Program Data Sheet
933-010

CENTRAL OPERATING UNIT: Bureau for Economic Growth, Agriculture, and Trade, Economic Growth and Agricultural Development (EGAT/EGAD)
PROGRAM TITLE: Economic Opportunities for the Poor
STRATEGIC OBJECTIVE AND NUMBER: Access to Economic Opportunities for the Poor Expanded, 933-010
STATUS: Continuing
PLANNED FY 2002 OBLIGATION AND FUNDING SOURCE: $18,300,000 DA
PROPOSED FY 2003 OBLIGATION AND FUNDING SOURCE: $17,300,000 DA
INITIAL OBLIGATION: FY 2002      ESTIMATED COMPLETION DATE: FY 2010

Summary: USAID'S program to increase access to economic opportunities for the poor focuses on promoting microenterprise development and policy reforms to make product, financial, and business service markets work better for enterprises in the formal and informal sectors. This will benefit the households that rely on them for vital income and assets. This includes promotion of:

• expanded and more diverse financial services delivered by sustainable financial intermediaries;
• appropriate business development services and new technologies for micro-entrepreneurs, particularly women and the poor; and
• policies and tools to improve the viability and competitiveness of enterprises operated by poor households and their access to needed services.

Passage of the Microenterprise for Self-Reliance Act of 2000 confirmed the role of microenterprise in U.S. foreign assistance programs and emphasized its links to poverty alleviation, growth and competitiveness, and healthy financial sector development.

Inputs, Outputs, and Activities: FY 2002 Program: USAID plans to fund central programs that play a leading role in implementing the Agency's Microenterprise Initiative. The Initiative is a critical element of USAID's economic growth strategy to help the poor increase their income, assets, skills, and productivity through microenterprise development. These programs support innovation and expansion of promising service delivery models, research and dissemination of microenterprise best practices, capacity-building and training activities, and donor coordination. These activities are implemented through competitive grant programs, contracted services, and joint programs with other donors and Public International Organizations (PIOs). A number of these will be carried out under a new umbrella contract for microenterprise development, which is expected to be in place by mid-FY 2002. Dissemination of lessons learned and new tools will be a major priority. Complementary research will assist field missions to advance their poverty reduction strategies by identifying policy options that are simultaneously pro-growth and pro-poor. The office will focus efforts to promote the use of credit instruments where appropriate for the expansion of microfinance and business services, and to support measures by commercial banks and private firms to better serve this market.

Planned FY 2003 Program: USAID plans to use FY 2003 resources requested in this Budget Justification to develop and test new microfinance products (e.g., new savings products, insurance, payment services) that can better meet existing clients' needs and reach out to currently underserved clients (particularly poorer households and more remote rural communities). Funds will also support experimentation with ways to strengthen business services markets that serve poorer entrepreneurs. The office will also expand its research agenda to focus on microfinance in crisis and post-conflict environments, impacts of business development services on these entities, and policy and regulatory measures to level the playing field for informal-sector entrepreneurs and the institutions that serve them. This will include advocacy of an improved legal and regulatory environment for microfinance and entrepreneurs in regions where it is particularly problematic, such as the Caucasus and Central Asia. The office will develop and offer several training and capacity building initiatives in the microfinance and business services arenas for USAID staff, partners, and other donors. Research into the broader policy environment to reduce poverty will complement promotion of an improved legal and regulatory environment for microenterprise development, and will build on policy measures identified in FY2002.

Performance and Results: This FY 02 SO has been preceded by a similar objective; results reported are for the old objective. The Microenterprise Initiative dramatically extended microfinance services. In FY 2000, 4.8 million poor clients (including 2.7 million in a single Indonesian institution) had active loans from USAID-supported institutions. The loans were valued at more than $1.7 billion. Two-thirds of the clients were women. More than 60% of the loans held by the institutions were in sizes appropriate to very poor clients ($300 or below in Africa, Asia and the Near East, $400 or below in Latin America and the Caribbean, and $1,000 or below in the Europe and Eurasia region). Loan repayment rates averaged 95%. USAID-assisted institutions had over three million savings clients with combined savings deposits of $554 million; average savings per clients increased 50% last year. The large Indonesian grantee served an additional 25 million savers. More than 250,000 poor microentrepreneurs received business development services from USAID-assisted institutions, resulting in improved market access, productivity, and earnings. Just over 50% of total funding provided by USAID to its 700+ implementing partners in this field supported very poor entrepreneurs. USAID played a leadership role in identifying and disseminating best practices in both the microfinance and business services areas.

Principal Contractors, Grantees or Agencies: Implementing partners include non-governmental organizations, credit unions, private firms, banks and others that provide financial and business services to microentrepreneurs and their families, as well as research and policy institutes engaged in identifying and disseminating best practices and pro-poor policy measures. In FY 2000, more than 700 microenterprise development institutions had active funding agreements Agency-wide.

US Financing in Thousands of Dollars