends. Networks and nonprofits accumulate the 
internal knowledge and operational experience that allows them 
to improve their performance over time. Contractors generally 
rely on procuring consultants to perform the work for them.
    In the last 2 years, the Committee notes that USAID has 
begun shifting its focus away from non-profit organizations and 
networks to contractors in the implementation of the Agency's 
microenterprise program. This is happening both at the mission 
level and the global level, through the increasing use of 
centrally-awarded indefinite quantity contracts.
    The Committee notes that in lieu of supporting the networks 
on a global level, USAID has issued a large Indefinite Quantity 
Contract (IQC) with a ceiling of over $100 million known as the 
Accelerated Microenterprise Advancement Project (AMAP). This 
mechanism is a 4-year contracting facility that USAID/
Washington and USAID field missions use to acquire technical 
services to design, implement or evaluate microenterprise 
development activities. This mechanism is largely made up of 
contractors who subcontract out the responsibility of providing 
direct services to clients to the nonprofits and cooperatives. 
The responsibility of the contractors under this mechanism, for 
the most part, is to provide technical assistance, 
administration support functions and research.
    At the country level, USAID has issued similar large 
contracts in countries such as El Salvador, Ecuador, Haiti, 
Zimbabwe, Uganda and Georgia, often averaging in the tens of 
millions of dollars. Some of the funds from these large 
contracts often result in financing expensive ``project 
management units'' and other intermediary costs, leaving much 
less for microenterprise and microfinance service providers 
operating on the ground.
    The Committee believes that an additional concern with 
relying mainly on contractors and consulting firms to implement 
microenterprise and microfinance assistance is the 
sustainability of programs after U.S. assistance ceases. A 
contractor's interest and involvement in a project ends when 
the contract ends. A program implemented by a non-profit entity 
may continue through funding from other donors or through their 
own resources. Contracts for the delivery of microenterprise 
assistance may also cost the U.S. taxpayer more in a variety of 
ways. For example, the prenegotiated salary scales for 
contractors through the Agency's IQCs may be much higher than 
their actual rates, and may also be inappropriately and 
dramatically higher than non-profit salary scales.
    The Committee believes that the use of grants and 
cooperative agreements may be more appropriate for the 
development of microfinance institutions. The vast majority of 
best-practice institutions supported by USAID have been 
developed through cooperative agreements, not contracts. 
Cooperative agreements also require a 25% matching contribution 
from non-USG sources which has led many non-profit entities as 
cited above to match many times that amount. Finally, non-
profits by definition do not take a profit on grants or 
cooperative agreement, but implement the program at cost.
    In sum, the Committee believes that contracts may not be 
the most appropriate mechanism for the delivery of 
microenterprise and microfinance assistance. The Committee 
suggests that the Agency consider the increased use of grants 
and cooperative agreements for the bulk of microenterprise and 
microfinance programming, which has proven to be a successful 
vehicle in the past.
    The Committee believes that USAID and the General 
Accounting Office should study and evaluate existing delivery 
mechanisms, and, after appropriate analysis, recommend the most 
appropriate mechanisms for the most cost-effective, efficient 
and accountable delivery of such services in support of 
microentrepreneurs and other poor clients. The Committee 
intends to request that USAID and the General Accounting Office 
initiate a study on these issues.
    More generally, the Committee is concerned by recent 
decisions taken at USAID suggesting a weakening of commitment 
to microenterprise development. USAID recently lessened the 
status of the work unit responsible for microenterprise 
development within the Agency, and USAID has either eliminated 
or cut back centralized assistance to support networks, credit 
unions, cooperatives and private voluntary organizations. Such 
partners have served as the primary vehicles for the direct 
provision of financial services to the poor in accordance with 
the provisions of the Microenterprise for Self-Reliance Act. 
Such partners are poised to reach hundreds of thousands of 
additional clients.
    The Committee supports the allocation of a portion of 
program funds through central mechanisms that finance the 
technical assistance and loan capital requirements of global 
networks so that they may rapidly scale-up their programs and 
meet industry performance standards. These networks shall be 
subject to external evaluations and should disclose performance 
results to the public in a transparent manner.
    The Committee supports the development of regional bureau 
strategies with practitioners for expanding the microfinance 
sector in each respective region and implement training so that 
USAID field staff responsible for microfinance programs are 
well-trained in microfinance best practices.
The Legislation
    The ``Microenterprise Results and Accountability Act of 
2004 contains key provisions that will improve existing 
microenterprise programs by increasing the Administration's 
oversight of and responsibility for dispersing microenterprise 
funds and by creating better accountability through the 
establishment of an office and a separate microenterprise 
account.
    H.R. 3818 answers the recommendations of the General 
Accounting Office and of the microenterprise practitioner 
community by establishing responsibility for administration of 
microenterprise development assistance within a new Office of 
Microenterprise Development, within the U.S. Agency for 
International Development.
    The headquarters staff of USAID within the Bureau for 
Economic Growth, Agriculture and Trade are currently 
responsible for the development of best practices and for 
contracting a number of core programs, but are not currently 
accountable for the overall provision of microenterprise 
development assistance. Instead, USAID has implemented a system 
of decentralization, whereby microenterprise programs 
administered by the Agency are accountable only at the field 
mission level.
    Decentralization of USAID functions may have had benefits, 
among them that strategies are developed by field missions of 
the Agency who are able to coordinate with the U.S. Embassy and 
host nation officials.
    However, the Committee believes that the management of 
microenterprise programs in the field is only as good as the 
experience and training of mission field staff. Unfortunately, 
in many cases the Agency has elected to ``subcontract'' the 
management of microenterprise programs, even in cases where it 
has trained mission personnel.
    H.R. 3818 will address this fundamental concern by 
requiring the Office established by this act be responsible for 
reviewing or approving all microenterprise activities. Under 
H.R. 3818, programs would continue to be implemented and 
monitored by the field missions of the agency, but overall 
accountability for such programs would be with the central 
Office of Microenterprise Development.
    H.R. 3818 will also ensure that more money goes directly to 
impoverished clients instead of expensive consultants.
    The legislation emphasizes the importance of 
microenterprise and microfinance by establishing a separate 
title called ``Microenterprise Development Assistance'' in the 
Foreign Assistance Act of 1961, and will emphasize the 
importance of using microenterprise programs to help improve 
the lives of the actual victims and potential victims of severe 
forms of trafficking.
    The Committee intends that the term ``microenterprise 
clients'' means individuals, including, but not restricted to, 
microentrepreneurs, who receive any of a broad range of 
financial services, business development services and 
complementary non-financial services delivered by microfinance 
and microenterprise institutions which are designed to increase 
clients' income, build their assets, and improve their quality 
of life.
    The Committee intends that the legislation promote and 
support the delivery of both microfinance and microenterprise 
programs in order to facilitate poverty alleviation, improved 
socioeconomic impact, and increases in social capital. 
Microfinance refers to a range of financial and non-financial 
services such as credit, savings, insurance, remittances, and 
complementary training for individuals, including, but not 
restricted to, microentrepreneurs. Microenterprise development 
refers to a range of services including finance, business 
development services, and non-financial services such as 
training, explicitly for microentrepreneurs.
    The purpose of providing for technical reviews and a 
central funding mechanism is to ensure that established best 
practices are followed and efficiently disseminated, thereby 
ensuring improved performance and the broadest and deepest 
possible outreach. At the same time, it is the intent of this 
legislation that USAID provide incentives for continued 
innovation, within the context of best practices, particularly 
in outreach to the very poor, increasing overall household 
assets, including social as well as financial capital, and 
providing broadened financial and non-financial services that 
facilitate poverty alleviation and improved impact of poverty 
alleviation efforts.
    In requiring that eligible implementing partner 
organizations use certified poverty measurement methods to 
assess the poverty level of their current or prospective 
clients by October 2005, the intent of the Committee is for 
implementing partners to use these methods to assess the 
poverty level of incoming clients, or, in the case of new 
programs, the poverty level of prospective clients and would 
not require programs to certify the poverty level of existing 
clients. It is the Committee's hope, however, that over time 
these or related poverty assessment methods will be useful in 
determining the impact of programs on client movement out of 
poverty.
    The November 2003 report of the Comptroller General stated 
that ``. . . many practitioners, including USAID, now generally 
consider loan size an inadequate indicator of clients level of 
poverty.''
    This finding was a major impetus for passage in 2003 of 
H.R. 192 that provided a framework for USAID to certify and put 
into use at least two new and more effective poverty 
measurement methods to better measure and ensure that 50 
percent of USAID microenterprise development resources are 
benefiting very poor clients.
    The Committee intended in H.R. 192, and in this 
legislation, that the definition of ``very poor'' be ``those 
individuals living on less than the equivalent of one dollar 
per day'' where ``one dollar per day'' is adjusted for local 
purchasing power parity.
    The Committee retained language on loan size as a way to 
define the ``very poor'' for USAID to use until the new 
measurements of assessing the poverty levels of the clients 
(linked more directly to one of the two conceptual definitions 
in H.R. 192--either the bottom fifty percent below the national 
poverty line, or those living on less than the equivalent of 
one dollar per day) have been certified and adopted by USAID, 
effective October 1, 2005.
    Since women comprise approximately 70 percent of the 
world's poor, it is expected that women's needs shall be 
explicitly considered through these innovations, as well as 
expansions of existing services, in both the design and 
implementation of financial products and other non-financial 
services. The Committee therefore encourages USAID to report on 
the specific ways women's needs and assets have been considered 
in the design and implementation of programs.
    The Committee believes that economic empowerment, 
especially for women, is a vital aspect of any strategy to 
combat the spread of HIV/AIDS, and particularly empowers women 
to protect themselves from transmission of HIV. Microfinance 
institutions can play a critical role in providing not only 
financial products and services to respond to the grave 
financial impact of the pandemic at the client household level, 
but also disseminating prevention and awareness information to 
clients in HIV/AIDS affected communities.
    Accountability and effectiveness of U.S. foreign aid 
programs should be paramount considerations by Congress and the 
Executive Branch. The structure for reform envisioned by H.R. 
3818 is accountable and responsible, and is based on that of 
other successful programs, including the Food for Peace program 
and the Development Credit program.
    Ensuring better results--not authorizing additional money--
is the focus of this legislation. H.R. 3818 reauthorizes 
funding for microenterprise programs for FY 2005 at a level 
consistent with the FY2004 authorization of $200 million. The 
legislation authorizes such sums as necessary for FY2006.

