Microcredit in Brazil
“It is estimated that there are approximately 16 million small productive units in Brazil, which are eventual microcredit clients,
out of which 13 million are own-account workers which implies that there are approximately 7 million potential clients exercising
real demand. In figures, that represents approximately R$11 billion; even though it is a high value, it counts for less that 1% of
GNP of Brazil.” (Santos & Silva, 2006)
Even though microcredit has been present in Brazil since 1973, it was in 1999 that significant changes were made in the sector as
per Law No. 9,790/99, which stated that microcredit NGOs could operate as OSCIPs by using public funds. Previously to that
Law’s enactment, two models regarding service providing to the microcredit clients had been considered. First, the
developmentism advocated that MIFs should focus on fighting poverty by granting credit and also by providing technical-
management ability, assistance to commerce, community life experience, etc. Second, the minimalism stated that MIF should
perform its only role as grantor only if it had self-sustainability, and therefore, could only offer financial services. In Brazil the
latter has been selected, because it required fewer subsidies and allowed MIFs to reach sustainability more rapidly (Santos &
Silva, 2006).
Ever since minimalism has been opted for, SCMs emerged in 1999 in order to attract private capital to the sector and also to
withstand the considerable market pressure for the establishment of a government agency to inspect those institutions since
microcredit emerged in Brazil, as well as in other countries, alongside of the financial system and not subjected to banking
supervision.
In December 2004, there were 40 SCMs operating in Brazil. The loan portfolio increased uninterruptedly; however, with a
deceleration in the period of 2003-2004 in light of changes to microcredit incentive policies, especially after interruption of
Banco Nacional de Desenvolvimento Econômico e Social (BNDES)´s fund releases
, usually directed to MIFs.
The microcredit average loan portfolio was twice as high between 2002 and 2004, increasing from R$390,000 to R$768,000 at
the end of the period. In December 2004, portfolio of operating SCMs held a small number of institutions. The three largest
institutions accounted for 50% of the total sector loans and the 11 largest institutions accounted for 80%.
Crediamigo is a public initiative and is the largest microcredit operation in Brazil. In December 2004, it held a portfolio of R$106
million, and SCMs of R$31 million. Total estimate of microcredit portfolio would be R$210 million.
2
BNDES is a government onlending or development bank
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Convention