Comprehensive conceptual project to blend angel investment concepts and microfinance strategies to improve the sustainability of the MSEs ecosystem

1. ANGELS OF MICROFINANCE – HOW TO ENGAGE THE GLOBAL CITIZENS TO FINANCE MSEs –
PROJECT MAIN CONCEPTS – SÃO PAULO, BRASIL - DECEMBER, 2015

2. Microfinance currently plays a small role into the financial sector.
There are limited number of MFIs operating in Brazil, serving 3 MM borrowers* – data is an issue
and misconceptions apply.
Larger MFIs have avg 2,000 active clients – the vast majority is considerably smaller.
Potential demand for microfinance in Brazil is expansive.
There are around 10 million microenterprises eligible for microfinance.
Overall microfinance penetration in Brazil is around 2.0% of potential demand.
There has had a expressive growth of financial services in Brazil, but the MSEs segment has a
unique demand profile:
- Growth in access to banking networks
- Increased portfolio availability – credit, loans, savings and insurance
The question remains – are them able to meet the lower-income microentrepreneurs financial
needs?
THE BRAZILIAN LANDSCAPE IN A NUTSHELL
THERE IS ROOM FOR IMPROVEMENT

3. The banking sector is increasingly viewing lower-income markets as a growth opportunity.
Yet the omnipresence of banks in the Brazilian economy add pressure and restrict access.
Stringent requirements from the perspective of low-income clients: typically require proof of minimum
income (R$ 500-1,000 per month) and several forms of identification (Identification Card, CPF, and Proof
of Residency) for opening current accounts.
Higher loans sizes, with conservative approval processes.
Limited lifecycle and high interest rates – 1,2% per month* + 3% of the total transaction amount as
administrative fee.
*some researched institutions are practicing na avg 4% monthly interest rate as of Dec’2015
THE BRAZILIAN LANDSCAPE IN A NUTSHELL
BUT ALSO HURDLES TO BE WORKED ON

4. Average micro entrepreneur borrower is almost illiterate
Average monthly income – up to RS 600 (US 175)
Female – 67% of the micro entrepreneurs
Loan amount – 60% ranging from USD 750 – USD 1000 up to 12 months
THE BRAZILIAN LANDSCAPE IN A NUTSHELL
AND VOICES THAT SHOULD BE HEARD

5. Improve focus on lower-income microentrepreneurs - tailored products addressing client needs
Local institutions – local outreach – field knowledge
Promoting understanding of products through effective training, collaterals and marketing materials
Fostering a long-term strategy and adopting supporting business practices
Production/ revenue oriented credit lines
THE BRAZILIAN LANDSCAPE IN A NUTSHELL
BUILDING A FRIENDLIER ENVIRONMENT FOR MSEs

6. Giving Index
World position – 90
12% have taken part in voluntary/ charitable projects
22% have given aid to charity
40% would help a stranger
Yet...
... would be willing to take part in a cause where peers were also involved
... Don’t actually know how to help
... Do not trust NGOs
... Fear Money won’t actually reach the need
THE BRAZILIAN LANDSCAPE IN A NUTSHELL
A NATION OF BYSTANDERS?

7. What the lower income MSEs really need?
- Investment Capital
- Mentoring
- A long term commitment plan
How to get involved?
- Provision of “angel” capital – small amounts of investment (limited to USD 1000 per year), full risk
with Market average return tied to production returns
- Administrative fee designed to provide mentoring and training – volunteer based network
- Losses can be mitigated with bundled credit life and/or crop insurance where applicable
BRINGING THE AVERAGE CITIZEN TO THE GAME
BLENDING MICROFINANCE AND CHARITABLE DONATIONS AS AN INVESTING PRODUCT

8. Escalate the available amount of available funding to MSEs
Involve new segments of the population – build a giving culture
Build up field knowledge to maximize returns on future investments
Construct production capacity of MSEs thus reducing dependability
Expectation of return as a way to improve the operational model
Questions that still need to be addressed
Need of intermediaries?
Subsides for losses?
Money transfers and receiving guarantees?
Need and role of intermediaries?
BRINGING THE AVERAGE CITIZEN TO THE GAME
KEY OBJECTIVES AND KEY QUESTIONS?