                                Hearings

    The Committee did not hold any hearings on microenterprise 
assistance during the second session of the 108th Congress 
prior to the consideration of H.R. 3818

                        Committee Consideration

    H.R. 3818 was introduced by Vice Chairman Smith on February 
24, 2004, and was referred to the Committee on International 
Relations. The Committee considered H.R. 3818 at a meeting on 
February 25, 2004.

                         Summary of Amendments

    The Committee adopted three amendments en bloc, offered by 
Rep. Meeks. The first amendment, inserted in section 251 of the 
new Microenterprise Development Assistance title established by 
the bill, a new finding which cites the success of 
microenterprise programs in empowering disenfranchised groups 
such as women, and suggests that such programs should also 
target populations disenfranchised due to race or ethnicity in 
countries where a strong relationship between poverty and race 
or ethnicity has been demonstrated, such as countries in Latin 
America.
    The second amendment amended section 252(a)(2) of the new 
title to authorize provision of assistance to conduct market 
analysis and product development for the expansion of domestic 
and international sales, particularly to United States markets.
    The third amendment inserted an additional reporting 
element in section 258(b) of the new title that requires an 
estimate of the percentage of beneficiaries of assistance under 
the new title in countries where a strong relationship between 
poverty and race or ethnicity has been demonstrated.
    The amendments en bloc were agreed to by voice vote.
    The Committee ordered H.R. 3818 reported favorably to the 
House, as amended, by a voice vote.

                         Vote of the Committee

    The measure passed by voice vote. There were no recorded 
votes.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that 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.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House Rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, March 4, 2004.
Hon. Henry J. Hyde, Chairman,
Committee on International Relations,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3818, the 
Microenterprise Results and Accountability Act of 2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Joseph C. 
Whitehill, who can be reached at 226-2840.
            Sincerely,
                                       Douglas Holtz-Eakin.
Enclosure

cc:
        Honorable Tom Lantos,
        Ranking Member.
H.R. 3818--Microenterprise Results and Accountability Act of 2004.

