U.S. Poverty Mandate Discussion

In June 2002, U.S. President George W. Bush reauthorized the Microenterprise for Self Reliance Act of 2000, extending the governments directive that 50% of all U.S. funding for microenterprise be targeted to the very poor. The Act originally indicated that the poverty metric would be average loan size: $1,000 or less in Europe or Eurasia, $400 or less in Latin America, and $300 or less in the rest of the world. Dissatisfaction with the use of average loan size as a proxy for client poverty levels led some to push for more detailed methods of poverty assessment, the creation and adoption of which the reauthorisation now mandates. The legislation has evoked strong opinions on both sides. Although the reauthorization of the Act temporarily muted the debate in the United States, the question remains pressing in light of the possibility of non-U.S. donor agencies and development banks implementing similar rules for their microfinance support. CGAP therefore proposed an open discussion on the issue, in order to inform well-reasoned positions that will promote the development of a financial sector that serves the needs of the poor. A summary of the Act and its implications was posted on the Microfinance Gateway, and reactions and opinions were solicited from members of the global microfinance community. Debate was lively, with some 40 thoughtful responses submitted by donors and practitioners in a brief three-week time period.