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MIGRATION-PORTUGAL: Starting a New Life With Microcredit

Mario de Queiroz

LISBON, Dec 7 2006 (IPS) - Starting one’s own business on borrowed money is no easy task in Portugal for an unemployed or retired person, or one lacking advanced professional qualifications, even if the loan is small and payable in instalments.

It is even harder for an immigrant, who would have difficulty getting a guarantor to back an application for a loan from Portuguese banks, which, as in most places in the world, only lend money to those who already have plenty of it, or require collateral in the form of assets that can easily be sold.

However, the example set by “banker to the poor” Muhammad Yunus, the Bangladeshi economist who was awarded this year’s Nobel Peace prize, is also being followed in Portugal, a European country with two million people on the fringes of poverty out of its 10 million total population.

Since 1999, micro-businesses have been receiving support from the National Association for the Right to Credit (ANDC), which has signed agreements with private banks, such as the Commercial Portuguese Bank (BCP) and the Espirito Santo Bank (BES), and with the state Caixa Geral de Depósitos (CGD, General Deposit Bank).

Total financing has reached 6.3 million dollars, according to information published this week by economic analyst Cristina Ferreira in Lisbon’s Público newspaper. This is a relatively modest sum if it is divided by six years. But loans granted this year account for half of the total.

Ferreira described microcredit as “an essential instrument for development policies,” as it is a financing solution for creating self-employment or micro-business start-ups, which often provide services like sewing, cleaning, household repairs, retailing or craft work.

Evaluation of proposals is in the hands of the ANDC. Once a project is deemed feasible, it is passed on to one of the banks that signed the joint protocol.

“I hadn’t the slightest idea this sort of possibility existed,” Natasha, an immigrant from Moldava, told IPS. She was over 50 when she decided to leave her home country in 2001 and move to Portugal, where she opened a food shop in Carcavelos, a suburb of Lisbon at the mouth of the Tajo River. Natasha’s business sells preserved, frozen or dry foods from Ukraine, Russia, Rumania, Bulgaria and Moldava, that cannot be found in Portuguese shops. She imports them from the main countries of origin of central and eastern European immigrants who live in Portugal.

Her dream is to buy a big house, where she can live and also expand her business, using a good-sized part of it for selling her products. “Now that I know about this opportunity, I’ll ask for a bank loan,” she said, regretful about the lack of publicity for the doors micro-credit can open.

In contrast, Viktoria and Andriy Mzurenko, a young Ukranian couple, said that there was plenty of information in the press catering to Portugal’s 600,000 immigrants, who are mostly from Brazil, Portuguese-speaking countries in Africa, and eastern and central Europe.

Andriy arrived in Portugal in 2000, when he was just 23, and after working in all sorts of jobs in construction and carpentry for three years, he managed to scrape together enough money for Viktoria to join him. Although she is a nurse, she only found work cleaning houses.

In 2003, they applied for and obtained a loan of 5,000 euros (6,400 dollars) from their bank and started their own business, the Russian Mini-Market in Mem Martins, a dormitory suburb 15 kilometres from Lisbon with a low-income population and a high proportion of Russian, Ukrainian, Rumanian and Moldavan immigrants.

Their business grew and they decided to move to Santárem, 120 kilometres north of the capital, where according to Viktoria they opened “not a wee tiny mini-market” but the Russian Market in the city, where they sell practically everything: a vast range of preserves, yoghurt, processed meats, smoked salmon, caviar, magazines, books and films.

Paulo Alves, 31, tells a similar story. With the aid of a micro-loan, he started an original business straightening out dents in metal, from cars and railings to pots and pans. Today he defines himself as “an immigrant who turned out well.”

The dent-fixing business, “Tira-Mossas” (Mark Removal) goes “to the customer’s home or workplace, where we straighten the dents without damaging the paintwork, and it works out much cheaper than a garage or workshop,” explained this ingenious Brazilian.

He has a traditional Portuguese surname, but no immediate family in Portugal. He landed in Lisbon without knowing a soul, but determined to “make a better life,” in 2000.

For three years he worked as a car paint-sprayer, and saved enough money to bring over his wife and daughter. Then in 2004 he launched “Tira-Mossas” on the Internet. Since he expanded his business, Alves operates not only in Lisbon, but also spends one week a month in Oporto, the second-largest city in the country, 320 kilometres north of Lisbon.

Since November 2005, access to micro-credits has become even easier, because of an initiative of the BCP to create an Autonomous Micro-Credit Network, with its own officials who are specialised in this area. This obviates the need for permission from the ANCD and several other bureaucratic steps that are required for the normal application route.

The BCP reported that the results of the first year of the autonomous network’s operation were decidedly positive.

So far, the BCP is the only financial institution that operates in the field of micro-credit using two methods: the autonomous network, and the protocol with the ANDC. Loan amounts vary from 1,000 to 5,000 euros (1,280 to 6,400 dollars), to be repaid in up to three years, with a non-negotiable interest rate of two percent.

The BCP’s credit line can also be used to finance larger loans, of up to 19,200 dollars payable in up to four years, but the interest rates range from five to 25 percent, and are determined on a case by case basis.

In the first year of direct operation of the autonomous micro-credit network, 187 projects were approved, for loans with a total value of 2.68 million dollars. Three hundred and twenty-seven new jobs were created.

When Yunus received his Nobel prize, BCP president Paulo Teixeira Pinto explained that the autonomous network exists “to give credit to people who were turned down by the financial system,” and to “help change the lives of people” who use this method to kickstart their projects.

Overall figures released this week by the ANDC indicate that since 1999, the Association has approved 630 projects, for a total of 3.6 million dollars. Women headed 54 percent of these projects, but the percentages of Portuguese citizens and foreign immigrants who applied to the ANDC were not made available.

Analysts agree that the most important thing about micro-credit is not the nationality of the applicant, but the overall purpose, that is, to integrate into society people who suffer from social exclusion; people who, with the help of small loans, launch their business ideas, create their own jobs and generate sustainable incomes.