Financing SMEs and Entrepreneurs 2020

7. Brazil

Key facts on SME financing

Micro and small-sized enterprises (MSEs) form an essential part of the Brazilian economy, accounting for 98.5% of all legally constituted companies (11.5 million), for 27% of GDP, and for 41% of the total payroll.

The reference interest rate of Banco Central do Brasil (Special Clearance and Escrow System - SELIC) has been gradually declining, from 14.15% per annum in December 2015, to 13.65% in December 2016, 6.9% in December 2017 and 6.4% in December 20181. The previous period of rate hike (from 7.25% in March 2013 to 14.25% in September 2016) led to high interest rates on loans for large corporate borrowers (14.8%) and SMEs (30.6%), leading to a shrinking demand for new SME loans. Interest rates have increased more for micro-enterprises and SMEs than for large businesses. However, this trend was reversed when the central bank decreased its rate at the end of 2016, thus decreasing interest rates for SMEs.

The stock of SME loans fell in 2015 and new lending to SMEs declined in 2014 and 2015. Both observations are in contrast with lending to large businesses, where the outstanding stock of loans, as well as new lending was up in 2014 and 2015.

Since 2008, large companies have been receiving a larger share of the business loans granted compared to SMEs. The government has taken on a more active role in this area, often with the aim to provide financial services to small businesses, excluded from classic financial institutions. Developments include a micro-credit programme, a quota to use 2% of demand deposits of the National Financial System to finance loans to low-income individuals and micro entrepreneurs, and a strong increase in the number of agencies where financial services are provided.

The regulatory framework for angel investors has been revised in 2016 and further adjusted in 2017, removing some long-standing barriers for investors in SME markets, most notably by offering more legal protection in the case of company closures, more latitude to investment and more information sharing between recipients and investors. In addition, new regulations concerning investment-based crowdfunding and Fintech were introduced in 2017 and 2018.

SEMPE, the Under-Secretariat for Micro and Small Enterprises (Ministry of Economy - ME) is the main body of the Brazilian government responsible for formulating, coordinating, articulating and defining public policy guidelines aimed at strengthening, expanding and formalising artisans, individual entrepreneurs and micro and small enterprises. In addition, SEMPE/ME leads the articulation of actions aimed at improving the business environment and at contributing to the expansion and sustainability of micro and small enterprises, with the aim to contribute to employment and income generation.

Table 7.1. Scoreboard for Brazil

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Outstanding business loans, SMEs	BRL billion	281.13	347.21	388.58	476.96	564.12	629.56	681.31	692.26	656.25	578.29	523.36	524.68
Outstanding business loans, total	BRL billion	506.61	689.55	780.83	935.86	1 114.03	1 286.53	1 460.03	1 623.01	1 734.61	1 565.18	1 436.38	1 440.78
Share of SME outstanding loans	% of total outstanding business loans	55.49	50.35	49.76	50.97	50.64	48.93	46.66	42.65	37.84	36.95	36.44	36.42
New business lending, total	BRL billion	..	..	..	..	..	917.83	948.01	992.11	1 027.21	817.48	735.23	813.87
New business lending, SMEs	BRL billion	..	..	..	..	..	566.88	562.21	532.2	490.9	408.98	398.48	429.13
Share of new SME lending	% of total business lending	..	..	..	..	..	61.76	59.3	53.64	47.79	50.03	54.20	52.73
Outstanding short-term loans, SMEs	BRL billion	105.57	109.37	104.07	119.57	150.72	158.58	161.9	155.96	141.47	122.28	116.75	125.36
Outstanding long-term loans, SMEs	BRL billion	160.04	200.91	240.04	309.64	386.91	469.35	518.06	534.8	513.04	454.62	403.23	396.71
Share of short-term SME lending	%	39.75	35.25	30.24	27.86	28.03	25.25	23.81	22.58	21.61	21.20	22.45	24.01
Government guaranteed loans, SMEs	BRL billion	0.07	0.08	0.11	0.05	2.21	2.01	1.74	2.02	2.84	3.27	5.05	4.14
Direct government loans, SMEs	BRL billion	10.09	11.76	13.85	14.47	17.16	18.93	22.12	24.12	27.21	29.06	30.46	29.18
Non-performing loans, total	% of all business loans	1.51	1.53	2.65	1.82	2.01	2.21	1.84	1.88	2.39	3.15	2.99	2.45
Non-performing loans, SMEs	% of SME loans	2.64	2.79	4.68	3.39	3.63	4.18	3.56	3.9	5.43	6.7	5.67	4.29
Interest rate, SMEs	%	..	..	..	..	..	19.7	23.7	25.2	34.8	31.7	25.1	21.50
Interest rate, large firms	%	..	..	..	..	..	9.0	12.0	13.3	16.4	17.4	9.0	8.60
Interest rate spread	% points	..	..	..	..	..	10.7	11.7	11.9	18.4	14.3	16.1	12.90

Source: See Table 7.2.

