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Alberto Bautista, 30, is a rarity in Santa Cruz Mixtepec: a young adult male. Most of the sons, husbands and brothers from this poor remote hamlet of Mixtec Indians, tucked in the sierras of southern Oaxaca state, are migrant workers in the U.S. Some 60% of Santa Cruz's population of 3,000 live illegally al otro lado — on the other side of the U.S.-Mexico border — sending back almost $1 million last year.

But now Bautista is back — working for his uncle in a new carpentry business financed by a microcredit bank that the wives in Santa Cruz founded recently with all that remittance cash. Bautista made $6 an hour picking strawberries in Arizona, more than many laborers in Mexico earn in a day. But he's hopeful that he can comfortably support his wife and new baby by crafting doors, cabinets and coffins, products that people in Santa Cruz and surrounding villages once had to travel miles to buy. "I didn't want to start a family al otro lado," Bautista says, as wood shavings fall to the floor of his uncle's workshop. "Al otro lado isn't home."

Bautista's homecoming is a small but important victory in the battle to curb illegal immigration — not at the border, but at its source in the dusty recesses of impoverished rural Mexico. The nation's massive labor migration — what President Felipe Calderon calls his country's "open wound" — was a top agenda item during his recent meeting with President George W. Bush. But if Bush was serious when he said "the working poor of Latin America need change," then many feel the U.S. should start helping burgs like Santa Cruz build the kind of small enterprises that can jump-start more viable local economies. "There is too much entrepreneurial ambition in this country that never sees one peso of encouragement," says Roberto Hernandez, 29, whose metal-window-frames business was financed by the Santa Cruz microbank, which is called Xu Nuu Ndavi, or Poor People's Money in Mixtec.

Mexican migrants sent as much as $25 billion back to the country last year — and the total for all Latin American migrants was more than $60 billion, according to the Inter-American Development Bank (IDB). At its annual conference this past weekend, IDB officials emphasized the need to encourage entrepreneurial ambition like that of Hernandez, either through bank credit or the creation of venture-capital funds focused on the poor. Its "Opportunity for the Majority" initiative also promotes getting land and other property titles to the region's have-nots in order to draw them out of the underground and into the kind of formal economy that makes capital and credit more accessible.

Such plans are especially urgent in places like Oaxaca. The Mixtecs send more undocumented workers across the border than any other of the 56 indigenous groups in Mexico, such as the Maya and the Zapotecs. It's easy to see why in Santa Cruz, where farmers still till the soil with oxen and wooden plows. But about five years ago, villagers like Olivia Mendoza, Bautista's aunt, decided to invest remittances in something more productive than pickup trucks and wide-screen TVs. "It was time to use that treasure to find ways to bring our families back together," says Mendoza, 40. With help from the Association of Mexican Social Sector Credit Unions (AMUCSS), they pooled $170,000 and set up Xu Nuu Ndavi. One of its first business-starter loans, about $5,000, went to Mendoza's husband Daniel, 45, whose carpentry shop now employs Alberto and two other locals. Their buddy Modesto Ramos, 33, another returned migrant worker, has used his credit to raise and market tomatoes from a 1,200-sq.-ft., irrigation-equipped greenhouse.

Xu Nuu Ndavi, whose capitalization today is nearly $1 million, offers loan values at a level beyond typical microcredit operations, which are sometimes criticized as the purview of First World do-gooders helping Third World women market tribal shawls. The handful of institutions like it are the first real banking system most rural Mexicans have ever known. In developed countries there are usually fewer than 2,000 people per bank branch. In Oaxaca the number is 38,000, according to AMUCSS. Mexico's big banks have failed to help. The few large banks that make up Mexico's financial oligopoly have all but shut out small business with exorbitant interest rates and prohibitive red tape — despite the fact that small- and medium-size enterprises employ most Mexicans. Migrants send as much as $25 billion home annually, "but there is virtually no engine to receive it, invest it and turn it into jobs," says AMUCSS director Isabel Cruz. "That's the ugly paradox of Mexico."

Another ugly paradox is that neither NAFTA nor other Washington-backed free-market reforms have reduced illegal immigration — or quieted a resurgent left across Latin America, led by Venezuela's anti-U.S. President Hugo Chavez. After winning last year's controversial presidential election with just 36% of the vote, the conservative Calderon has worked his way to a 58% approval rating. That might be enough cover to delve deeper into new initiatives for Mexico's development, whether in microbanks, health care or schools. Across the street from Xu Nuu Ndavi, a $300,000 church is rising in Santa Cruz. Some residents see it as a sign of the village's resurrection. Others call it a lavish vanity. But either way, Santa Cruz has a rich new faith in the power of poor people's money.

• Tim Padgett/Santa Cruz Mixtepec
• Mexicans send billions of dollars home from the U.S. every year. In Santa Cruz Mixtepec, locals are using the money to create jobs