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Abstract: Microcredit Regulation in Brazil
by
Juliana de Carvalho Ortolani
São Paulo University Law School - Brazil - LL.M (under development)
This text intends to sketch the regulation outlines of a revolutionary and inspirational economic activity: the microcredit, both displaying and challenging the formats adopted by the institutions engaged in such activity, within the Brazilian society, state and economy standards, in light of the contents of the principles and values stated in our federal constitution The microcredit - also referred to as productive popular credit or solidarity credit - is part of the microfinance, which is recognized worldwide as an efficient instrument in order to combat poverty, create jobs and generate income, and, consequently, promote social re-inclusion. The organizations which carry out microcredit transactions have a distinct structure from traditional banks, since they offer financing directed towards production to people that do not have properties to offer as security. The credit agent, as well as the collective guarantees, such as the joint guarantee (aval solidário), are important elements for the development of microcredit activities.
Poverty is a slow and diffuse process of social exclusion. Such characteristics cause people to notice poverty, but prevent people from discussing it in-depth, in view of the impotence that the idea of poverty brings. The issue of poverty is usually approached superficially and tangentially, the causes and consequences of poverty are inverted. It is common to identify the lack of education and high birthrate among poor people as the causes of poverty. However, such circumstances are indeed some of the consequences of poverty, instead of its causes.
Microcredit does not serve as a substitute for, but must integrate diverse public policies. When combined with other instruments of local management and development, it can have a great impact on the development of a community. As the credit is directed specifically for the development of productive activities, a social assistance network is very important and must be combined with microcredit.
In Brazil, the productive popular credit is granted by institutions of several distinct legal forms, which are subject to distinct regulations, guided by both public and private legal principles. The federal government, states and municipalities issue regulations on the matter and create special funds directed to productive popular credit. Within the public sector, credit is granted directly through such funds, or specific legal entities are created to perform such activity, often in partnership with members of the civil society and state and local governments, with federal and international funding.
In the private sector, such activity is carried out by Microentrepreneur Credit-Granting Associations (Sociedades de Concessão de Crédito Microempreendedor - SCMs), Credit Cooperatives (Cooperativas de Crédito) and non-profit organizations, which may qualify as Public Interest Civil Society Organizations (Organizações da Sociedade Civil de Interesse Público - OSCIPs) or not, and which are also generically designated as NGOs.
The microcredit regulation brings to effectiveness several basic principles of the Brazilian Federal Constitution. The major principles adopted by the Brazilian Republic are the respect to human dignity and the social value of work and free initiative, with the purpose of guaranteeing the national development, eradicating poverty and reducing social and regional inequalities.
Brazil lacks an efficient and organized policy directed to microcredit. Nowadays, there are several actions, but the same are fragmented and overlap. Also, there is some confusion between projects which aim at promoting poor people´s access to banks (bancarização) and microcredit programs. The first ones are exclusively aimed at ensuring low income peoples access to the banking system, without the commitment to generate income, while microcredit it is an activity specifically aimed at creating jobs and fostering small businesses that are capable to produce wealth.
Differently from other developing countries, Brazil is a singular case for the study of the microcredit, in view of the high technological development of the banking sector and the banking network spread throughout the country in contrast with the high index of social exclusion, with the increasing importance of the informal economy and the enormous number of small businesses. These contradictions do not go unnoticed.
Furthermore, the high interest rates charged by the financial institutions in Brazil do not encourage the investment directed to development, towards production, and in this context, the microcredit assumes an event greater relevance.
Considering that microcredit is an instrument directed to local development, it is interesting to study diverse international successful cases and experiences, as well as errors and failures. In my experience as a pro bono attorney of the Associação Brasileira dos Dirigentes das Entidades Gestoras e Operadoras de Microcrédito, Crédito Popular Solidário e Entidades Similares (Brazilian Association of the Managers of Entities the Operate and Manage Microcredit, Solidarity Popular Credit and Similar Entities - ABCRED), I have acquaintance with diverse experiences carried out in different regions of Brazil, figures, methodologies developed, and have participated in the advocacy of the conception of public policies for the microcredit sector. Therefore, by participating of this great international forum of ideas, I intend to present the most update and significant issues on the matter currently under discussion in Brazil and learn from the other participants´; experiences, thus enriching the international debate on microcredit.
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Date received: October 10, 2003
Copyright © 2003 by the author(s). The author(s) of this document and the organizers of the conference have granted their consent to include this abstract in Atlas Conferences Inc. Document # camp-34.