impactMarket’s microcredit accelerating entrepreneurs in a Brazilian favela
Get to know about impactMarket’s first microcredit pilot in Favela do Coroadinho, Brazil.
impactMarket, the Human Empowerment Protocol, is widely known for its crypto Unconditional Basic Income (UBI) program, which is empowering over 40,000 users from vulnerable communities all around the world. That was just the beginning of the journey toward our commitment to financial inclusion. After two years of success stories and reported impact of the UBI protocol on the lives of thousands of people, in November 2022 we released the crypto wallet Libera, which for many users is the first “bank account” they have ever had. A few months later, in February 2023, we launched impactMarket’s Learn & Earn, going further in empowering our users with relevant financial literacy content with exciting rewards. However, our efforts to make the world a fairer place for all didn’t stop there. We are ready to share with you our next step to further unlock human potential and broaden access to finance for those who need it the most. We’re excited to unveil our newest product, impactMarket’s Microcredit, which complements our range of inclusive and impactful financial solutions.
Microcredit is a powerful tool for empowering enterprising individuals to help foster sustainable economic development within the communities we work in. By providing small-sized loans to those who lack access to traditional loan systems, we can help them enhance their income streams, expand their businesses, create jobs for fellow community members, and contribute greatly to their economies. This approach has been proven to work and has already been successful in many countries in the Global South.
To better develop impactMarket’s Microcredit, we recently implemented a pilot program in Brazil focused on entrepreneurs in one of the communities we support, NEDUC, at the Coroadinho Favela in the north of Brazil. Through this pilot, we aimed to test the potential of microcredit pipelines to support the growth of small businesses and promote economic emancipation.
Brazil: The perfect “lab” to test financial inclusion solutions
impactMarket supports communities in almost 30 countries and Brazil is one of the top 3 in terms of reach. It is also the first country we chose to test our microcredit pilot. But, why Brazil?
According to the World Bank Global Findex Database, around 45% of adults in Brazil are unbanked or underbanked. This means that they do not have access to formal financial services, such as bank accounts, credit, insurance, or savings products, or they have limited access to these services. The percentage of unbanked individuals in the country is particularly high among low-income and marginalized communities, such as those living in favelas or rural areas. This lack of access to financial services can make it difficult for these individuals to start or grow their businesses, save money, or invest in their future.
However, the rise of digital technologies and mobile devices has opened up new opportunities for financial inclusion. With the widespread adoption of smartphones and the Internet, many Brazilians are now able to access financial services through digital channels, such as mobile banking apps and e-wallets.
Simultaneously, there has been a growing interest in cryptocurrencies and blockchain technology in Brazil. According to a recent survey by Statista, Brazil is one of the top countries in the world to adopt cryptocurrencies, with over 10% of the population owning or using it. The Brazilian government is looking to enter the cryptocurrency sector, having recently formalized a legal framework for “Real Digital”, the local Central Bank Digital Currency (CBDC).
These trends suggest that there is a significant potential for on-chain microcredit services to reach unbanked and underbanked individuals in Brazil, providing them with access to credit and other financial services in a decentralized and secure manner. By leveraging blockchain technology, microcredit providers can offer fast, low-cost, and transparent services, while also reducing the risks associated with traditional lending models.
Overall, the combination of high rates of financial exclusion and increasing adoption of digital and crypto technologies in Brazil creates a fertile ground for the development of on-chain microcredit services to empower individuals and communities, promote economic growth, and foster financial inclusion.
Community-based innovation: Discover NEDUC
Okay, now that you understand why our first microcredit pilot was in Brazil, it’s time to get to know more about the community chosen for the pilot, NEDUC.
NEDUC is a local non-profit organization located in one of the largest favelas in Brazil, Coroadinho, in the city of São Luís do Maranhão. Within the impactMarket global network, this community stands out among the others thanks to the engagement of its community manager, Christiane Mendes, who plays a key role in assisting the beneficiaries and leveraging all opportunities to empower her community. Incentives to microentrepreneurs are some of the priorities of the organization, boosting the local economy while empowering people in need to have new sources of income.
