I’ve been away from the blog for a few days, otherwise occupied by The Financial Times’ thirst for stories and my need to get my head round issues I don’t usually cover. The FT correspondent is away and I am covering for him for a couple of weeks.
My first piece came out in Tuesday’s paper, about Accion International’s new microfinancing program in the Amazon.
Boston-based Accion International is to launch a micro-financing operation in the Amazon offering small loans to what it estimates are as many as 1.9m entrepreneurs who have trouble securing loans through traditional channels.
The idea of microfinancing is well established in Asia and Africa and even in some parts of Latin America. But it has yet to really take off in Brazil for a variety of reasons.
One of them, as Accion’s Bettina Wittlinger told me, is that Brazilian banks hardly need to loan to small fry. They are making out like bandits already. With interest rates among the highest in the world, they make money by doing nothing. So why invest money and manpower– microfinancing is labour intensive – in small entrepreneurs?
One interesting issue she raised, and that confirmed what I learned while doing an earlier piece related to microfinancing for Time magazine, is that institutions would rather not give money to projects run by male individuals. They would rather give it to women and to groups of people, often as few as two or three.
There are too many temptations for men and their default rate is higher. Women are more conscientious and groups can use peer pressure. One person might want to give up but the others keep them honest.
The FT piece explains why Accion chose Manaus and Amazonas state to launch what they hope will eventually be a nationwide project.
Anyone interested in reading some background on Crediamigo, the operation that is described as a Brazilian Grammen, can download this study carried out by the Fundação Getulio Vargas.