The sewing machine works at full speed all day and piles of cloth and fabric are stacked up to the ceiling in Rokhaya Mboup's cramped living room, which she has converted into a successful sewing shop in the suburbs of the Senegalese capital Dakar since being granted a small loan two years ago.

Even in the slowest months, when Mboup earns around CFA 50,000 (US $100) from selling lingerie, clothes and bottom pads, she is better off than many Senegalese.

The rest of Mboup’s family is jobless and relies on the income from her small business. Unemployment is rampant in the former French colony. For the lucky few who find work, salaries are extremely low. Nearly a quarter of Senegal’s 11 million people scrape by on less than one dollar a day, according to United Nations statistics.

Mboup, 50, said she dragged herself out of the mire two years ago with a small loan of 200,000 CFA francs (US $383) granted by PAMECAS, one of six large microfinance institutions in Senegal. Using her prized television and bedroom furniture as a deposit, she was given CFA 550, 000 CFA francs (US $1,055).

"It was really simple", she explained. "I asked for the sum I needed, they came to my house, I showed what I could put down as a deposit, they agreed and gave me the money."

"Now I can go to the market every day, I contribute to the electricity, the water and the food costs at home and I still can keep on some cash to meet unexpected financial commitments", she said.

Loans change lives

Since 1993, small loans like the one given to Mboup have been changing lives throughout Senegal. At least CFA 200 billion (US $383 million) in loans is counted out every year, according to the most recent data from the Dakar-based Central Bank of West African states (BCEAO).

By 2003, nearly 40 percent of Senegal’s population had borrowed money from microfinance providers, according to the same data. Microfinance specialists estimate the market is worth several hundred billion dollars.

More than 650 microfinance institutions exist in West Africa alone, offering financial services to about six million customers out of a total population of 80 million inhabitants. Only the booming cell phone market is experiencing more growth in Africa.

Development experts are positive about the impact.

"We have observed that when the most underprivileged people have access to credit, the livehood improves instantly", Madina Assouman, from the UN Capital Development Fund (UNCDF) in Dakar said.

According to UNCDF, microfinance is an effective mean of contributing to poverty reduction and the achievement of the Millennium Development Goals - and notably to build, by 2015, a finance sector accessible to the greatest number of people.

"A rise in the family income would be translated into a better diet and girl schooling", Assouman explained.

In Senegal than half of the beneficiaries are women and the proportion is increasing, the regional banking institution says. In 2002, 52 percent of the lenders were women, 10 percent higher than two years earlier.

"We have noticed that more men than women came to microfinance, women lacking of guarantees to secure the loans", Sagar Tall, human resources officer at PAMECAS said.

Not a panacea

While success stories like Mboup’s are encouraging, there are barriers to using the programme to help others break out of their poverty trap.

Matar Doye, the executive secretary of the Farmer’s Federation of Djender, 50 km outside Dakar in a rural area, has tried to use the microfinance structure to provide basic financial services to the Federation’s members.

"We wanted to fight against the funding problems faced by the smallest farmers: since 20 years, intermediaries gave farmers small loans to be reimbursed at the end of the harvest. Usually, the farmer sells his crop to the lender at a fixed price", he said.

But because the Federation lacks financial clout to prevent intermediaries from squeezing the illiterate farmers, the lending structure is now hard pressed to answer its members' needs, he explained.

Half of the Senegalese population lives in rural areas, 40 percent of them below the poverty line, according to the UN International Fund for Agricultural Development (IFAD), which mainly targets small producers, engaged in agricultural and non-agricultural activities.

"Access to microcredit is not so easy for the poorest, particularly the young who have some tremendous difficulties to obtain the loans", Ousmane Gueye, programme officer at a local NGO specialised in employment issues told IRIN.

Most of the lenders still operate like a normal bank, asking for a minimum income level and applying high interest rates, Gueye explained.

"If a young person finally gets his credit, and if he pays it back, he will be obliged to borrow again to continue his business. He will be kept hostage.”

Interest rates on credit can vary from 12 to over 30 percent per annum in West Africa, with an average of 20 percent, Assouman at UNCDF said.

"These interest rates are a handicap for the poorest, they don't fit their needs", she said. "It seems that these costs are impossible to reduce: managing a small or a big loan costs the same."

Microfinance can help some dreamers like Mboup turn their ideas into cash and jobs. But, "it should not be considered as a panacea for poverty reduction,” Assouman said.

“It is but one of several important areas for investment in poverty relief and it is not designed to help the poorest, who crucially need non-financial mechanisms."