                                SUMMARY

    H.R. 3818 would create within the U.S. Agency for 
International Development (USAID) a new Office of 
Microenterprise Development. The bill would authorize the 
appropriation of $200 million for fiscal year 2005 and such 
sums as may be necessary for 2006 for grants and credits to 
microenterprise development programs, or programs that would 
provide access to financial services to poor persons in 
developing countries. A new Office of Microenterprise 
Development would be responsible for coordinating all 
microenterprise activities funded by USAID. CBO estimates that 
implementing H.R. 3818 would cost $354 million over the 2005-
2009 period, assuming the appropriation of the authorized 
amounts. H.R. 3818 would not affect direct spending or 
receipts.
    H.R. 3818 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. 3818 is shown in the 
following table. The costs of this legislation fall within 
budget function 150 (international affairs).

                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                              2004     2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Spending Under Current Law for Microenterprise Grants           200        0        0        0        0        0
and Loans
  Estimated Budget Authority \1\
  Estimated Outlays                                             160      152       79       40       19       11
Proposed Changes                                                  0      200      203        0        0        0
  Estimated Authorization Level
  Estimated Outlays                                               0       26      103      122       69       34
Spending Under H.R. 3818 for Microenterprise Grants             200      200      203        0        0        0
and Loans
  Estimated Authorization Level \1\
  Estimated Outlays                                             160      178      182      162       88       45
----------------------------------------------------------------------------------------------------------------
\1\ The 2004 level is the amount authorized for that year. Because USAID has not published its operating budget
  for 2004, CBO has used the amount authorized for 2004 for the purpose of this estimate.

                           BASIS OF ESTIMATE

    H.R. 3818 would authorize the appropriation of $200 million 
in 2005 and such sums as may be necessary in 2006 for 
activities designed to promote microenterprises. The estimate 
assumes that the bill will be enacted late in 2004, that the 
authorized amounts will be provided in annual appropriation 
acts, and that outlays will follow historical spending 
patterns. It also assumes funding in 2006 at the level 
authorized for 2005 adjusted for inflation. (If appropriations 
in 2006 were not adjusted for inflation, CBO estimates that 
spending over the 2006-2009 period would be $3 million lower 
than the amounts shown above.)
    The bill would encourage the use of centralized 
decisionmaking within USAID for microenterprise programs. It 
would establish a new office within USAID that would be 
required to review or approve each grant agreement before funds 
are obligated by field missions or implementing partner 
organizations. Based on information from USAID, CBO expects 
that the new office would require a director and up to an 
additional six full-time positions. CBO estimates the new 
requirements would increase administrative expenses by about $1 
million a year. The estimate assumes the necessary funds are 
included in the authorized amounts.

              INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

    H.R. 3818 contains no intergovernmental or private-sector 
mandates as defined in UMRA and would not affect the budgets of 
state, local, or tribal governments.

                    Performance Goals and Objectives

    The goals and objectives of this legislation are to improve 
the results and accountability of the microenterprise 
development programs administered under the authority of the 
Foreign Assistance Act of 1961.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8, clause 18 of the 
Constitution (relating to making all laws necessary and proper 
for carrying into execution powers vested by the Constitution 
in the Government of the United States).

