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Since August 2002 RealMicrocrédito has provided financing to about 18,000 customers, representing R$49 million in loans. This is a small figure when compared to the almost R$9 billion - plus R$12.8 billion from Aymoré Financiamentos - of credit we gave to consumer clients in 2006 alone. For our microcredit operations our challenge is to break-even by the end of 2007. Current figures show that in Brazil there are more than ten million small companies in the informal sector, employing nearly 14 million people. Despite this potential, microcredit struggles to take off in this country. Why is this?
The answer involves a number of characteristics of the Brazilian economy: there are excessive regulatory constraints for the financial system, a lack of information showing who the good payers are, the Federal Government’s welfare state policy, and even the ease of obtaining consumer credit. Within the Brazilian financial system, for example, anyone can buy a sewing machine or an oven in dozens of small instalments, without the slightest bureaucracy. At the same time, experts point to the importance of private sector banks in this process. “We have to treat microcredit as a business, and not as corporate social investment”, says micro-finance consultant Terence Gallagher, Executive Director of Planet Finance Brasil.
In some ways, the models tested until now have been very much inspired by successful experiences in other countries of Latin America and, to a lesser degree, in Asia. “Still very little is spent on research to discover what Brazilian customers actually need”, claims Manuel Thedim, Director of the Work and Society Studies Institute. In spite of the obstacles, we were investing in microcredit before Muhammad Yunus, founder of the Grameen Bank, won the Nobel Peace Prize, or before the Brazilian government began creating microcredit incentives. |
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With a R$2,000 loan,
business woman Marli Ferreira dos Santos opened her shop in Osasco (SP). |
A success in other countries, microcredit
has a long way to go
in Brazil, adding new challenges for our operation |
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So why did we decide to invest?
“Because there is a huge potential market in Brazil for expanding credit, particularly to those who don’t have access to financial institutions and banks. And microcredit is an important tool to support income generation for small business people”, says José Giovani Anversa, Managing Director of RealMicrocrédito. “We focus on the customer’s business, in buying machines, equipment, raw materials and goods. We also offer credit for working capital and small renovations, but we do not fund the purchase of consumer goods like refrigerators or cars.” To avoid this happening, our agents monitor the use of the funds and the development of our customers’ business. |
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