Why micro-finance works?
Manuel Pacheco explains based on his hands-on experience in East Timor
Away from the sophistication of the finance industry in the first world, that has lead to many questionable practices to say the least, there is a real need for financial services for those who are poor but believe in themselves to fight their way out of poverty. After all credit has long been one of the most important weapons of every entrepreneur, rich or poor.
This is the main idea beyond micro-finance: to provide financial services to those who are to poor to have available sources of credit or other services.
I had the privilege of working as a volunteer in a small micro-finance institution in Timor-Leste. During the two years I spent in the project we initiated several micro-credit initiatives in both urban and rural areas of the country.
Banking in every environment is all about mutual trust, and one thing I can confirm from my experience: trusting people helps people to trust themselves.
Micro-credit places the individuals being helped as the main actors of the all process: instead of just being “aid receivers” they are partners in one project where they take the main part.
Sure, one thing is certain, micro-credit is not a panacea for all evils, but for some people it may be a path for improving, even if in a small manner, their lives. I have seen many failures, and some successes, new fishing materials; new little stores (Kios), carpenters and farmers creating or expanding their little businesses.
One common factor in the successes I have witnessed was the character and the will of the new entrepreneur. This plays a much bigger role that, for instance, the type of business being created.
We can also typically see that those who have success reinvest their gains in the business or in the success of their families that is, for instance, in the education of their children.
Above all micro-credit may help some people exiting the vicious cycle of poverty and entering in a new virtuous cycle of self-affirmation, increased income and increased hope in a better future.
