The Foreign Service Journal, December 2006

were sown in 1974 when, convinced of the entrepreneurial spirit of the poor, Yunus began lending small amounts of money to men and women in rural Bangladesh without requiring collater- al. Since then, the bank has grown to serve over 70,000 villages and three million clients who use the loans to set-up small businesses. Grameen Bank uses innovative methods to make microloans effec- tive. To ensure high recovery rates — currently at 95 percent — members are assigned to groups of five that are collectively responsible for loan repayment, a measure that applies social pressure and incentives. Having discovered early on that men are less productive and more likely to default on loans, the Bank caters pri- marily to women, who comprise 97 percent of Grameen clients. Because borrowers are the principal owners — clients own 94 percent of the bank and the government the rest — Grameen Bank is a predominantly female-owned institution, highly un- usual in a traditionally male-dominat- ed society ( www.grameen-info. org/bank/index.html ). But Grameen Bank is not just a financial institution. It has given birth to several spin-off organizations dedi- cated to promoting development in rural areas, such as an energy pro- gram, a phone company and an Inter- net service, among many other enter- prises ( gfamily.html ). Last month, in col- laboration with French dairy giant Danone, Grameen opened a food plant aimed at providing nutritious products for the poor. In recent years, hundreds of microcredit institutions have been established to engage poor popula- tions all over the world. The United Nations’ Economic and Social Coun- cil named 2005 the Internation- al Year of Microcredit ( www.yearof ). In November, 2,000 delegates from 100 countries attended the Global Microcredit Sum- mit in Halifax, Canada. They endor- sed two main goals: to ensure that 175 million of the world’s poorest families, especially the women of those fami- lies, are receiving credit for self- employment and other financial and business services; and that 100 million of the world’s poorest families move from below $1 a day to above $1 a day by the end of 2015 ( www.globalmi ) . However, as many experts hasten to point out, microcredit is no panacea. These development practi- tioners fear that the hope of microcre- dit is turning to hype as proponents embrace unrealistic expectations of its developmental effects. “It helps with cash flow smoothing, and can also boost the confidence of women,” states Thomas Dichter in a critical look at the microcredit movement. “These are good things, but they are considerably less than the serious long-term economic changes that are claimed for the movement. They are not the same as credit used for pro- ductivity, job creation and enterprise growth in an increasingly competitive and global economy” ( http://micro cle/detail/31747 ). Bangladesh is a case in point: the birthplace of the model microcredit institution remains a Least Developed Country. Microfinance has a vital role to play, but not as a substitute for much-needed political and economic reforms. — Lamiya Rahman, Editorial Intern Afghanistan at A Turning Point? A sharply rising tide of violence in Afghanistan, as the southern insur- gency gathers momentum, and the 14 F O R E I G N S E R V I C E J O U R N A L / D E C E M B E R 2 0 0 6 C Y B E R N O T E S