FY2016 Funding Recommendation:
President's FY2016 Request
InterAction's FY2016 Recommendation
Microfinance provides access to financial services like credit, savings and insurance for the world’s poorest and most marginalized people, enabling poor families to start businesses or meet health, education or emergency needs, thus helping them lift themselves out of poverty.
An estimated 2.5 billion people have no access to formal financial services. Microfinance began as a way to finance self-employment ventures by poor people who lacked employment or income-generating opportunities or could not obtain credit. It has since expanded to include poor households’ management of their finances through savings, credit and insurance for things like enterprise, education, housing, health care and alleviating household shocks such as those from macroeconomic instability or periodic droughts and other climate-related issues. U.S. microfinance assistance should focus on improving access to these financial services for the very poor (those living on less than $1.25 a day) and the people most marginalized by the societies in which they live.
Public funding is critical for reaching these populations; very little private foreign microfinance investment goes to the countries with the greatest need – or to the most marginalized populations in them. For instance, in sub-Saharan Africa, the region with the highest percentage of people living in extreme poverty, three in four adults do not have an account at any formal financial institution – an estimated 400 million Africans. By implementing pro-poor microfinance services in conjunction with health, nutrition, livelihood and other development interventions, USAID microenterprise funding plays a critical role in expanding financial opportunities for the underserved and ensuring safety nets are in place for the most vulnerable.
Strong congressional support has demonstrated U.S. leadership in microfinance and microenterprise development, recognizing these tools as a cost-effective way to reduce poverty and promote economic growth. In FY2012, U.S. microenterprise assistance helped provide approximately 2.8 million people in more than 37 countries with access to financial services and other resources to engage in the global economy and help lift themselves out of poverty.
Providing small, affordable loans in Iraq
Established in 2003 after the fall of Saddam Hussein, Global Communities’ Access to Credit Services Initiative (ACSI) is today Iraq’s largest and longest-lasting microfinance program. ACSI provides small, affordable loans to Iraqi individuals who do not otherwise have access to sufficient capital to start a business or improve their homes.
These loans improve the quality of life for thousands of Iraqi families, increase financial stability of local economies, and are a major force for the economic reconstruction of the country. ACSI began with a modest grant from the Coalition Provisional Authority, and today is self-sustaining. Supported by investors such as the U.S. government’s Overseas Private Investment Corporation, ACSI currently has an active portfolio of nearly $60 million, and has disbursed more than $550 million in loan capital since its inception. Remarkably, their loans maintain a 99% repayment rate.
ACSI places a special focus on female-headed households and women entrepreneurs such as Laqaa Abdul Mohsen. Since her childhood, Laqaa dreamed of being a hairdresser. Through her partnership with ACSI, Laqaa defied the reality of her often-turbulent environment to finally achieve her dream.
Her hometown is about 100 miles south of Baghdad, in Najaf, which was a frequent battleground in the years following the fall of Saddam Hussein. For Laqaa, this meant developing her business slowly but surely, over a series of seven loans from ACSI, which helped her decorate her shop, buy new beauty products and cosmetics, and eventually expand her shop to a second floor to accommodate her growing ranks of loyal customers. Today, she has the most popular hair salon in Najaf, and is thrilled by the opportunities that her relationship with Global Communities has brought her. She says that her success has grown in small steps, but that she will stay with ACSI as long as it takes to achieve every part of her dreams.
Photo Credit: Global Communities