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Janashakthi Bank Society, Sri Lanka


USAID Announces $240 Million Microenterprise Initiative

(Hillary Clinton offers enthusiastic support)
By Berta Gomez, USIA Staff Writer, July 24, 1997

Washington. The United States is allocating $240 million over two years to make small, low-interest loans available to the world's poorest families, officials said July 24.

First Lady Hillary Rodham Clinton joined lawmakers and administration officials at a Capitol Hill ceremony renewing the 1994 Microenterprise Development Initiative, through which the U.S. Agency for International Development (USAID) funds lending and training programs that help poor families start or expand small businesses.

"Microcredit is one of the strongest strategies we can employ to assist people to help themselves," the first lady said.

Recipient organizations have included the Jordanian Women's Development Society, Ugafode in Uganda, the Janashakthi Bank Society in Sri Lanka, Banco Solidario in Ecuador and the Rural Bankers' Association of the Philippines.

The renewed USAID program builds on more than 15 years of support for microenterprise as a tool for development. It also builds on the momentum of the first-ever Microcredit Summit in Washington this past February, where donor governments, multilateral banks and non-governmental organizations pledged to make microcredit services available to 100 million families worldwide by the year 2005. Those services now reach an estimated 8 to 10 million families.

"Microenterprise fosters progress at all levels," Hillary Clinton said in a statement. "By empowering people at the grassroots, it deepens the commitment of citizens to democracy. By providing credit to the poor, it allows ever more men and women to pull themselves out of poverty and enter the economic mainstream. By offering new opportunities to women, it moves us all closer to making real the dream of equality."

The United States is the leading bilateral contributor to microenterprise programs and supports about 150 microcredit institutions in more than 40 countries. Although it began supporting microenterprise in the early 1980s, the initiative launched in 1994 reflected a decision to place such programs "front and center" on the development agenda, Clinton said.

Since 1994, USAID has provided more than $400 million to lending programs from Hungary to Honduras. About two-thirds of the clients of microenterprise programs supported by USAID are women, and the loan amounts are generally between $50 to $300, although in some countries — notably in Central Europe — loans for as much as $10,000 are considered microenterprise loans.

USAID's 1997 renewal of the initiative keeps the fundamentals of the program in place, and increases the focus on helping those in extreme poverty. At least half of the loan recipients will be women, and at least two-thirds of the loans will be for less than $300. Institutions that receive the U.S. funds will be required to maintain repayment rates of at least 95 percent.

USAID officials say that the $240 million budget will be spent during fiscal years 1997 and 1998, and that the funding will be divided evenly among four regional bureaus: Africa, Latin America and the Caribbean, Asia and the Near East, and Eastern Europe and the New Independent States.

"We are proud of our history of leadership in this field and we pledge to continue that leadership," USAID Administrator Brian Atwood said. "The challenge before us is to expand the reach of microfinance to the enormous untapped market of the world's poor."

USAID developed the renewal program through consultations with members of Congress and representatives of the Microenterprise Coalition, which includes 25 leading non-profit organizations. Reflecting broad bipartisan support for the initiative, Republican and Democratic members of Congress attended the ceremony and praised the Clinton administration's efforts in promoting microenterprise as one of the most effective ways to alleviate poverty.

The microcredit movement began more than 20 years ago in Bangladesh, where Mohamed Yunus founded the now-famous Grameen Bank and demonstrated that tiny loans — as small as a few dollars — could help impoverished women establish small businesses.

"Microcredit is not charity; it is not a handout," Hillary Clinton stressed. "It operates according to the rules of free enterprise."



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