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Brazil expands Federal Microcredit Program

The federal government of Brazil has announced that it will expand its National Program of Oriented Productive Microcredit (PNMPO).  With the expansion, the program will be renamed "Growing - National Microcredit Program," and will include new conditions for financing, including lower interest rates and lending targets for public banks.  The program will retain its main feature: extending credit opportunities for individual entrepreneurs and micro-enterprises with a turnover of up to R$ 120,000 annually.

At the end of the first quarter of 2011, the program held R$ 976.7 million (approximately US$ 599.7 million) in its loan portfolio, and 908,500 active clients. Of the PNMPO clients, 65.4% were women and most clients (89%) were working in the trade sector. Since April 2005, when the program was first launched, more than 7.8 million microcredit operations have been carried out, for a total of R$ 10.1 billion in loans (nominal values).

With the expansion of the program will come a significant reduction in interest rates from up to 60% per year down to 8% per year.  The fee for opening a line of microcredit is also being reduced, from 3% of the financed amount to 1% of the value of credit.

With these updates to the PNMPO, the government of Brazil hopes to improve the sustainability of credit operations and thus increase the production capacity of microentrepreneurs, in turn generating additional  jobs and income in Brazil.

PNMPO credit transactions, which are valued up to R$ 15,000, can be used for working capital or investment. Payment terms are agreed between the borrower and the financial institutions and may vary based on the type of project and resources used.

More than 3.4 million active clients  are expected to be benefiting from the expanded program by the end of 2013. The active portfolio is anticipated to reach R$ 3.0 billion by the end of that period, with participation from Banco do Brasil, Banco do Nordeste do Brasil, Caixa Econômica Federal and Banco da Amazônia (Basa), as well as any other public or private banks that choose to join the program.

The Brazilian government will match up to R$ 483.0 million by the end of 2013 to ensure the reduction of interest and the provision of credit guidance services by the financial institutions. The government's matching contribution will be paid monthly by the National Treasury, and will vary month-to-month based on the number, amount and maturity of the operations contracted by the participating banks.

The changes to PNMPO are expected to be fully implemented within 30 days, and at that time, federal public financial institutions will be able to operate within the new conditions. The funds from the National Treasury may be granted to any financial institution that operates under the program's conditions. The government hopes that the revisions to the program will encourage increased private bank participation, ultimately increasing the amount of resources available and the number of entrepreneurs who benefit.

25 August, 2011