Bigger Bang for Loan Bucks

`GIVE a man a fish, and he'll eat for a day. Teach him to fish, and he'll eat for a lifetime.'' These days, that old saying is being updated into fashionably technocratic jargon: It's now called ``microenterprise lending.'' Give the world's poorest a $5 handout, and they'll spend it on food. But give them a bit of credit - a $50 loan, say - and they'll buy a rickshaw or a sewing machine and start a business. No doubt about it: It works. The idea first took root in Bangladesh, where an economics professor named Muhammad Yunus founded the Grameen Bank to provide just such loans, some as small as one dollar. Since 1979, the bank has worked with more than a half-million landless women in Bangladesh, turning many into self-employed entrepreneurs. Few default: The repayment rate is an astonishingly high 98 percent.

Not surprisingly, the idea is spreading. Indonesia's Baden Kredit Kecamatan, the Rural Banks of Ghana, ACCION International, and the Foundation for International Community Assistance all are providing development loans. So is the United States Agency for International Development (AID).

And that's where the tension lies. In 1988, Congress earmarked $50 million for AID's microenterprise lending. A congressional committee report urged that up to 80 percent of the loans should be targeted for the poorest 50 percent of the population - with special attention to women and to the very poorest, and with loans not usually exceeding $300.

Now comes a study from the Results Educational Fund - a Washington-based nonprofit organization dedicated to ending world hunger - sharply criticizing AID for noncompliance. Rather than lending to the poorest females, says the fund's report, AID ``remains committed to assisting people `a few rungs up' from the very poor.'' Citing examples, the study points to a program in Honduras that spent $970,000 to send 100 entrepreneurs to a three-week course in the US (average loan size: $10,000), and to a program in Jordan offering loans in the $15,000-to-$20,000 range.

The General Accounting Office, at the request of Reps. Edward F. Feighan (D) of Ohio and Benjamin A. Gilman (R) of New York and Sen. Dennis DeConcini (D) of Arizona, is studying AID's record of compliance. Meanwhile, the folks at AID are taking strong issue with the Results study. They point out that Congress voted down legislation covering gender and the size of loans, leaving it to the committee report merely to ``urge'' those standards. Moreover, they say the agency convened an advisory committee on microenterprise lending (as Congress recommended) and has carefully followed its lead.

If this were just another nonprofit watchdog snapping at the tail of a federal agency, it would be of passing interest. In fact, there's something deeper. ``There is a kind of philosophical difference here,'' says AID's Michael Farbman. The real question is simple: How do you get the biggest bang for the loaned buck in poor countries?

Does microenterprise lending work well outside those countries (Bangladesh, Indonesia) where population densities, very low incomes, and community traditions make it feasible?

Can self-employment projects alone bootstrap a poor nation into success, or are larger-scale, wage-earner projects also necessary?

Can microenterprise lending work in the absence of top-down changes in a nation's laws, infrastructure, and productive capacities?

Tough questions, those, on which reasonable thinkers may differ. The Results people, committed to the poorest of the poor, see one set of answers. AID, committed to sustainable growth across a whole range of programs, sees another. If AID is doing something illegal or wasteful, of course, it must adjust. But the real waste would be to have two institutions committed to doing good embroiled in months of internecine strife. If that happens, the real losers - once again - will be the world's poor.