SMEs in the national economy

Micro and small enterprises (MSEs) account for the overwhelming majority of the total number of Brazilian enterprises (98.5%), contributing to 54.5% of formal employment2, and to 27% of GDP. In addition, MSEs account for about 37% of the federal administration’s procurement3. Those numbers would be higher if the active number of sole entrepreneurships and individual micro entrepreneurs were included4. MSEs play an important role in creating new registered jobs in the economy, according to data from the Brazilian Ministry of Labor and Employment. In 2018, micro and small enterprises hired 580 932 employees, while larger firms dismissed 47 188 workers.

In terms of the size classification established by the Brazilian Institute of Geography and Statistics (lBGE), the segment of micro, small and medium enterprises (MSMEs) comprises companies that have up to 249 employees: micro enterprises have 0 to 9 employees, small enterprises have 10 to 49 employees, and medium-sized enterprises have between 50 to 249 employees. All companies having more than 249 workers are classified as large enterprises.

The more accepted definition of MSEs in Brazil is based on the annual turnover criterion according to the Statute of Micro and Small Enterprises (Lei Complementar 123/2006). The banking industry, however, relies on different definitions based on internal criteria that meet their respective targeting strategies.

With a relatively high self-employment rate (32.9% in 2017), Brazilian policy makers have increasingly turned their focus to improving the business climate for SMEs and entrepreneurs in recent years (OECD, 20175).

Brazil's economy is highly dependent on its service sector, which accounts for 73.3% of GDP, followed by the industrial sector (21.6%) and agriculture (5.1%) (IBGE)6. Because of the 47% depreciation of the Brazilian real in 2015 (virtually counterbalanced by a 17% appreciation in 2017 and a 12% depreciation in the first semester of 2018), attention has turned towards catalysing the export sector.

Brazilian MSMEs have thus far only been contributing to a small share of Brazilian exports (5.8% in 20167), which suggests that there is an opportunity for them to be more active in Brazilian international trade. With the service industry growing in Brazil, and as the government is focusing its efforts on nurturing and supporting individual micro entrepreneurs and MSMEs, the status of this segment is becoming increasingly more important.

SME lending

In the last few years, a new challenge to a sustainable provision of finance and credit to MSMEs has emerged. After years of high growth, Brazil entered a recession in 2015, partially caused by the recent credit boom, followed by debt deleveraging. Companies also allocated their resources in costs and expenses, rather than in investments. By failing to increase their cash flow capacity to repay loans, many entrepreneurs failed to honour their commitments. Another explanation is the rising cost of post-fixed loans during the 2015 economic decline.

The economic contraction took a toll on nominal SME bank lending rates in 2015, when the stock of SME loans declined by 2.2%. This decline is potentially due to the worsening economic climate, as well as the high interest rates charged. Once adjusted for inflation, the share of the outstanding stock of SME loans as a share of total business loans has been on a decreasing path since 2013.While total outstanding lending has grown rather steadily over 2007-15, loans to large companies were driving this trend. Over the past few years, growth in SME lending has turned negative as funds drifted away from SMEs towards larger, less risky companies. This trend can also be observed via the share of outstanding lending for SMEs, which decreased from 52.9% in 2008 to 39.6% in 2015.

New lending to SMEs follows a similar downward path over the same period. This trend was reversed in 2016 and 2017, with the support of public and private actions monitored by SEMPE/ME. Since 2008, there has been an increasing preference for long term lending to SMEs and micro enterprises. While 54.44% of loans were short-term in 2008, this share has since then fallen to 27.57% in 2015.

Credit conditions

Despite their importance to economic growth, MSMEs suffer more from credit constraints than larger companies, since they usually have less collateral to secure a loan and are more likely to default than large companies. This situation is often exacerbated by the lack of financial planning and training of managers.

According to SEBRAE, 83% of MSMEs owners did not request any credit in 2016, while 19% of those that had requested one were denied by banks. SEBRAE also indicates that the default rate increased from 3.4% in 2012 to 8% in 2016.