               Section-by-Section Analysis and Discussion

    Section 1. Short Title. Section 1 contains a short title, 
the ``Microenterprise Results and Accountability Act of 2004.''
    Section 2. Findings and Policy. Section 2 contains five 
findings or statements of policy, including findings on past 
Congressional support for microenterprise development 
assistance programs through the enactment of Public Laws 106-
309 and 108-31; a finding that states the U.S. Agency for 
International Development is not presently organized to 
adequately coordinate, implement and monitor microenterprise 
development assistance programs; and statements summarizing 
salient points from the Comptroller General's report on 
microenterprise development assistance, dated November 2003.
    Section 3. Microenterprise Development Assistance. Section 
3 amends chapter 2 of part I of the Foreign Assistance Act of 
1961 by inserting a new title, designated as title VI, entitled 
``Microenterprise Development Assistance.''
    Subtitle A of the new title includes five sections:
    Section 251 includes five findings or declarations of 
policy concerning the importance of microenterprise development 
assistance in promoting stable economic growth in developing 
countries and in promoting the developing of free, open, and 
equitable international economic systems.
    Section 252(a) authorizes microenterprise development 
assistance on a grant basis for programs in developing 
countries to increase the availability of credit, savings and 
other services to microenterprises lacking full access to 
capital, training, technical assistance, and business 
development services, through (1) grants to microfinance 
institutions for the purpose of expanding the availability of 
credit, savings, and other financial services to 
microenterprise clients; (2) grants to microenterprise 
institutions for the purpose of training, technical assistance, 
and business development services 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; (3) capacity-building for microenterprise institutions 
in order to enable them to better meet the credit, savings, and 
training needs of microenterprise clients; and (4) policy and 
regulatory programs at the country level that improve the 
environment for microenterprise clients and microenterprise 
institutions that serve the poor and very poor.
    Section 252(b)(1)(A) establishes within the Agency an 
Office of Microenterprise Development, which shall be headed by 
a Director who shall be appointed by the Administrator and who 
should possess technical expertise and ability to offer 
leadership in the field of microenterprise development.
    Section 252(b)(1)(B) requires the Office to coordinate and 
be responsible for the provision of assistance under title VI.
    Section 252(b)(2) requires that assistance under section 
252(a) be provided through grants executed, approved, or 
reviewed by the Office to eligible implementing partner 
organizations that have a capacity to develop and implement 
microenterprise programs. ``Eligible implementing partner 
organizations'' is a defined term in section 259, which is 
included in the new title VI.
    Section 252(b)(3) establishes that the Office, with respect 
to assistance under section 252(a) that is furnished through 
field missions of the Agency, shall be responsible for 
reviewing or approving each grant agreement prior to obligation 
of funds under the agreement in order to ensure that activities 
to be carried out using such funds are efficacious, technically 
sound, and suitable for the economic and security climate of 
the country or region where the activities will be conducted; 
and approving microenterprise development components of 
strategic plans of missions, bureaus, and offices of the 
Agency. In this context, reviewing grant agreements could refer 
to review of requests for proposals or other forms of the grant 
prior to negotiation or finalization of the grant agreement.
    Section 252(c) concerns ``targeted assistance,'' and 
includes language that already appears in existing law (section 
131 of the FAA).
    Section 252(d) includes language similar to existing law 
which states that the Administrator should increase the use of 
central mechanisms through microenterprise, microfinance, and 
practitioner institutions in the implementation of title VI.
    Section 253 requires that the Administrator, acting through 
the Director of the Office, establish a monitoring system that 
(1) establishes performance goals for the 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 
performance goals described above and the objectives of the 
assistance authorized under section 252; (3) provides a basis 
for recommendations for adjustments to the assistance to 
enhance the sustainability and the impact of the assistance, 
particularly the impact of such assistance on the very poor, 
particularly poor women; and adopts the widespread use of 
proven and effective poverty assessment tools to successfully 
identify the very poor and ensure that they receive adequate 
access to microenterprise loans, savings, and assistance.
    Section 254(a) repeats language from existing law (section 
131) and requires the Administrator, in consultation with 
microenterprise institutions and other appropriate 
organizations, to develop no fewer than two low-cost methods 
for eligible implementing partner organizations to use to 
assess the poverty levels of their current or prospective 
clients. This section requires the Administrator to develop 
poverty indicators that correlate with the circumstances of the 
very poor. This section requires the Administrator to field-
test the required methods; and, not later than October 1, 2004, 
the Administrator to, certify from among such the low-cost 
poverty measurement methods no fewer than two such methods as 
approved methods for measuring the poverty levels of current or 
prospective clients of microenterprise institutions for 
purposes of assistance under section 252.
    Section 254(b) restates existing law by requiring that, 
with reasonable exceptions, all eligible implementing partner 
organizations applying for microenterprise assistance under 
title VI shall use one of the certified methods, beginning not 
later than October 1, 2005, to determine and report the poverty 
levels of current or prospective clients.
    Section 255(a) authorizes there to be appropriated to the 
President to carry out subtitle A $200,000,000 for fiscal year 
2005 and such sums as may be necessary for fiscal year 2006.
    Section 255(b)(1) provides that amounts appropriated 
pursuant to the authorization of appropriations under 
subsection 255(a) may be referred to as the `Microenterprise 
Development Assistance Account'; shall be allocated to the 
Office, and upon approval by the Director of the Office, may be 
reallocated to field missions of the Agency in furtherance of 
the purposes of this title; are authorized to remain available 
until expended; and are in addition to amounts otherwise 
available for such purposes.
    Section 255(b)(2) provides that, notwithstanding any other 
provision of law, amounts made available for assistance for 
microenterprise development assistance under any provision of 
law other than this title may be provided to further the 
purposes of title VI. To the extent assistance described in the 
preceding sentence is provided in accordance with such 
sentence, the Administrator of the Agency shall include, as 
part of the report required under section 258, a detailed 
description of such assistance and, to the extent applicable, 
the information required by paragraphs (1) through (9) of 
subsection (b) of section 258 with respect to such assistance.
    Section 4. Microenterprise Development Credits. Section 4 
amends the Foreign Assistance Act of 1961 by transferring 
section 108 of such act from chapter 1 of part I to subtitle B 
of the new title VI (as added by section 3), inserting it after 
section 255 (as added by section 3), and redesignating the 
transferred section as section 256. Section 108 from existing 
law otherwise is unchanged, with the exception of the 
authorization of such section for the fiscal years 2005 and 
2006.
    Section 5. United States Microfinance Loan Facility. 
Section 5 amends the Foreign Assistance Act of 1961 by 
transferring section 132 of such act from chapter 1 of part I 
to subtitle C of the new title VI (as added by section 3), 
inserting it after section 256 (as added by section 4), and 
redesignating the transferred section as section 257. Section 
132 from existing law otherwise is unchanged, with the 
exception of the authorization of such section for the fiscal 
years 2005 and 2006.
    Section 6. Miscellaneous Provisions. Section 6 amends the 
newly established title VI by adding at the end a new subtitle 
D, entitled ``Miscellaneous Provisions,'' which includes two 
sections:
    Section 258(a) requires that Not later than December 31, 
2005, and each December 31 thereafter, the Administrator shall 
submit to the appropriate congressional committees a report 
that contains a detailed description of the implementation of 
title VI for the previous fiscal year.
    Section 258(b) requires the report required of section 
258(a) to contain the following information: (1) The number of 
grants provided under section 252, with a listing of the amount 
of each grant; the name of each implementing partner 
organization; and a listing of the number of countries 
receiving assistance authorized by sections 252; (2) The 
results of the monitoring system required under section 253; 
(3) The process of developing and applying poverty assessment 
procedures required under section 254; (4) The percentage of 
assistance furnished under section 252 that was allocated to 
the very poor based on the data collected using the certified 
methods required by section 254; (5) The absolute number of the 
very poor reached with assistance furnished under section 252; 
(6) The amount of assistance provided under section 252 through 
central mechanisms; (7) The name of each country that receives 
assistance under section 256 and the amount of such assistance; 
(8) An estimate of the percentage of beneficiaries of 
assistance under this title who are women, including, to the 
extent practicable, the percentage of these women who have been 
victims of sex trafficking, as well as information on efforts 
to provide assistance under this title to women who have been 
victims of severe forms of trafficking or who were previously 
involved in prostitution; and (9) Any additional information 
relating to the provision of assistance authorized by this 
title, including the use of the poverty measurement tools 
required by section 254, or additional information on 
assistance provided by the United States to support 
microenterprise development under this title or any other 
provision of law.
    Section 258(c) requires that the content of the report 
required by section 258 shall be produced by the Office 
established under section 252(b)(1), and shall be made 
available for free electronic distribution through such Office.
    Section 259 includes 14 definitions used throughout title 
VI.
    Section 7. Repeals. Section 7 repeals section 131 of the 
Foreign Assistance Act, strikes subsection (b) of section 4 of 
P.L. 108-31, and makes a conforming amendment to the same 
section.
    Section 8. References. Section 8 establishes that any 
reference in a law, regulation, agreement, or other document of 
the United States to section 108, 131, or 132 of the Foreign 
Assistance Act of 1961 shall be deemed to be a reference to 
subtitle B of title VI of chapter 2 of part I of the Foreign 
Assistance Act of 1961, subtitle A of title VI of chapter 2 of 
part I of such act, or subtitle C of title VI of chapter 2 of 
part I of such act, respectively.

                        New Advisory Committees

    H.R. 3818 establishes no new advisory committees.

                    Congressional Accountability Act

    H.R. 3818 does not apply to the legislative branch.

                            Federal Mandates

    H.R. 3818 imposes no Federal mandates.

         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 italics, 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. 131. MICROENTERPRISE DEVELOPMENT GRANT ASSISTANCE.

