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There is something of a Dickensian feel about the makeshift factory at the bottom of Álvaro Avelár López’s garden in Amecameca, a quiet Mexican town that sits under the Popocatépetl volcano.

A few yards from Mr Avelár’s front door women sift through black bags of waste brought by pick-up truck from the municipal dump. In a shed nearby their colleagues – young men wearing T-shirts and back-to-front baseball caps – feed waste plastics into two gas-heated tanks, perched on top of a metal frame.

When Mr Avelár talks about his business from the simply decorated front room that he uses as an office, he displays the down-to-earth, almost Gradgrindian, practicality of the self-made man. “Here you have it,” he says. “It is all real, nothing painted, nothing for show.”

But there is nothing that is old-fashioned about his business. Mr Avelár is a plastics recycler. The material he collects from rubbish tips is mixed with pigment, converted into a rust coloured sludge and then rolled out into sheets of plastic lamina.

The sheets are moulded and cut as roofing tiles that are sold mostly to the building trade. Avelop – as the company is called – also makes septic tanks, cisterns and ecological toilets and has latched on to the contemporary marketing appeal of a green brand.

It is a formula that has served Mr Avelár well. At the factory, 27 workers – three times more than in 2000 – work round the clock to produce 250 metres of plastic lamina each day. Annual turnover from sales amounts to more than 3.6m pesos ($330,000, €241,000, £165,000) and has also more than tripled since 2000.

Mr Avelár’s father, Miguel, who died seven years ago, invented the recycling machines that can process waste directly rather than using plastic that has first been converted into granules. Mexico’s enormous self-build housing market – poorer Mexicans build their own homes – provide a ready demand for the tiles.

But until Banco Compartamos, a microfinance institution, offered to help, shortage of finance was a problem. Conventional banks had rejected early approaches and local money-lenders would have charged the company a prohibitively expensive 10 per cent interest a month.

“We were often at a point where we nearly threw in the towel,” says Mr Avelár.

Avelop’s sales, once limited to the State of Mexico, are now taking place across the country and – though an intermediary – in McAllen, Texas. Mr Avelár is even eyeing export markets in Canada and Costa Rica.

His success is testament to the importance in Latin America of microfinance, a practice that aims to empower the poor by extending small loans which has been popularised by the award last year of the Nobel Peace Prize to Muhammad Yunus, the founder of Bangladesh’s Grameen Bank.

For the past two years, Mr Avelár has obtained part of his working capital as well as money to buy additional waste material from Compartamos, a bank that began life as a non-governmental organisation in the poor southern states of Chiapas and Oaxaca 17 years ago, but is now one of the biggest microfinance institutions in Latin America.

The bank’s growth has highlighted a take-off in microfinance and the extension of financial services to less well-off Mexicans. Compartamos has seen its client base increase tenfold since 2001 and last week it successfully listed on the Mexico City stock exchange, raising $407m.

The Mexican microfinance sector has benefited from an increase in government backing, with 156 mainly smaller organisations receiving 1,961m pesos in funding in 2006, compared with 52m pesos in 2002.

But Carlos Danel, co-director of Compartamos, estimates that only a small fraction of Mexico’s estimated 17m microenterprises have access to credit, in spite of the rapid expansion in the market since 2000.

Mr Avelár is borrowing more money – 50,000 pesos – than the typical Compartamos client and paying a percentage point a month less in interest than the usual 4 per cent to 6 per cent per month. But his success, say bank officials, demonstrates the untapped entrepreneurial potential of the huge informal sectors where up to a third of Mexicans make their living.

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