In an effort to curtail inflation, Brazil's Central Bank started raising benchmark interest rates in 2011 and kept them at a high level (14.25%) until September 2016. Since then, there has been a gradual though significant decline (6.5% in 2018). That episode led to high interest rates, averaging 34.8% for SMEs in 2015 and 17.4% for large companies in 2016, at their peaks. Moreover, the interest rate spread widened over those years peaking at 18.4% in 2015 and has been decreasing progressively since then. In June 2016, interest rates for microenterprises reached 42% and SME interest rates reached 35.9%, as they continued on an even steeper growth path, while large company interest rates began to decrease over the second quarter of 2016. In 2018, the interest rate for SMEs reached 21.5%, while large companies’ interest rates reached 8.6%.

Alternative sources of SME financing

As the cost of debt has continued to rise and economic growth has slowed, investors have begun turning to alternative financing methods as well as consolidating businesses through mergers and acquisitions of smaller companies.

Small investors are often discouraged to borrow money from a bank due to the high interest rates, requiring substantial profit margins to cover the costs. Moreover, the lack of tax incentives constitutes an obstacle for the development of alternative sources of investment in Brazil from the investor-side.

Angel Investment

Angel investing is a relatively new field in Brazil and the network is still in its infancy. As of 2013, Brazil had more than 6 500 angel investors venturing in around 1 500 companies, with an investment potential of BRL 2.6 billion. According to the organization Anjos do Brasil - a non-profit angel investment network and angel investing group in Brazil - there were 7 070 angel investors in 2016, slightly less than in 2015 (7 260), but total angel investments amounted to BRL 851 million in 2015, a 9% increase from 2015, although still far from reaching its full potential.

Surveys show that Brazilian investors are willing to invest their money in start-ups despite the risks, but due to legal uncertainty, most of them refrain from doing so. The Statute of Micro and Small Enterprises (Lei Complementar 123/2006), with the new Lei Complementar 155/2016 (the “Angel Investment Law” enacted in October 2016 and regulated by Normative Ruling RFB no. 1719) addresses some of those uncertainties looming over angel investors, crowdfunding equity investors and venture capitalists.

The Angel Investment Law aims at promoting innovative activities and productive investments. It represents a milestone for the development of entrepreneurship in Brazil by addressing early-stage investments in Brazilian start-ups. The new law amends the National Statute of Micro and Small Enterprises to bolster the legal framework for early-stage investments in Brazilian start-ups with gross annual income of less than BRL 4.8 million.

It has also brought new benefits and protection for investors. For instance, investors will no longer be personally or legally liable for the debt of the companies they invest in vis-a-vis the previous legal status quo. The update of the Statute also makes a difference relative to labour liabilities of a bankrupt or insolvent enterprise. It furthermore extends the fiscal benefits of the Simples Nacional regime to start-ups.

With the enactment of the Angel Investment Law, Brazilian start-ups may now receive seed money from individuals, companies and investment funds through a participation agreement (contrato de participação). The amount invested through the participation agreement is not added to the share capital and, therefore, angel investors are not considered as equity owners of the start-up. As a result, angels investing through a participation agreement have no management or voting rights in the company. While this may seem unattractive and a deterrent to investment, this legal structure does protect angel investors from liabilities of the start-up, even in the event of insolvency. Moreover, the participation agreement can mirror certain rights that are typically granted to equity owners, such as tag-along and pre-emptive rights.

The participation agreement must provide that the angel investor’s right to receive dividend distributions is limited to a 5-year term, and distributions may not exceed 50% of the company’s net profits in each fiscal year. Moreover, the participation agreement must be effective for no longer than 7 years. Even though the Angel Investment Law does not provide guidelines as to what happens after this seven-year period, it is expected that upon termination of the seven-year period, the angel investor must exercise the right to withdraw or convert the contribution to actual equity, if the participation agreement provides for such transition. In addition, an angel investor’s right to withdraw its interests in the startup can only be exercised after at least two years have passed from the date of the investment. However, this lock-in does not prevent the angel from transferring ownership of its participation interest to third parties upon consent from the other equity owners, unless otherwise provided in the participation agreement.

There are still a few loopholes in the new law and some regulatory conflicts that must be addressed. Considering the Angel Investment Law is new, either the courts will provide clear and uniform interpretation to reconcile these regulatory bodies as conflict arises or the Congress will draft supplementary legislation to address these questions. Despite these pending issues, the adoption of the Angel Investment Law should contribute to a safer and more conducive environment for angel investors, especially non-Brazilian angels.