    [(a) Findings and Policy.--Congress finds and declares 
that--
            [(1) access to financial services and the 
        development of microenterprise are vital factors 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 facilitate access to financial 
        services and assist the development of microenterprise 
        in developing countries;
            [(3) access to financial services and the 
        development of microenterprises can be supported by 
        programs providing credit, savings, training, technical 
        assistance, business development services, and other 
        financial and non-financial services; and
            [(4) given the relatively high percentage of 
        populations living in rural areas of developing 
        countries, and the combined high incidence of poverty 
        in rural areas and growing income inequality between 
        rural and urban markets, microenterprise programs 
        should target both rural and urban poor.
    [(b) Authorization.--
            [(1) In general.--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 training, technical assistance, and business 
        development services, through--
                    [(A) grants to microfinance institutions 
                for the purpose of expanding the availability 
                of credit, savings, and other financial 
                services to microentrepreneurs;
                    [(B) grants to microenterprise institutions 
                for the purpose of training, technical 
                assistance, and business development services 
                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 microenterprise 
                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 
                microentrepreneurs and microenterprise 
                institutions that serve the poor and very poor.
            [(2) Implementation.--Assistance authorized under 
        paragraph (1)(A) and (B) 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; or
                    [(C) other indigenous governmental and 
                nongovernmental organizations.
            [(3) Targeted assistance.--In carrying out 
        sustainable poverty-focused programs under paragraph 
        (1), 50 percent of all microenterprise resources shall 
        be targeted to very poor entrepreneurs, defined as 
        those living in the bottom 50 percent below the poverty 
        line as established by the national government of the 
        country. Specifically, such resources shall be used 
        for--
                    [(A) direct support of programs under this 
                subsection through practitioner institutions 
                that--
                            [(i) provide credit and other 
                        financial services to clients who are 
                        very poor, with loans in 1995 United 
                        States dollars of--
                                    [(I) $1,000 or less in the 
                                Europe and Eurasia region;
                                    [(II) $400 or less in the 
                                Latin America region; and
                                    [(III) $300 or less in the 
                                rest of the world; and
                            [(ii) can cover their costs in a 
                        reasonable time period; or
                    [(B) demand-driven business development 
                programs that achieve reasonable cost recovery 
                that are provided to clients holding poverty 
                loans (as defined by the regional poverty loan 
                limitations in subparagraph (A)(i)), whether 
                they are provided by microfinance institutions 
                or by specialized business development services 
                providers.
            [(4) Support for central mechanisms.--The President 
        should continue support for central mechanisms and 
        missions, as appropriate, 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 financial 
                        services to poor entrepreneurs through 
                        a significant grassroots infrastructure 
                        based on market principles; and
                            [(ii) act as wholesale 
                        intermediaries providing a range of 
                        services to microenterprise retail 
                        institutions, including financing, 
                        technical assistance, capacity-
                        building, and safety and soundness 
                        accreditation.
            [(5) Limitation.--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 (b)(1), the Administrator of the agency 
primarily responsible for administering this part 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) adopts the widespread use of proven and 
        effective poverty assessment tools to successfully 
        identify the very poor and ensure that they receive 
        needed microenterprise loans, savings, and assistance.
    [(d) Development and Certification of Poverty Measurement 
Methods; Application of Methods.--
            [(1) Development and certification.--(A) The 
        Administrator of the United States Agency for 
        International Development, in consultation with 
        microenterprise institutions and other appropriate 
        organizations, shall develop no fewer than two low-cost 
        methods for partner institutions to use to assess the 
        poverty levels of their current or prospective clients. 
        The United States Agency for International Development 
        shall develop poverty indicators that correlate with 
        the circumstances of the very poor.
            [(B) The Administrator shall field-test the methods 
        developed under subparagraph (A). As part of the 
        testing, institutions and programs may use the methods 
        on a voluntary basis to demonstrate their ability to 
        reach the very poor.
            [(C) Not later than October 1, 2004, the 
        Administrator shall, from among the low-cost poverty 
        measurement methods developed under subparagraph (A), 
        certify no fewer than two such methods as approved 
        methods for measuring the poverty levels of current or 
        prospective clients of microenterprise institutions for 
        purposes of assistance under this section.
            [(2) Application.--The Administrator shall require 
        that, with reasonable exceptions, all organizations 
        applying for microenterprise assistance under this Act 
        use one of the certified methods, beginning no later 
        than October 1, 2005, to determine and report the 
        poverty levels of current or prospective clients.
    [(e) Level of Assistance.--Of the funds made available 
under this part, the FREEDOM Support Act, and the Support for 
East European Democracy (SEED) Act of 1989, including local 
currencies derived from such funds, there are authorized to be 
available $155,000,000 for each of the fiscal years 2001 and 
2002 and $175,000,000 for fiscal year 2003 and $200,000,000 for 
fiscal year 2004, to carry out this section.
    [(f) Definitions.--In this section:
            [(1) Business development services.--The term 
        ``business development services'' means support for the 
        growth of microenterprises through training, technical 
        assistance, marketing assistance, improved production 
        technologies, and other services.
            [(2) Microenterprise institution.--The term 
        ``microenterprise institution'' means an institution 
        that provides services, including microfinance, 
        training, or business development services, for 
        microentrepreneurs.
            [(3) Microfinance institution.--The term 
        ``microfinance institution'' means an institution that 
        directly provides, or works to expand, the availability 
        of credit, savings, and other financial services to 
        microentrepreneurs.
            [(4) Practitioner institution.--The term 
        ``practitioner institution'' means any institution that 
        provides services, including microfinance, training, or 
        business development services, for microentrepreneurs, 
        or provides assistance to microenterprise institutions.
            [(5) Very poor.--The term ``very poor'' means those 
        individuals--
                    [(A) living in the bottom 50 percent below 
                the poverty line established by the national 
                government of the country in which those 
                individuals live; or
                    [(B) living on less than the equivalent of 
                $1 per day.]

           *       *       *       *       *       *       *


Chapter 2--Other Programs

           *       *       *       *       *       *       *


            TITLE VI--MICROENTERPRISE DEVELOPMENT ASSISTANCE

                      Subtitle A--Grant Assistance

SEC. 251. FINDINGS AND POLICY.

