A recent study of financial services available in Timor-Leste shows that the country's small but growing microfinance sector is poised to provide broad new savings and loan opportunities to the large proportion of the population without access to commercial credit.

According to the assessment by international microfinance experts for Catholic Relief Services (CRS), 17,000 borrowers--nearly half of the total borrowers in Timor-Leste--are clients of specialized microfinance institutions rather than banks. More than a dozen of these institutions already exist, ranging from credit cooperatives to NGOs, and most are members of the Association of Microfinance Institutions in Timor-Leste (AMFITIL). AMFITIL has evolved from the earlier Microfinance Working Group and has been lauded by donors and analysts as having one of the most detailed and stringent codes of conduct in the world, as well as a joint reporting format for all members and an industry-wide performance monitoring system.

The report highlighted areas in which microfinance institutions can fill important gaps in lending and financial services, including in the agricultural sector, where donor grants often supplied free equipment in the past. It also provides a comprehensive review of a range of financial services, including small grant funds, mircrocredit loans, and housing and commercial loans. In addition, it offers guidance about the conditions that must be met to access these services and details the repayment terms. At present, residents in 3 of the country's 13 districts have no access to microfinance, and the study found that outside the capital, Dili, there were few choices for financial services.

The assessment complemented a recent 2-day workshop on the role of microfinance institutions in Timor-Leste. Participants from the sector also heard from the founder of Bangladesh's Grameen Bank, Muhammad Yunus. Yunus is famous for revolutionizing lending services to the poor through a village-based savings and loan organization, a model now used by microfinance institutions around the world. Yunus stressed the importance of microcredit for helping people, especially women, escape poverty.

Among the conference participants were Prime Minister Mari Alkatiri, Foreign Affairs Minister Jose Ramos Horta and representatives of the donor community, microfinance institutions (including members of AMFITIL), and commercial banks active in Timor-Leste.

Through its small grants, USAID has provided assistance to Timor-Leste's microfinance industry since 2000, soon after the country's separation from Indonesia. A grant of $33,700 to CRS funded the new assessment and the assessment's translation into Indonesian and Portuguese to ensure wider accessibility. USAID's support for a strong microfinance industry increases economic opportunities for the poor, especially women, and builds a financial foundation for entrepreneurship and long-term planning for small businesses.

Printer Friendly Version