Investment-based Crowdfunding

In July 2017, the Securities and Exchange Commission of Brazil (CVM) promulgated new regulations on investment-based crowdfunding (Normative Ruling CVM no. 588), aiming at making it more attractive through accredited private platforms. It dispensed a thorough review and approval by CVM for all investment-based crowdfunding initiatives – until recently, a time consuming and burdensome process.

The regulation covers the public offering of securities issued by small business (gross annual revenue limited to BRL 10 million) through participative investment electronic platforms. They will be able to publicly fund their activities without the need of a previous registration at CVM.

The annual funding limit per issuer is BRL 5 million per calendar year, with underwriting periods of no longer than 180 days. The annual funding limit per investor is BRL 10 000, and this limit may be increased by up to 10% in case of qualified investors.

The platform must be registered and accomplish a set of requirements, as it has an intermediation role in the public offering. They shall disclose to the investor that the offering and the issuer are not subject to a prior registration with CVM and that the Commission does not assure the truthfulness of the provided information.

Fintech

In April 2018, the Brazilian National Monetary Council (CMN) issued a resolution (Resolution CMN 4656/2018) which provides for the creation of two new types of financial institutions to fund clients through electronic platforms. The licensing process is simplified compared to a traditional financial institution and there is no need to act in collaboration with traditional banks.

The direct credit company (Sociedade de Crédito Direto – SCD) is allowed to fund their loans exclusively through equity capital. The SCD is prohibited to have equity in other financial institutions and to raise capital from the public to fund their clients. The SDC is allowed to sell and/or assign the credits to other financial institutions and it must comply with Brazilian Central Bank prudential supervision regulation.

The peer-to-peer loan company (Sociedade de Empréstimo entre Pessoas – SEP) is allowed to connect lenders and borrowers and to intermediate the negotiation of funding through electronic platforms. The lenders/creditors may be individuals, legal entities or investment funds. The borrowers/debtors may be individuals or legal entities domiciled in Brazil. The SEP is not co-obliged and does not grant any guarantee/security to the transactions.

The creditors/lenders exposure is limited in terms of credit amount (BRL 15 000), as well as by SEP, but qualified investors are exempted from such limits. SEPs are forbidden to use their own capital to fund loans in the platform and to hold equity of another financial institution.

The SCD and the SEP must have a permanent minimum requirement of BRL 1 million for both corporate capital and net worth. International fintechs and investors may become equity holders of Brazilian fintech shares upon presidential decree authorization.

Other indicators

Overall, the rate of non-performing loans for SMEs, with the exception of micro enterprises, remains close to the rate observed for all businesses. SME non-performing loan rates have remained relatively low - picking up only slightly from 2.7% of SME loans in 2008 to 5.4% in 2015.

Government policy response

The contribution of Brazilian small businesses to the overall economy remains less prominent compared to their counterparts in advanced and other high middle-income countries, which demonstrates an opportunity for this segment to play a more prominent role in the economy. Moreover, there is an acute perception of the urgent need to adopt structural measures to improve the business environment so that MSEs become less susceptible to a breakdown in times of crisis, ensuring minimum employment and income levels in the country. A significant landmark in the creation of an enabling environment for micro and small enterprises was the Microenterprise Statute (Estatuto da Microempresa), promulgated in 1984.

Four years later, the new federal constitution (Constituição Federal, 1988) recognised the central role of micro and small enterprises in the economy.

In 1990, the autonomous small and micro enterprise development agency SEBRAE (Serviço Brasileiro de Apoio às Micro e Pequenas Empresas) was created.

The passing of a Constitution-mandated law (Lei Complementar 123/2006), known as the National Statute of the Micro and Small Enterprises or the General Law for Micro and Small Enterprises boosted formal entrepreneurial activity, because it made it easy for individual micro entrepreneurs (MEIs) to start a legal business entity.

The Brazilian Government offers multiple incentives for national individual micro entrepreneurs (MEI, acronym in Portuguese) and MSEs. Among these, there are special credit lines that are easier to obtain and that help small business grow.

In September 2017, the Decree 9161/2017 was issued to regulate the Programa Nacional de Microcredito Produtivo Orientado, (PNMPO), which provides credit access to small enterprises8. The MSEs Microcredit Programme decree included the rural productive activities as beneficiaries, increased the gross revenue limit for beneficiaries, and established the methodology for the credit operation – to be conducted by specialized professionals.