    Congress finds and declares the following:
            (1) Access to financial services and the 
        development of microenterprise are vital factors 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 facilitate access to financial 
        services and assist the development of microenterprise 
        in developing countries.
            (3) Access to financial services and the 
        development of microenterprises can be supported by 
        programs providing credit, savings, training, technical 
        assistance, business development services, and other 
        financial services.
            (4) Given the relatively high percentage of 
        populations living in rural areas of developing 
        countries, and the combined high incidence of poverty 
        in rural areas and growing income inequality between 
        rural and urban markets, microenterprise programs 
        should target both rural and urban poor.
            (5) Microenteprise programs have been successful 
        and should continue to empower vulnerable women in the 
        developing world. Such programs should take into 
        account the risks faced by women who are potential 
        victims of severe forms of trafficking and the need for 
        assistance for women who become victims of severe forms 
        of trafficking, as provided for in section 106(a)(1) of 
        the Trafficking Victims Protection Act of 2000 (22 
        U.S.C. 7104(a)(1); Public Law 106-386).
            (6) Given that microenterprise programs have been 
        successful in empowering disenfranchised groups such as 
        women, microenterprise programs should also target 
        populations disenfranchised due to race or ethnicity in 
        countries where a strong relationship between poverty 
        and race or ethnicity has been demonstrated, such as 
        countries in Latin America.

SEC. 252. AUTHORIZATION; IMPLEMENTATION; TARGETED ASSISTANCE.

    (a) Authorization.--The President is authorized to provide 
assistance on a grant basis for programs in developing 
countries to increase the availability of credit, savings, and 
other services to microenterprises lacking full access to 
capital, training, technical assistance, and business 
development services, through--
            (1) grants to microfinance institutions for the 
        purpose of expanding the availability of credit, 
        savings, and other financial services to 
        microentreprise clients;
            (2) grants to microenterprise institutions for the 
        purpose of training, technical assistance, and business 
        development services for microenterprises to enable 
        them to make better use of credit, to better manage 
        their enterprises, to conduct market analysis and 
        product development for expanding domestic and 
        international sales, particularly to United States 
        markets, and to increase their income and build their 
        assets;
            (3) capacity-building for microenterprise 
        institutions in order to enable them to better meet the 
        credit, savings, and training needs of microentreprise 
        clients; and
            (4) policy and regulatory programs at the country 
        level that improve the environment for microentreprise 
        clients and microenterprise institutions that serve the 
        poor and very poor.
    (b) Implementation.--
            (1) Office of microenterprise development.--
                    (A) Establishment.--There is established 
                within the Agency an Office of Microenterprise 
                Development, which shall be headed by a 
                Director who shall be appointed by the 
                Administrator and who should possess technical 
                expertise and ability to offer leadership in 
                the field of microenterprise development.
                    (B) Duties.--The Office shall coordinate 
                and be responsible for the provision of 
                assistance under this title.
            (2) Assistance through grants to eligible 
        organizations.--Assistance under subsection (a) shall 
        be provided through grants executed, approved, or 
        reviewed by the Office to eligible implementing partner 
        organizations that have a capacity to develop and 
        implement microenterprise programs.
            (3) Review and approval.--With respect to 
        assistance under subsection (a) that is furnished 
        through field missions of the Agency, the Office shall 
        be responsible for--
                    (A) reviewing or approving each grant 
                agreement prior to obligation of funds under 
                the agreement in order to ensure that 
                activities to be carried out using such funds 
                are efficacious, technically sound, and 
                suitable for the economic and security climate 
                of the country or region where the activities 
                will be conducted; and
                    (B) approving microenterprise development 
                components of strategic plans of missions, 
                bureaus, and offices of the Agency.
    (c) Targeted Assistance.--In carrying out sustainable 
poverty-focused programs under subsection (a), 50 percent of 
all microenterprise resources shall be targeted to very poor 
clients, defined as those individuals living in the bottom 50 
percent below the poverty line as established by the national 
government of the country. Specifically, such resources shall 
be used for--
            (1) support of programs under this section through 
        practitioner institutions that--
                    (A) provide credit and other financial 
                services to clients who are very poor, with 
                loans in 1995 United States dollars of--
                            (i) $1,000 or less in the Europe 
                        and Eurasia region;
                            (ii) $400 or less in the Latin 
                        America region; and
                            (iii) $300 or less in the rest of 
                        the world; and
                    (B) can cover their costs in a reasonable 
                time period; or
            (2) demand-driven business development programs 
        that achieve reasonable cost recovery that are provided 
        to clients holding poverty loans (as defined by the 
        regional poverty loan limitations in paragraph (1)(A)), 
        whether they are provided by microfinance institutions 
        or by specialized business development services 
        providers.
    (d) Support for Central Mechanisms.--The Administrator 
should increase the use of central mechanisms through 
microenterprise, microfinance, and practitioner institutions in 
the implementation of this title.

SEC. 253. MONITORING SYSTEM.

    (a) Establishment.--In order to maximize the sustainable 
development impact of assistance authorized under section 
252(a), the Administrator of the Agency, acting through the 
Director of the Office, shall establish a monitoring system 
that meets the requirements of subsection (b).
    (b) Requirements.--The requirements referred to in 
subsection (a) are the following:
            (1) The monitoring system establishes performance 
        goals for the assistance and expresses such goals in an 
        objective and quantifiable form, to the extent 
        feasible.
            (2) The monitoring system establishes performance 
        indicators to be used in measuring or assessing the 
        achievement of the performance goals described in 
        paragraph (1) and the objectives of the assistance 
        authorized under section 252.
            (3) The monitoring system provides a basis for 
        recommendations for adjustments to the assistance to 
        enhance the sustainability and the impact of the 
        assistance, particularly the impact of such assistance 
        on the very poor, particularly poor women.
            (4) The monitoring system adopts the widespread use 
        of proven and effective poverty assessment tools to 
        successfully identify the very poor and ensure that 
        they receive adequate access to microenterprise loans, 
        savings, and assistance.

SEC. 254. DEVELOPMENT AND CERTIFICATION OF POVERTY MEASUREMENT METHODS; 
                    APPLICATION OF METHODS.

