Small Business Microlending Expansion Act Of 2009

Floor Speech

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Mr. GRAVES. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise today in support of H.R. 3737, which is the Small Business Microlending Expansion Act of 2009, and with that, I will go ahead and yield such time as he may consume to the gentleman from Indiana (Mr. Pence), who is the Chairman of the Republican Caucus.

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Mr. GRAVES. Mr. Speaker, just before I get started, in talking about the last bill that was up, I want the chairman of the committee to know that I am going to reserve my judgment on how I am going to vote on that bill, since we have a recorded vote, until I consult with her, given her statement that she is a Mets fan. So I just wanted to make sure she knew that. So I will wait to see how she votes before I make a decision on how I am going to vote on that.

Mr. Speaker, I mentioned earlier I do rise today in support of H.R. 3737, which is the Small Business Microlending Expansion Act of 2009. The committee has worked on a very bipartisan basis to bring this technical but very important piece of legislation to the floor.

H.R. 3737 represents the first substantive change to the microloan program in nearly a decade. In the United States, microlending is used as potential engines of economic activity for those individuals that do not have access to commercial financial institutions and the technical knowledge needed to start a small business.

The Small Business Administration created a pilot program and Congress created a permanent authority for the program in 1992. SBA does not provide micro-credit directly to entrepreneurs. Instead, the SBA provides below-market rate loans to nonprofit intermediaries. These institutions then make loans to entrepreneurs.

As with other SBA financing programs, the SBA does not provide all the funds for financing. Intermediaries must contribute 15 percent of the value of loans in non-Federal funds.

But the key to the success of microlending is not the loans, but, rather, it is the education and counseling that the intermediaries provide to their borrowers. With this knowledge, these entrepreneurs are able to manage their financial resources and ensure repayment of the loans. The success is demonstrated by the very low number of defaults by borrowers and cost-effective means by which it produces jobs in areas that need economic revitalization.

Despite its success, the microloan program needs to be revised in light of changes to the economy during the past 6 years and in some cases to update matters that have not been altered since the program's inception more than 15 years ago.

Microlenders exist mainly because normal commercial lending institutions do not provide access to credit for those who are highly credit risky. One way to improve that is to have borrowers' histories passed along to credit bureaus, and I think having the SBA work with the intermediaries to accomplish the delivery of credit histories will benefit borrowers.

H.R. 3737 also enables the intermediaries to determine the length of the credit that will be made available to the borrowers. Given the expertise of the intermediaries, it makes abundant sense for the determinations on the length of loans to rest with the intermediaries and the borrowers. I want to emphasize that this change has no impact on the loan obligations of intermediaries to the SBA. So the change involves no risk to the Federal Treasury.

H.R. 3737 also raises the level of the average loan size in the intermediary's portfolio from $7,500 to $10,000. This level has not been changed since 1992, and the adjustment is appropriate to take account of inflation in the intervening 15 years. One key element in the microloan program is the preloan training provided by intermediaries to ensure that only those individuals with the right aptitude start small businesses. H.R. 3737 expands the capacity of intermediaries to provide such training.

Again, I would like to thank the chairwoman and the gentleman from Indiana for bringing forward these important changes to the microloan program.

Mr. Speaker, I don't think we have anymore speakers, so I will yield back the balance of my time.

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