As the government works to improve lending conditions for SMEs, Brazil has experienced steady real growth in its government loan guarantees from BRL 6.55 billion in 2013, to BRL 9.44 billion in 2015.

In April 2018, the Chamber of Foreign Trade approved improvements in the MSMEs Export Credit Insurance - eligible criteria, premium price and risk coverage among others9. The objective is to boost MSMEs growth by enabling these companies to reach overseas markets and maintain a stable level of exports. MSMEs with gross revenue up to BRL 300 million and exports up to US$ 3 million are eligible to export credit insurance10 and there is no minimum transaction amount required to apply. The export credit insurance provides coverage against commercial, political and extraordinary risks, which might impact the MSMEs goods and/or services export transactions either in the pre-shipment or in the post-shipment phases.

As a result of these different credit policies, the number of customers using financial services has increased substantially. In 2010, the national credit registry estimated that 114 million of individuals and 6.5 million of businesses had active credit operations. In 2012, domestic credit to the private sector had risen to 53.3% of GDP, up from 25.5% in 2001. Public banks tripled their share of total domestic credit supply over the same period.

Through the above-mentioned credit programmes, the Brazilian Government aims to overcome one of the main barriers to micro and small enterprise development in the country. Without access to credit at affordable interest rates, small production units remain trapped in the informal sector, relying on subsistence strategies and insufficient resources to address their low productivity and profitability.

Notwithstanding this progress, significant challenges remain in terms of credit and financial service provision. The financial inclusion project, developed by the Central Bank in 2009, therefore established three main goals:

• Ensuring that the supply of financial services is adapted to the needs of the public, with more emphasis on savings and insurance instruments;

• Promoting transparency in the supply of financial products and extending financial education;

• Expanding people's access to financial services.

The Federal Administration proposed an amendment to the Brazilian Bankruptcy Law (Projeto de Lei - PL 10 220/2018), with specific provisions for MSEs11. Taking into account that MSEs account for 60% of the judicial reorganization, the bill establishes simplified procedures dedicated to them, such as use of electronic communication, different time limits and debt instalment. The proposal is currently under consideration in the Brazilian National Congress.

In April 2019, the National Congress issued the Complementary Law 167 (Lei Complementar n°167, de 24 de abril de 2019) which creates the Simple Credit Company (Empresa Simples de Crédito - ESC) in the municipalities, aimed to operate loans, financing and discounts of credit securities for MEIs and MSEs. The complementary bill authorises the ESC inclusion in the Simple Nacional regime to benefit from fiscal incentives, in order to facilitate the creation of ESCs and the financing of micro and small enterprises.

The Under-Secretariat of Micro and Small Enterprises (SEMPE/ME)

The Under-Secretariat of Micro and Small Enterprises (SEMPE) is part of the Ministry of Economy in the new Federal Administration structure stablished in 2019. SEMPE is responsible for formulating, articulating and implementing the National Policy for the Development of Micro and Small Enterprises, and aims to improve the operating environment for SMEs, including greater coordination to foster access to finance and credit, which is seen as a key priority. SEMPE/MDIC’s main institutional competencies include developing, implementing and monitoring policies and other government initiatives aimed at the improvement of the business environment affecting small businesses, including artisans and traditional handcrafters (around 7 million individuals), individual entrepreneurs (7 million Micro Empreendedor Individual – MEI), start-ups, micro, and small enterprises (around 8 million MSEs).

Among SEMPE's objectives are the broadening of access to credit and the development of private investment for MSEs, besides access to training, innovation, new markets, simplification in the opening and legalization of companies. These objectives are achieved through training and guidance of micro and small entrepreneurs, the simplification of procedures and the creation of an official network that facilitates the exchange of information between borrowers and lenders.

• The Fórum Permanente da Micro e Pequena Empresa (National Consultation Forum on Micro and Small Enterprises) - an institutional framework designed to facilitate dialogue between government and MSEs representative entities, presided by SEMPE - has been instrumental in supporting the Secretariat activities. Under the aegis of Fórum Permanente, there is a committee dedicated to foster the universalization of access to credit and the development of private investment for MSEs. The committee’s activities entail the development of new forms of guarantees, training of micro and small entrepreneurs on finance issues, reduction of interest rates for renegotiation of past-due debts, as well as stimulating private investment (such as angel investment).

