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FEDERAL AGENCY CAN’T `THINK SMALL’

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Two years ago, after considerable lobbying by groups trying to reduce world hunger, the U.S. Congress was persuaded to fund an experiment in tiny loans to the "poorest of the poor" - to encourage self-sufficiency instead of the usual government-to-government aid. Some $50 million was appropriated for fiscal 1988 and another $75 million for fiscal 1989, which began Oct. 1.

Unfortunately, the program has not worked well. This is not the fault of the original idea, but rather, the way the program has been administered by the U.S. Agency for International Development.AID did not want the job in the first place because it was too different from what the agency had been doing. By foot-dragging and using the money in inappropriate ways, AID has not met the goals of the project.

The original plan called for most of the loans to be targeted to the poorest populations in Third World countries, with special emphasis on women and the 20 percent who were at the bottom of the poverty scale.

Loans were not supposed to exceed $300. This "microenterprise" lending was to be patterned after a concept started in 1975 by a Bangladesh bank. Under those rules, people with ideas for small, home-centered businesses can borrow small amounts to purchase cows, sewing machines, fish nets, or to start small shops. The Bangladesh experience showed 500,000 destitute people have been helped and repayment is about 99 percent.

Yet an audit of AID progress by RESULTS Education Fund, an organization devoted to ending world hunger, showed AID was putting much of the earmarked money into vastly larger loans.

The study often found loans running to an average of $15,000 to $20,000 in some countries, far from the $300 limit. The AID was unable to provide hard data on much of the spending. Apparently it has proven very difficult for AID to think small.

RESULTS has called for a General Accounting Office investigation into how the AID bureaucracy is following congressional intent. That ought to be done. And Congress should demand that the microenterprise money - only a tiny part of the total AID budget - be spent in the way it was intended.

The best suggestion seems to be one that would take the program away from the AID bureaucracy and handle it through an independent Credit for the Poor Foundation.