USAID’s microenterprise development program, which is highly  decentralized, funded projects in 52 countries in 2001. USAID takes a collaborative approach in its microenterprise development  program. 2). USAID annually collects data on its microenterprise program through the  MRR. USAID Has Met Some Program Objectives

USAID’s microfinance activities have achieved some of the agency’s key  program objectives but made limited progress toward others. First,  microfinance can help to alleviate the effects of poverty among  participants. Third, the program appears to have succeeded in  encouraging the participation of women through micro loans. 3.) 4.) Although microfinance can help alleviate some of the impacts of poverty,  the research literature does not show conclusively that it has lifted large  numbers of people above the poverty line. In fiscal year 2001, 294  USAID-supported MFIs reported sustainability levels; of these, 112, or 38  percent, said that they were fully sustainable, a percentage that had  remained consistent since 1999. MRR Data Generally Reliable but May Not Accurately Reflect USAID’s Microenterprise Activities

Although the basic data collected for USAID’s MRR are generally reliable,  certain methodological problems may impede accurate reporting on the  agency’s progress in meeting key goals. Specifically, it may not be  reporting accurately (1) the actual amounts obligated to microenterprise  activities, (2) whether 50 percent of USAID’s resources went to the very  poor, and (3) the sustainability of USAID-supported MFIs. In addition, the agency has provided information on best practices to  missions and implementing partners through policy guidance, training, and  technical assistance. USAID Has Made Efforts to Identify and Disseminate Best Practices

According to officials from the World Bank and other organizations,  USAID has recognized the importance of identifying and disseminating  successful and unsuccessful attempts to design and implement  microenterprise activities. SEEP has  published two studies on microenterprise best practices. However, evidence suggests that microfinance  alone has not lifted large numbers of the poor over the poverty line. Despite the general reliability of its data, certain methodological  weaknesses in USAID’s MRR system may prevent the agency from  reporting with precision its program expenditures, the percentage of its  funds going to the very poor, the percentage of MFIs that are sustainable,  and the extent of USAID’s contributions to the institutions it supports. Appendix I: Scope and Methodology

To determine whether the U.S. Agency for International Development’s  (USAID) microenterprise development program is meeting its key  objectives, we first identified those objectives by reviewing the agency’s  policy guidance and the pertinent legislation. Offer an array of services. Promote MFI sustainability. GAO Comments

1. 2. 3. According to the 2001 MRR,  “Microenterprises are small, often informally organized businesses that  are owned and operated by poor and very poor entrepreneurs. This could potentially improve this  aspect of USAID’s reporting. In addition to our  assessment of its impact on poverty alleviation and poverty reduction,  there are sections focused on reaching the poor and very poor and  other services these groups may need; outreach to women; the  sustainability of MFIs; the reliability of the MRR; best practices  identified by the microenterprise development industry; USAID’s  efforts to identify and promote best practices; whether USAID  incorporates best practices in their projects; and a synopsis of 22 key  studies.
Why GAO Did This Study

Microenterprises--small businesses owned and operated by poor entrepreneurs--have potential to help the world's poorer populations. For this reason, the U.S. Agency for International Development (USAID) included microenterprise development in its programming. In 2001, the agency reported that its was conducting microenterprise projects in 52 countries and had obligated almost $2 billion since 1988 to support its program. The program supports micro loans, among other services, to assist poor entrepreneurs. Since 1996, USAID has annually reported the program's results. To help Congress oversee USAID's management of its microenterprise development program, GAO was asked to (1) determine the extent to which the agency's microfinance activities are meeting the program's key objectives, (2) assess the reliability of USAID's reporting on its overall microenterprise activities, and (3) examine the agency's role in identifying and disseminating microenterprise best practices.

What GAO Found

USAID's microfinance activities have met some, but not all, of the agency's microenterprise program objectives. These objectives are to (1) reduce poverty among participants; (2) target the poor and very poor; (3) encourage women's participation; and (4) develop sustainable microfinance institutions (MFI). First, regarding reducing poverty--defined as alleviating its impacts or lifting and keeping a large number of people above the poverty line--GAO found that microfinance can help alleviate some impacts of poverty, incrementally improving borrowers' income levels and quality of life and offering an important coping mechanism to poor workers and their families. However, there is little evidence that it can lift and keep many over the poverty line. Second, microfinance generally has served the poor clustered around the poverty line but not the very poor. Third, USAID has successfully encouraged the participation of women, who have comprised about two-thirds of micro loan clients since 1997. Fourth, USAID has emphasized the importance of MFI sustainability. In fiscal 2001, of 294 USAID-supported MFIs that reported on sustainability, 38 percent reported achieving full sustainability--a percentage consistent since 1999. The basic data in USAID's Microenterprise Results Reporting (MRR) system are reliable, but certain methodological problems may affect the accuracy of some of the agency's reporting on key program objectives. Specifically, USAID may not be reporting accurately (1) the amounts it has obligated to microenterprise activities; (2) whether 50 percent of its resources went to the very poor, as required by Congress; and (3) the sustainability of USAID-supported institutions. Further, although the agency reports annually on the activities of institutions it supports, it does not show the percentage of those institutions' total funding that its contribution represents. USAID has identified and disseminated microenterprise best practices, providing information to its missions and implementing partners through policy guidance, training, and technical assistance. In addition, USAID has collaborated with microenterprise development provider networks and others to publish information about these practices.