    (a) Development and Certification.--
            (1) In general.--The Administrator of the Agency, 
        in consultation with microenterprise institutions and 
        other appropriate organizations, shall develop no fewer 
        than two low-cost methods for eligible implementing 
        partner organizations to use to assess the poverty 
        levels of their current or prospective clients. The 
        Administrator shall develop poverty indicators that 
        correlate with the circumstances of the very poor.
            (2) Field testing.--The Administrator shall field-
        test the methods developed under paragraph (1). As part 
        of the testing, institutions and programs may use the 
        methods on a voluntary basis to demonstrate their 
        ability to reach the very poor.
            (3) Certification.--Not later than October 1, 2004, 
        the Administrator shall, from among the low-cost 
        poverty measurement methods developed under paragraph 
        (1), certify no fewer than two such methods as approved 
        methods for measuring the poverty levels of current or 
        prospective clients of microenterprise institutions for 
        purposes of assistance under section 252.
    (b) Application.--The Administrator shall require that, 
with reasonable exceptions, all eligible implementing partner 
organizations applying for microenterprise assistance under 
this title use one of the certified methods, beginning not 
later than October 1, 2005, to determine and report the poverty 
levels of current or prospective clients.

SEC. 255. AUTHORIZATION OF APPROPRIATIONS; ADDITIONAL AUTHORITIES.

    (a) Authorization of Appropriations.--There are authorized 
to be appropriated to the President to carry out this subtitle 
$200,000,000 for fiscal year 2005 and such sums as may be 
necessary for fiscal year 2006.
    (b) Additional Authorities.--(1) Amounts appropriated 
pursuant to the authorization of appropriations under 
subsection (a)--
            (A) may be referred to as the ``Microenterprise 
        Development Assistance Account'';
            (B) shall be allocated to the Office, and upon 
        approval by the Director of the Office, may be 
        reallocated to field missions of the Agency in 
        furtherance of the purposes of this title;
            (C) are authorized to remain available until 
        expended; and
            (D) are in addition to amounts otherwise available 
        for such purposes.
    (2) Notwithstanding any other provision of law, amounts 
made available for assistance for microenterprise development 
assistance under any provision of law other than this title may 
be provided to further the purposes of this title. To the 
extent assistance described in the preceding sentence is 
provided in accordance with such sentence, the Administrator of 
the Agency shall include, as part of the report required under 
section 258, a detailed description of such assistance and, to 
the extent applicable, the information required by paragraphs 
(1) through (10) of subsection (b) of such section with respect 
to such assistance.

                     Subtitle B--Credit Assistance

SEC. [108.] 256. MICROENTERPRISE DEVELOPMENT CREDITS.

    (a) * * *

           *       *       *       *       *       *       *

    (c) Eligibility Criteria.--The [Administrator of the agency 
primarily responsible for administering this part] 
Administrator of the Agency shall establish criteria for 
determining which microfinance institutions described in 
subsection (b)(1) are eligible to carry out activities, with 
respect to microenterprise households, assisted under this 
section. Such criteria may include the following:
            (1) * * *

           *       *       *       *       *       *       *

    (f ) Availability of Funds.--
            (1) In general.--Of the amounts authorized to be 
        available to carry out [section 131] this part, there 
        are authorized to be available $1,500,000 for each of 
        fiscal years [2001 through 2004] 2005 and 2006 to carry 
        out this section.

           *       *       *       *       *       *       *


          Subtitle C--United States Microfinance Loan Facility

SEC. [132.] 257. UNITED STATES MICROFINANCE LOAN FACILITY.

    (a) * * *
    (b) Disbursements.--
            (1) * * *

           *       *       *       *       *       *       *

            (3) Congressional notification procedures.--During 
        each of the fiscal years [2001 and 2002] 2005 and 2006, 
        funds may not be made available from the Facility until 
        15 days after notification of the proposed availability 
        of the funds has been provided to the congressional 
        committees specified in section 634A in accordance with 
        the procedures applicable to reprogramming 
        notifications under that section.

           *       *       *       *       *       *       *

    (d) Funding.--
            (1) Allocation of funds.--Of the amounts made 
        available to carry out this part for [the fiscal year 
        2001] each of the fiscal years 2005 and 2006, up to 
        $5,000,000 may be made available for--
                    (A) * * *

           *       *       *       *       *       *       *

    [(e) Definitions.--In this section:
            [(1) Administrator.--The term ``Administrator'' 
        means the Administrator of the agency primarily 
        responsible for administering this part.
            [(2) Appropriate congressional committees.--The 
        term ``appropriate congressional committees'' means the 
        Committee on Foreign Relations of the Senate and the 
        Committee on International Relations of the House of 
        Representatives.
            [(3) United states-supported microfinance 
        institution.--The term ``United States-supported 
        microfinance institution'' means a financial 
        intermediary that has received funds made available 
        under part I of this Act for fiscal year 1980 or any 
        subsequent fiscal year.]

                  Subtitle D--Miscellaneous Provisions

SEC. 258. REPORT.

    (a) In General.--Not later than December 31, 2005, and each 
December 31 thereafter, the Administrator of the Agency shall 
submit to the appropriate congressional committees a report 
that contains a detailed description of the implementation of 
this title for the previous fiscal year.
    (b) Contents.--The report shall contain the following:
            (1) The number of grants provided under section 
        252, with a listing of--
                    (A) the amount of each grant;
                    (B) the name of each implementing partner 
                organization; and
                    (C) a listing of the number of countries 
                receiving assistance authorized by sections 
                252.
            (2) The results of the monitoring system required 
        under section 253.
            (3) The process of developing and applying poverty 
        assessment procedures required under section 254.
            (4) The percentage of assistance furnished under 
        section 252 that was allocated to the very poor based 
        on the data collected using the certified methods 
        required by section 254.
            (5) The absolute number of the very poor reached 
        with assistance furnished under section 252.
            (6) The amount of assistance provided under section 
        252 through central mechanisms.
            (7) The name of each country that receives 
        assistance under section 256 and the amount of such 
        assistance.
            (8) An estimate of the percentage of beneficiaries 
        of assistance under this title who are women, 
        including, to the extent practicable, the percentage of 
        these women who have been victims of sex trafficking, 
        as well as information on efforts to provide assistance 
        under this title to women who have been victims of 
        severe forms of trafficking or who were previously 
        involved in prostitution.
            (9) Any additional information relating to the 
        provision of assistance authorized by this title, 
        including the use of the poverty measurement tools 
        required by section 254, or additional information on 
        assistance provided by the United States to support 
        microenterprise development under this title or any 
        other provision of law.
            (10) An estimate of the percentage of beneficiaries 
        of assistance under this title in countries where a 
        strong relationship between poverty and race or 
        ethnicity has been demonstrated.
    (c) Limitation.--The content of the report required by this 
section shall be produced by the Office established under 
section 252(b)(1), and shall be made available for free 
electronic distribution through such Office.