Among Fórum Permanente’s actions in 2018 to foster better access to credit, the following are to be highlighted:

• Oriented Credit Programme (Programa de Crédito Orientado) – implemented in partnership with SEBRAE and financial institutions, the programme aims to ensure that loans granted to MSEs are sustainable and competitive. Its activities encompass entrepreneur training on financial management and the enterprise evaluation regarding the need to obtain credit.

• MSE National Credit Week (Semana Nacional de Crédito da Micro e Pequena Empresa) – this activity is focused on the renegotiation of bank debts and obtainment of new funding. Free mentoring in credit procedures, financial management and use of guarantees are offered. It is conducted by SEBRAE and counts on financial institutions participation.

• National Credit Guarantees System (Sistema Nacional de Garantias de Crédito) - SEMPE has been drawing up studies to regulate article 60-A of Lei Complementar 123/2006, which provides that a National Credit Guarantees System may be established with the purpose of facilitating the access of MSE to credit and other financial institutions services.

BNDES

Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Economic and Social Development, BNDES) is a federal public company associated with the Ministry of Economy. Its goal is to provide long-term financing to enterprises that contribute to the country's development. BNDES is one of the largest development banks in the world, with assets in the order of BRL 835 billion12.

BNDES finances investments to expand, modernise and recover the production capacity and competitiveness of national companies, including MSMEs. It provides several financing products to meet the financial needs of MSMEs (firms with annual gross revenue of up to BRL 300 million13). MSMEs have access to BNDES finance and credit lines through Banco do Brasil, Caixa Econômica Federal and other state-controlled banks, as well as a few private banks with large outreach (there are 5 57014 municipalities in Brazil, of which 100% have at least one accredited finance services provider).

According to BNDES, approximately 50% of its financing is made through indirect operations, brokered by financial agents like Banco do Brasil, which has at least one agency in every Brazilian city of economic relevance.

Between 2015 and 2016, spending on MSMEs accounted for 27.5% and 30.8% of BNDES total outlay. This share picked up and reached 48.6% in the first semester of 201815, thus reflecting BNDES’s new policy priorities of expanding MSMEs’ access to credit.

Among BNDES' initiatives to facilitate MSMEs' access to credit, the "BNDES Card" stands apart for its readiness and operational simplicity. It is a type of credit card, aimed at financing MSMEs' investments in a simplified way and reducing many fixed costs associated with credit concession. Besides reducing transaction costs, the card stands out because it does not require collateral and offers the possibility to finance 100% of the investment. Thus, the product gives the prospect of easier and more agile credit, while contributing to the growth of MSMEs.

Launched in 2003, the BNDES Card is a pre-approved line of credit that aims to finance investments made by sole entrepreneurships or individual micro entrepreneurs (MEI, Portuguese acronym) and MSMEs. In 2017, there were more than 650 000 companies with an active BNDES Card. Nonetheless, that year, spending amounted for BRL 2.7 billion, a 52.4% decline from 2016. According to the main issuing banks, this decline was mainly due to the increased default risk of smaller companies16.

The Card's credit limit is established by the issuers of the product (up to BRL 2 million per issuer), which are Brazilian financial institutions authorised by the BNDES to issue the Card. These financial institutions are responsible for selecting the companies that apply for a Card, so they are also responsible for analysing the credit risk.

The main benefits of the BNDES Card are:

• Pre-approved credit limit of up to BRL 2 million, granted by the bank that issued the BNDES card;

• Automatic financing for up to 48 months, with payment to be done in fixed instalments;

• Attractive interest rates;

The banks allowed to issue BNDES Cards include state and private banks, as well as credit cooperatives.

Business owners who possess a BNDES Card can only buy products from suppliers willing to sell to BNDES credit card holders. All the products available to such card owners are available on the BNDES website. Suppliers must provide a thorough description of the products they are going to sell on the website (categories, subcategories, price and manufacturer/supplier information). Information about how to contact the company and about the individuals responsible for the BNDES' accredited supplier account must also be provided.

The BNDES Card has been increasingly in demand since it was created in 2003, suggesting that it is a well-designed public policy for MSMEs.

Figure 7.1. Trends in SME and entrepreneurship finance in Brazil

Source: See Table 7.2.

