Three decades ago, a Bangladeshi economist named Muhammad Yunus founded the Grameen Bank ("village bank" in Bangla) to extend small loans to Bangladeshis too poor to qualify for traditional bank loans, without requiring collateral.

This novel approach to banking, which depends on mutual trust and accountability to ensure loan repayment, granted the poorest of the poor access to tiny loans for use in small income-generating self-employment projects, allowing them to support themselves and their families.

Thus was born the concept of micro-credit, and the rest, as they say, is history. Starting with a loan of US$ 27 paid out to 42 families from Yunus' own pockets, the Grameen Bank operates today in thousands of villages throughout Bangladesh, employing close to 20,000 people and has, over the years, issued more than US$ 5.72 billion to 6.67 million borrowers. Its model has been widely replicated in both developing and developed countries, with more than 7,000 micro-financing institutions serving 16 million people considered "un-bankable" by the formal banking sector. A week ago, Grameen Bank and its founder were awarded the 2006 Nobel Peace Prize "for their efforts to create economic and social development from below." (The Prize in Economics would have, I think, carried even more weight but I suppose that would have put this truly revolutionary, effective and pro-poor development practice in a direct collision course with the established neo-liberal economic orthodoxy for growth and development - but I digress.)

So, what does micro-credit have to do with diaspora involvement in national development initiatives? Remittances or, more precisely, ways and means to make productive use of the millions of dollars immigrants send back to their countries of origin.

Remittances have grown rapidly over the past decades, on the African continent and elsewhere in the developing world. The United Nations Office of the Special Adviser on Africa estimated that, between 2000 and 2003, Africans in the diaspora remitted about US$17 billion per year on average. In many African countries, remittances account for a sizeable percentage of the economy. For example, IMF figures show that registered remittances account for 40% of GDP in Lesotho, and between 12%-20% in countries such as Cape Verde, Senegal and Togo.

2004 figures from the Ethiopian Economic Association estimate remittances from the Ethiopian diaspora at about ETB 4 billion (about US$ 450 million, using current exchange rates), monies received through formal and informal channels combined, adding that the diaspora community has the potential to remit up to ETB 17.5 billion. The National Bank of Ethiopia puts the number at a more conservative US$ 220 million per year, but that is considering officially registered transfers only.

Whatever the exact figures may be, remittances are now widely accepted "one of the most tangible benefits of international migration for development", with the potential for real and lasting impact on national development initiatives - provided they are innovatively exploited and properly managed.

Remittances have traditionally been sent to family members and are mainly used for basic, private consumption. In the immediate, this raises the standard of living of those receiving them and stimulates local economies through higher consumption levels. However, as remittances continue to gain in volume worldwide, easily outstripping the amount of international development aid, potential mechanisms to leverage remittances as developmental investments are being increasingly investigated.

Micro-financing initiatives have proven a particularly straight-forward and effective way of providing the most impoverished segment of a population with access to soft loans, thereby engaging them as active participants in the economy of a country. It has taken hold in many African countries and the continent boasts a number of successful micro-credit projects; some are rural and others urban-based and also vary in size and purpose. They have been used to care for AIDS orphans in Uganda, and to help rebuild the lives of Rwandese women post-genocide. In Ethiopia, micro-finance institutions are playing an increasingly large role in the provision of credit to small farmers, although the bulk of loans granted in this sector is still being provided by the commercial banks, with the government as the underwriter.

Despite the many successes of micro-financing schemes, lack of funds for loans remains a major challenge for many institutions. And this is where diaspora resources could be used to fill the gap. This could be accomplished through the formation of diaspora groups to support either existing micro-finance institutions or set up their own, taking into account the challenges of managing such a project from outside of the country and making related provisions. This could be as simple as members of a group each setting aside a few dollars per month, to be pooled and invested in micro-credit initiatives in the country of origin. The logistics of such an endeavor could be facilitated by the relevant government agencies, working perhaps in partnership with local private sector organizations. Governments need also ensure that the appropriate regulatory frameworks necessary to foster sustainable micro-finance activities are in place, including includes measures easing bureaucratic hindrances.

There are as many ways to put remittances to use on developmental initiatives as we dare imagine. It could be supporting infrastructure development programs in communities of origin; groups of expatriates pooling their resources together to establish all types of business initiatives; etc. However, the idea of diaspora participation in providing micro-loans presents its own unique appeal. It does not require any extraordinary financial outlay and yet has a real and immediate potential to effect a significant change in the lives of the poor. It is a simple enough system that requires minimal planning, and with the appropriate home country support, can be operationalized fairly easily and rapidly. It also shows that, for diaspora participation to be effective, there does not always need to be large and fancy programs underpinning it.

As the IMF announces that most of the African continent - save for 5 countries, including Ethiopia - is slated to miss the much touted Millennium Development Goals (including that of eradicating extreme poverty and hunger by 2015), we need to devise innovative local solutions for local challenges. This includes finding creative ways to utilize the sizeable resources of Africans in the diaspora, be they financial or otherwise.

Ed.'s Note: The writer is a researcher currently studying issues related to the effective and sustainable participation of the African diaspora in the continent's development efforts, with a focus on Ethiopia.