Talking Points of Ambassador Harriet Babbitt, USAID Deputy Administrator

This is an archived USAID document retained on this web site as a matter of public record.
Talking Points of Ambassador Harriet Babbitt, USAID Deputy Administrator
to the Microenterprise Workshop
U.S./Africa Ministerial Partnership for the 21^st Century Conference
March 17, 1999
Opening Statement
I am delighted to be here at this historic U.S./Africa Ministerial Conference. We are honored that so many ministers dealing with a wide range of portfolios – from finance and development to the environment – have come from so many African countries. Your presence is evidence of the new day dawning in Africa and demonstrates the eagerness of Africa’s leaders to be part of that new day.
I am especially pleased to be part of this Microenterprise Workshop because microenterprise is a key engine of growth for developing countries. I am grateful for the opportunity to discuss its potential -- and ways to make it sustainable -- with this outstanding group of ministers.
Microenterprise has a vital role in improving the lives of the poor – and a vital role in helping the overall economies of developing countries grow and prosper. We have seen that it can be particularly useful in creating jobs, income and opportunity for Africa’s poor. Mincroenterprise financing enables poor families, and especially women entrepreneurs, to:

Improve their economic status;
Achieve higher and more secure incomes;
Build savings and other assets as a cushion against family emergencies and natural disasters;
Improve their access to safe drinking water, balanced nutrition, housing and education, and-- Participate more effectively in building economic democracies and civil societies.

Although it is difficult to measure the informal sector of economies, the International Labor Organization (the ILO) estimates that more than 50 percent of the labor force in several African countries is part of the informal economic sector. The informal sector makes up slightly more than 60 percent of urban employment in sub-Saharan Africa.
We define microenterprises as business activities with 10 or fewer employees and very limited assets. In practice, most microenterprises involve one or two people or a family working together.
Women are central to any strategy for poverty alleviation. They are heavily represented in the microenterprise sectors of developing economies – and women constitute 85 percent of USAID’s micro loan clients.
USAID has demonstrated its commitment to microenterprise by investing more than $1 billion over the past decade to encourage and support microenterprises. Historically, we have been one of the largest supporters of microenterprise programs worldwide. We also have supported many development activities to design more effective strategies and tactics to support microenterprise.
In addition, USAID has supported research addressing issues of policy, legal and regulatory constraints, that effect microenterprise and limit business growth.
Our agency has engaged also enthusiastically organizing the donor community to improve its focus on microenterprise -- such as in donor collaboration through "CGAP" – the Consultative Group to Assist the Poor.
Microenterprise development, and microfinance in particular, provide unique opportunities for the very poor.
These loans offer them the capacity to build on individual initiative and talents. They also help them to build on traditional systems of trade and production often ignored by banking and lending systems.
At the same time, microenterprise financing offers opportunities to strengthen and expand existing financial systems.
Microenterprise has always been an important engine of growth in the United States – although we did not apply that name to it until recently.
Our Small Business Administration reports that 12 million new jobs were created in the United States within the small and microenterprise sector between 1994 and 1996.
Assisting people in developing countries to help themselves has been a basic tenet of U.S. foreign policy for half a century.
Our First Lady, Hillary Rodham Clinton, has made microenterprise a special focus of her visits to countries around the world. She has visited microenterprise programs in South Africa and Uganda.
She has seen for herself – and told the world – about the importance of microenterprise financing.
She knows that not many of these families will become rich, but many will be able to provide better nutrition, better health, better education and greater opportunities for their children. Our nation was built on such aspirations.
The number of microenterprise success stories are multiplying. With each success, our understanding of what constitutes the best practices in microenterprise financing is growing – and increases the promise for building self-sustaining programs for growth in developing economies.
Africa
Funding for our regional microenterprise program for Africa rose from $27 million in 1996 to $38 million in 1997. This included $20 million for credit programs and $18 million for non-credit programs.
Poverty loans, in Africa -- those of $300 or less -- constituted 89 percent of total loans and 70 percent of the dollar value of the portfolio. The delivery of non-financial services to microentrepreneurs is also a focus area for USAID.
Numerous USAID missions are working with Africans to improve the policy environment for private enterprise, microentrepreneurs, and the organizations that are providing microfinance services.
A sound business climate and policies that provide a level playing field are important for both overall economic growth and for microentrepreneurs to succeed. Alleviating macroeconomic, legal, regulatory, and institutional constraints that handicap the growth of the microenterprises is central to creating a healthy business environment.
An improved policy and regulatory regime enables more microenterprises and microentrepreneurs to graduate from the microsector.
Today we want to explore some of the best practices in the area of microenterprise policy and regulation and we are fortunate to have two distinguished African experts to share their experience.
Mr. Mutua will discuss in more detail best practices and tactics for the building of viable microfinance institutions.
Dr. Andah will discuss in more detail appropriate supervisory and regulatory principles for the microfinance sector.
Michael Barr who is the Deputy Assistant
Secretary for Community Development
Policy at the U.S. Department of Treasury will close the discussion, highlighting key points and areas of agreement.
Our first panelist will be Kimanthi Mutua, managing director of the Kenyan NGO K-Rep, a program started by USAID in 1984. His work includes consulting in numerous African countries and he is currently chairman of the C-GAP advisory group – Mr. Mutua.
Our next speaker is Dr. David Andah from the Central Bank of Ghana. He is director of bank’s office of non-bank microfinance. He has 15 years of experience in a wide range of supervisory positions with the Central Bank -- Dr. Andah.
Michale Barr will make some closing remarks and sum up the key points of our discussions. Mr. Barr is Deputy Assistant Secretary for Community Development Policy at the U. S. Treasury where he has worked on microfinance issues and policy. He has also worked on policy planning at the Department of State. Mr Barr…
Possible Points you might make in discussion
USAID’s financial support for microenterprise has been rising, in spite of overall reductions in Agency funding. For 1997 (the last year for which we have complete results) USAID’s microenterprise activities have:

committed $165 million to the development of microenterprises, of which 70 percent supported credit and other microfinance services. The other 30 percent goes to business development services such as training, marketing development, and technical support.-- provided 1.4 million poor clients with loans from USAID-supported institutions, of which 67 percent of the loans were poverty loans (in Africa, the standard for "poverty loans" is at or below $300).
enabled 2.1 million clients to participate in the savings programs of USAID-supported institutions.

Lessons Learned from USAID’s experiences have included:

"More people want a good place to save than want loans;"

Historically, where poor communities have both options available, savings surpass loans by a considerable margin.

A microloan is rarely sufficient to help a poor entrepreneur build a successful business and escape poverty. Other important complementary factors are access to other financial services (for example, savings and insurance), improved market access, increased managerial and technical skills, and the existence of a supportive business environment and social and physical infrastructure.

The prosperity of microenterprises is determined not only by the availability of microfinance services, but also by the health of the host country’s business, regulatory, and infrastructural environment. This includes the health of such important complementary sectors as agriculture, on which microenterprises are so dependent for their inputs and as a market for their outputs.

Financially viable microfinance programs can serve large numbers of the poor with critical savings and credit services. Dramatically successful microfinance programs in Bangladesh, Bolivia, and Indonesia, for example, have reached millions of clients.

A wide variety of other lessons learned are documented in our Microenterprise Briefs and other publications available from USAID’s Microenterprise Development Office. I have two of these publications here today which you may have copies of – the proceedings of the Commercialization Conference in Africa and Reaching Down and Scaling Up, USAID’s microenterprise results report for 1997.

This is an archived USAID document retained on this web site as a matter of public record.

Last Updated on: July 12, 2001