WASHINGTON, D.C. – Small loans made available to entrepreneurs abroad are changing lives for the better in some of the world’s poorest countries, but more can be done to build on these successes, according to U.S. Rep. Chris Smith (R-NJ), who chaired a hearing on the issue of microfinance today. 

“Microenterprise focuses on helping the most impoverished people of the world to build themselves up, little by little, into self-sufficiency by providing them with access to financial services like small loans and savings accounts,” said Smith, Chairman of the House International Relations Subcommittee on Africa, Global Human Rights and International Operations.  “The tools of microfinance and microenterprise provide a shining counterpoint to other programs that just don’t perform.”

            Smith convened the hearings so Congress could chart the progress made in the implementation of the Microenterprise Results and Accountability Act of 2004 (P.L. 108-31), a law authored by Smith, and determine how Congress can continue to enhance these beneficial programs.

            Smith’s law created a microenterprise office within the U.S. Agency for International Development (USAID) to oversee field missions and report to Congress; increased competition for grants; required USAID to place a priority on awarding grants to nongovernmental organizations that run microenterprise programs rather than expensive consultants and contractors; and increased reporting requirements to demand greater cost effectiveness and efficiency in the program.

Witnesses at the hearing shared their personal stories about the effectiveness of microfinance programs.  It was noted throughout the hearing that the effort to reach out to women with these programs has been very successful.  In Fiscal Year 2005, USAID granted 61% of their microfinance loans to female clients. As a result, they have started their own business with loans as small as $50.       

Efforts to enhance the programs so that more of USAID funds reach the poorest of the international community were also discussed during the hearing.  USAID reports that only 23% of the loans made in Fiscal Year 2005 reached clients who would fall in the “very poor” category.  Smith’s law calls for that number to reach 50%.

“We need to look at developing innovative tools to ensure that these programs reach the poorest people of the world.  This is an area where we can make a real difference,” Smith said.

While work remains, Smith noted that U.S. microfinance programs have been reformed for the better, pointing to the fact that they helped over 5.8 million clients in Fiscal Year 2005 alone. 

“The result is clear – microenterprise has the power to dramatically change lives for the better,” said Smith.