SEC. 259. DEFINITIONS.

    In this title:
            (1) Administrator.--The term ``Administrator'' 
        means the Administrator of the Agency.
            (2) Agency.--The term ``Agency'' means the United 
        States Agency for International Development.
            (3) 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.
            (4) Business development services.--The term 
        ``business development services'' means support for the 
        growth of microenterprises through training, technical 
        assistance, marketing assistance, improved production 
        technologies, and other related services.
            (5) Director.--The term ``Director'' means the 
        Director of the Office.
            (6) Eligible implementing partner organization.--
        The term ``eligible implementing partner organization'' 
        means an entity eligible to receive assistance under 
        this title which is--
                    (A) a United States or an indigenous 
                private voluntary organization;
                    (B) a United States or an indigenous credit 
                union;
                    (C) a United States or an indigenous 
                cooperative organization;
                    (D) an indigenous governmental or 
                nongovernmental organization;
                    (E) a microenterprise institution;
                    (F) a microfinance institution; or
                    (G) a practitioner institution.
            (7) Microenterprise institution.--The term 
        ``microenterprise institution'' means a not-for-profit 
        entity that provides services, including microfinance, 
        training, or business development services, for 
        microentreprise clients in foreign countries.
            (8) Microfinance institution.--The term 
        ``microfinance institution'' means a not-for-profit 
        entity or a regulated financial intermediary that 
        directly provides, or works to expand, the availability 
        of credit, savings, and other financial services to 
        microentreprise clients in foreign countries.
            (9) Microfinance network.--The term ``microfinance 
        network'' means an affiliated group of practitioner 
        institutions that provides services to its members, 
        including financing, technical assistance, and 
        accreditation, for the purpose of promoting the 
        financial sustainability and societal impact of 
        microenterprise assistance.
            (10) Office.--The term ``Office'' means the Office 
        of Microenterprise Development established under 
        section 252(b)(1).
            (11) Practitioner institution.--The term 
        ``practitioner institution'' means a not-for-profit 
        entity or a regulated financial intermediary, including 
        a microfinance network, that provides services, 
        including microfinance, training, or business 
        development services, for microentreprise clients, or 
        provides assistance to microenterprise institutions in 
        foreign countries.
            (12) Private voluntary organization.--The term 
        ``private voluntary organization'' means a not-for-
        profit entity that--
                    (A) engages in and supports activities of 
                an economic or social development or 
                humanitarian nature for citizens in foreign 
                countries; and
                    (B) is incorporated as such under the laws 
                of the United States, including any of its 
                states, territories or the District of 
                Columbia, or of a foreign country.
            (13) United states-supported microfinance 
        institution.--The term ``United States-supported 
        microfinance institution'' means a financial 
        intermediary that has received funds made available 
        under this part for fiscal year 1980 or any subsequent 
        fiscal year.
            (14) Very poor.--The term ``very poor'' means those 
        individuals--
                    (A) living in the bottom 50 percent below 
                the poverty line established by the national 
                government of the country in which those 
                individuals live; or
                    (B) living on less than the equivalent of 
                $1 per day.

           *       *       *       *       *       *       *

                              ----------                              


                 SECTION 4 OF THE ACT OF JUNE 17, 2003

                          (Public Law 108-31)

 AN ACT To amend the Microenterprise for Self-Reliance Act of 2000 and 
   the Foreign Assistance Act of 1961 to increase assistance for the 
poorest people in developing countries under microenterprise assistance 
           programs under those Acts, and for other purposes.

SEC. 4. REPORT TO CONGRESS.

    [(a) In General.--] Not later than September 30, 2005, the 
Administrator of the United States Agency for International 
Development shall submit to Congress a report that documents 
the process of developing and applying poverty assessment 
procedures with its partners.
    [(b) Reports for Fiscal Year 2006 and Beyond.--Beginning 
with fiscal year 2006, the Administrator of the United States 
Agency for International Development shall annually submit to 
Congress on a timely basis a report that addresses the United 
States Agency for International Development's compliance with 
the Microenterprise for Self-Reliance Act of 2000 by 
documenting--
            [(1) the percentage of its resources that were 
        allocated to the very poor (as defined in paragraph (5) 
        of section 131(f) of the Foreign Assistance Act of 1961 
        (22 U.S.C. 2152a(f)(5))) based on the data collected 
        from its partners using the certified methods; and
            [(2) the absolute number of the very poor 
        reached.]2/26/2004 4:25:28 PM - 
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                            Dissenting Views

    Mr. Chairman, I wish to express my dissenting views on this 
legislation, but first I want to emphasize my support for 
accountability at all levels and branches of government. I am 
outspoken about my concerns over wasteful use of taxpayer 
money, and these concerns factor into my opposition to the bill 
as considered by the committee.
    In particular, I am concerned about provisions in this law 
that exclude for-profit, private sector consulting firms from 
participating in the U.S. Agency for International 
Development's microenterprise development program. Many of 
these firms currently provide valuable services and expertise 
to the Agency and to beneficiaries around the world and do 
about 20 percent of USAID's work in microenterprise 
development. For-profit firms add significant value to USAID's 
program implementation in areas such as loan delivery, legal 
and regulatory reform, and the creation of industry 
infrastructure that serves a broad group of international 
microenterprise development organizations.
    Excluding for-profit firms eliminates an important 
participant in the bidding process for contracts. If we 
eliminate this sector of this industry from bidding, we also 
eliminate potential cost savings and efficiencies that result 
from competition. When competition is reduced, costs rise and 
quality declines. Beneficiaries of the microenterprise program, 
USAID's performance, and U.S. taxpayers would bear the brunt of 
such decline.
    Competition for contracts is not only beneficial on the 
front end of the contracting process, but the potential for 
future contracts gives incentives for all industry players to 
demonstrate their value in the execution and completion of 
contracts. By not including these tax-paying U.S. entities from 
participation, we eliminate contributors that are accountable 
to the congressional program goals by virtue of the contractual 
nature of their business with USAID.
    It is ironic that in a program intended to foster 
entrepreneurship and for-profit enterprises in developing and 
free markets around the world, we propose to limit the 
participation of such enterprises in the very execution of the 
program.
    I urge you to ensure that private sector development firms 
are allowed to continue to participate in the USAID 
microenterprise program.

                                   Jeff Flake.

                                
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