Economic Challenges in the Twenty‑First Century 343NGOs can also be an alternative channel for finance to individuals and small groups that
are often neglected by the national or international banks; many of these programs are
subcontracted to NGOs from national and international development institutions.
One well- publicized effort, now duplicated many times over, has been microfinance.
Grameen Bank in Bangladesh, created in 1983 by an academic-turned-banker, Muham-
mad Yunus (who won the Nobel Peace Prize in 2006), provides small amounts of
funding for individuals and groups to invest in an eco nom ically productive enterprise.
The Grameen Foundation has aided 9.4 million of the world’s poor with the support
of its national and local partners. Using a variety of funds, programs have been incu-
bated in India, Indonesia, the Philippines, and Ethiopia, among others. The purpose is
to empower women, who are typically ignored by multilateral institutions, by providing
them with income that they are expected to use for productive purposes.
Microfinance institutions have grown exponentially, becoming bigger, more com-
petitive, and more diverse. Some are not- for- profit, such as the Grameen Bank, while
others are for- profit institutions; some offer just credit, while, increasingly, others offer
a variety of saving alternatives. But do microfinance institutions lift individuals out of
poverty? Do they foster economic development and growth more generally, as the Gra-
meen Bank has claimed?
Recent studies show a more nuanced result on whether microfinance alleviates pov-
erty. One study finds that microfinance has no overall impact on the borrower’s
house hold welfare after 18 months, mea sured by income, spending, or school atten-
dance. However, when the borrower already owned a small business, then the new credit
infusion improved income and spending. In other words, microcredit helps those who
are already better off.^15 Another study of six randomized evaluations of programs across
four continents finds some evidence that expanded credit increased business activity,
but did not result in a statistically significant increase in total house hold income. Micro-
credit is not a panacea.^16 Clearly, the verdict about the effectiveness of microcredit in
improving living standards awaits further refinement.
Is D EvElopmEnT BEIng AChIEvED? goAls For
ThE nExT 15 YEArs
Are the benefits of the many forms of economic globalization being distributed across
the continents? Are the goals of sustainable development being met? In general, pro-
ponents of economic liberalism point to success in closing the development gap. Begin-
ning in the 1990s, growth in emerging markets increased, followed after 2000 by an
acceleration in the developing world. Average per- capita incomes in both emerging
markets and developing economies in general have grown at a faster rate than in the
developed economies.