Microfinance

FY2017 Funding Recommendation:  
$265 million

 

Funding History

       Enacted   

       President's FY2017 Request   

       InterAction's FY2017 Recommendation

 *Estimated


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Justification

 Key Facts

Microfinance provides the world’s poorest and most marginalized people with access to financial services like credit, savings, and insurance. It enables poor families to start businesses or meet health, education, or emergency needs, thus helping them lift themselves out of poverty.

An estimated 2 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; these financial tools can be used for 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. In sub-Saharan Africa, the region with the highest percentage of people living in extreme poverty, almost two-thirds of adults do not have an account at any formal financial institution. 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 FY2014, U.S. microenterprise assistance helped provide approximately 1,141,398 people with access to a microfinance loan or savings account, allowing them to engage in the global economy and help them lift themselves out of poverty.

Success Story

Microfinance Supports Local Economies 

The Vitas Group is a global network of locally-registered microfinance companies created by Global Communities, an international development and humanitarian assistance organization. The network provides financial products and services that respond to clients’ needs and foster the long term development of individuals, their businesses, and their communities. With funding from the Overseas Private Investment Corporation (OPIC), Vitas Group specializes in reaching populations not serviced by traditional banks or financial institutions, and has a particular specialization and large presence in the Middle East.

Every last one of the over 16,000 borrowers in the Vitas network is entrepreneurial at heart, but Bassam Matta takes “entrepreneur” to a new level. Bassam and his family have been farmers for years in the mountainous Laqlouq region of Lebanon, about 30 kilometers from the historical city of Byblos. In 1994, in an effort to increase the income of the farm, Bassam began using his herd of over 20 cows to produce milk and dairy products to sell in the local market. Knowing that he had only tapped the surface of his farm’s potential for years, he recently contacted a client advisor from Vitas Lebanon to discuss his options. With the advisor’s support, Bassam applied for a loan that allowed him to develop another set of products that would diversify his business risk and create growth opportunities: jams, spices, honey and natural juices.

The decision was game-changing. Seeing his success at building a niche market for gourmet local foods, Bassam imagined the even broader potential. He took an entrepreneurial leap and applied for a loan to fund “La Valleé Blanche.” A revolutionary concept, “the White Valley” will be the first boutique hotel in his beautiful mountain village and will offer its guest free classes on how to produce seven different types of cheese and guided learning tours of the farm, as well as a restaurant serving traditional Lebanese food. This venture will increase tourism, provide jobs and training to those in the village, and contribute substantially to the local economy. From a small loan for making jams, to a boutique hotel and a growing local economy, Bassam is just one example of how a small amount of investment can go a long way.

 

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