Statlink

Table 7.2. Definitions and sources of indicators for Brazil's scoreboard

Indicator	Definition	Source
Outstanding business loans, SMEs	Bank and financial institution loans to SMEs, amount outstanding (stocks) at the end of period. Definition of SME: Exposure in the National Financial System up to BRL 100 million.	Central Bank of Brazil, Credit bureau data
Outstanding business loans, total	Bank and financial institution business loans to all non-financial enterprises, outstanding amounts (stocks)	Central Bank of Brazil, Credit bureau data
Share of SME outstanding loans	Proportion between outstanding business loans to SMEs and total business loans	Central Bank of Brazil, Credit bureau data
New business lending, total	New loans issued over the course of the year. It is measured by an internal proxy and therefore differs from other publications of BCB. Data not available before 2012. Proxy overall idea: measure on a client-facility-month basis what is increment in the outstanding exposure.	Central Bank of Brazil, Credit bureau data
New business lending, SMEs	New loans issued over the course of the year. It is measured by an internal proxy and therefore differs from other publications of BCB. Data not available before 2012. Proxy overall idea: measure on a client-facility-month basis what is increment in the outstanding exposure.	Central Bank of Brazil, Credit bureau data
Share of new SME lending	Proportion between new business loans to SMEs and total business loans over the course of the year	Central Bank of Brazil, Credit bureau data
Outstanding short-term loans, SMEs	Loans equal to or less than one year to SMEs.	Central Bank of Brazil, Credit bureau data
Outstanding long-term loans, SMEs	Loans for more than one year to SMEs.	Central Bank of Brazil, Credit bureau data
Share of short-term SME lending	Proportion between short-terms loans (<1 year) to SMEs and long-terms business loans to SMEs.	Central Bank of Brazil, Credit bureau data
Government guaranteed loans, SMEs	Loans guaranteed by government, stocks, SMEs.	Central Bank of Brazil, Credit bureau data
Direct government loans, SMEs	Direct loans from government, stocks, SMEs. Encompasses only loans made by public development banks, not commercial or public controlled banks.	Central Bank of Brazil, Credit bureau data
Non-performing loans, total	Outstanding credit operations with at least one payment past due 90 days, total. The values presented here involve only delinquency and not broader measures of problematic assets.	Central Bank of Brazil, Credit bureau data
Non-performing loans, SMEs	Outstanding credit operations with at least one payment past due 90 days, SME. The values presented here involve only delinquency and not broader measures of problematic assets.	Central Bank of Brazil, Credit bureau data
Interest rate, SMEs	Median annual rates for new loans to SMEs. Data not available before 2012.	Central Bank of Brazil, Credit bureau data
Interest rate, large firms	Median annual rates for new loans to large firms. Data not available before 2012.	Central Bank of Brazil, Credit bureau data
Interest rate spread	Difference between median annual rates for small and large enterprises	Central Bank of Brazil, Credit bureau data

References

BNDES, Annual Report (2017), Brazilian Development Bank (BNDES) https://www.bndes.gov.br/wps/portal/site/home/conhecimento/noticias/noticia/relatorio-anual-2017

BNDES, Historical Data, Brazilian Development Bank (BNDES)

https://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/Investor_Relations/Financial_Information/historical_data.html

https://www.bndes.gov.br/wps/wcm/connect/site/5b978105-430a-4768-8cc7-2da4ef18d283/Int2+1D+a+produto+MPME.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE.Z18_7QGCHA41LORVA0AHO1SIO51085-5b978105-430a-4768-8cc7-2da4ef18d283-m7pb-P6

https://www.bndes.gov.br/wps/wcm/connect/site/079e02d5-299d-4517-b39c-9ac1286af7b2/201903_BOLETIM_DE_DESEMPENHO-com+Mercado+de+capitais.pdf?MOD=AJPERES&CVID=mFm6Vgh

BNDES, BNDES Card, Brazilian Development Bank (BNDES)

https://www.cartaobndes.gov.br/cartaobndes/PaginasCartao/FAQ.ASP?T=1&Acao=R&CTRL=&Cod=90,90#P

IBGE, “Contas Nacionais” (2017), Brazilian Institute of Geography and Statistics (IBGE)

ftp://ftp.ibge.gov.br/Contas_Nacionais/Contas_Nacionais_Trimestrais/Fasciculo_Indicadores_IBGE/2017/pib-vol-val_201704caderno.pdf

MDIC, “Crescem Exportações de Micro e Pequenas Empresas” (2017), Ministry of Industry, Foreign Trade and Services (MDIC)

http://www.mdic.gov.br/index.php/noticias/2760-crescem-exportacoes-de-micro-e-pequenas-empresas

OECD, OECD Data Brazil https://data.oecd.org/brazil.htm

SEBRAE, “Anuário do Trabalho nos Pequenos Negócios” (2016), Brazilian Micro and Small Business Suport Service (SEBRAE)

http://www.sebrae.com.br/Sebrae/Portal%20Sebrae/Anexos/Anuario%20do%20Trabalho%20nos%20Pequenos%20Neg%C3%B3cios%202016_.pdf

The Brazilian Government, Microcredit Programme (2017)

http://www.planalto.gov.br/ccivil_03/_ato2015-2018/2017/decreto/D9161.htm

The Brazilian Government, MSMEs Export Credit Insurance (2018)

http://camex.gov.br/noticias-da-camex/2010-deliberacoes-da-116-reuniao-do-conselho-de-ministros-da-camex

http://camex.gov.br/component/content/article/62-resolucoes-da-camex/em-vigor/2024-resolucao-n-33-de-11-de-maio-de-2018

The Brazilian Government, Public Procurement (2016)

http://www.brasil.gov.br/economia-e-emprego/2016/01/micro-e-pequenas-empresas-ja-tem-incentivos-em-compras-publicas

The Brazilian National Congress, Bankruptcy Bill

http://www.camara.gov.br/proposicoesWeb/prop_mostrarintegra;jsessionid=B9BE27CB6CD1D2B9D85FEE100F36F3FE.proposicoesWebExterno2?codteor=1658833&filename=Tramitacao-PL+10220/2018

http://www.camara.gov.br/proposicoesWeb/fichadetramitacao?idProposicao=2174927

Notes

← 1. https://m.sebrae.com.br/sites/PortalSebrae/estudos_pesquisas/flutuacao-do-emprego-e-desemprego-nas-mpe-2018detalhe55,0c66fa7107102610VgnVCM1000004c00210aRCRD

← 2. http://www.sebrae.com.br/Sebrae/Portal%20Sebrae/Anexos/Anuario%20do%20Trabalho%20nos%20Pequenos%20Neg%C3%B3cios%202016_.pdf

← 3. http://www.brasil.gov.br/economia-e-emprego/2016/01/micro-e-pequenas-empresas-ja-tem-incentivos-em-compras-publicas

← 4.  MEI (acronym in Portuguese, which includes 492 professional categories) are sole entrepreneurs invoicing up to BRL 81000. This enterprise category benefit from privileged tax collection system that has been contributing to reduce informality. They pay a fixed monthly amount of for social security, VAT (ICMS) and/or services taxes (ISS), which guarantee access to labour benefits.

← 5.  https://data.oecd.org/brazil.htm

← 6. ftp://ftp.ibge.gov.br/Contas_Nacionais/Contas_Nacionais_Trimestrais/Fasciculo_Indicadores_IBGE/pib-vol-val_201804caderno.pdf

← 7. http://www.mdic.gov.br/index.php/noticias/2760-crescem-exportacoes-de-micro-e-pequenas-empresas

← 8.  http://www.planalto.gov.br/ccivil_03/_ato2015-2018/2017/decreto/D9161.htm

← 9. http://camex.gov.br/noticias-da-camex/2010-deliberacoes-da-116-reuniao-do-conselho-de-ministros-da-camex

← 10. http://camex.gov.br/component/content/article/62-resolucoes-da-camex/em-vigor/2024-resolucao-n-33-de-11-de-maio-de-2018

← 11. http://www.camara.gov.br/proposicoesWeb/prop_mostrarintegra;jsessionid=B9BE27CB6CD1D2B9D85FEE100F36F3FE.proposicoesWebExterno2?codteor=1658833&filename=Tramitacao-PL+10220/2018

http://www.camara.gov.br/proposicoesWeb/fichadetramitacao?idProposicao=2174927

← 12. https://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/Investor_Relations/Financial_Information/historical_data.html

← 13. https://www.cartaobndes.gov.br/cartaobndes/PaginasCartao/FAQ.ASP?T=1&Acao=R&CTRL=&Cod=90,90#P

← 14.  https://cidades.ibge.gov.br/brasil/panorama

← 15. https://www.bndes.gov.br/wps/wcm/connect/site/079e02d5-299d-4517-b39c-9ac1286af7b2/201806_BOLETIM_DE_DESEMPENHO.pdf?MOD=AJPERES&CVID=mjdWNLu

← 16. https://www.bndes.gov.br/wps/wcm/connect/site/5b978105-430a-4768-8cc7-2da4ef18d283/Int2+1D+a+produto+MPME.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE.Z18_7QGCHA41LORVA0AHO1SIO51085-5b978105-430a-4768-8cc7-2da4ef18d283-m7pb-P6