Snapshot of the Pilot
Target population: 15 microentrepreneurs, of which 14 are black women, who haven’t received loans for their businesses before. They are aged between 22 and 43, with an average age of 34. This pilot included 9 individual borrowers and 3 groups of borrowers (Comunidade Entre fios; Comunidade Sustentável; Qualifica +) with 3 people in each group. This population was prioritized to leverage the impact of the pilot, addressing the expressive inequality they face which is worsened by racism, sexism, oppression, and economic marginalization. Black women entrepreneurs are often the backbone not only of their families but also of their local economies, so by empowering them we catalyze a ripple effect of collective prosperity and social justice. Furthermore, collecting data on the lack of financial access of this target population, further emphasized the need to test non-traditional finance.
Credit conditions: Individual loans are either R$ 1000 ($190) with 4% monthly interest or
R$ 2000 ($380) with 3.5% monthly interest. For group borrowers, the loan amount is R$ 5000 ($950) with a 3.5% interest rate. The interest is applied on the outstanding amount, with a 3 to 5-month maturity.
Stakeholders of the pilot:
- impactMarket’s Management: Our Impact Measurement Lead and our Chief Operations Officer. On the ground, our Ambassador in Brazil and the local mobile banker.
- impactMarket’s Users: The selected borrowers from the NEDUC Community.
- Other key stakeholders: a. Mission-aligned investors providing capital for the pilot.
b. LoveCrypto provided borrowers and the mobile banker with the flexibility to convert their funds to fiat money when they need. - impactMarket’s technology: Libera wallet, using Celo Dollar, supported every transaction in the pilot.
How did it work?
- Selection of a community: Using criteria such as engagement and maturity of the community, and a minimum of one year of receiving and transacting UBI, for this pilot selection, led us to the NEDUC community.
- Selection of our local mobile banker: With the emphasis on a community-centric approach, our ‘on-the-ground’ microcredit manager was selected from the NEDUC community. Using criteria such as strong familiarity with impactMarket’s products for over one year; high engagement and reputation among the community members; and a good understanding of loans, Celo dollar’s functions, and the Libera wallet led us to select Chris Mendes. Her role was key to the pilot and her tasks included selecting the borrowers, managing the money release and transfers, assisting with conversions, following due dates, and supporting repayments.
- Selection of the borrowers: As mentioned above, all selected borrowers are those who have been trained in using the Libera wallet and its features and in receiving and transacting UBI for over one year. Borrowers also had to be over 20 years of age with an existing micro-business of these industries: Food & Beverage / Perishables; Personal Care Services; and Low-cost non-perishables.
- Locally tailored communication: Offline and digital promotions were strategically spread across the community to attract the targeted audience that fit the criterion.
- Screening of the borrowers: Microcredit applicants had a predefined period to fill out an online form to provide basic information, required for a preliminary analysis. They were also asked to complete a screening questionnaire of multiple choice questions that assessed their behavioral patterns with their finances, their financial status and goals, as well as their overall perception of money and digital currencies. Following the analysis of the information by the managing team, one-on-one interviews with the applicants were conducted to dive deeper into the information pertaining to their profiles, their businesses, their alternate sources of income, and their intentions and goals for the microcredit amount.
- Disbursements: With the mobile banker receiving the total loan amount to her Libera wallet, she was delegated the responsibility of disbursing predetermined loan amounts to each of the 15 participants. While each transaction was supervised by the managing team using Celo Explorer, this responsibility empowered the local mobile banker to feel a sense of leadership within the pilot. With a controlled group, the mobile banker could take a closer and more personal approach to support and engage the borrowers.
- Repayments: Just as the disbursements, repayment from the mobile banker to our mission-aligned investors was time-tracked on Celo Explorer, which completes the full cycle of such a loan. Individual borrowers have the flexibility to repay their monthly loan amounts in cash, digital currencies, and Celo Dollars. Flexibility in repayment proved to be a crucial aspect in encouraging borrowers to meet their due dates, and with a 100% repayment rate, this deeply informed the impactMarket team in designing our multiple upcoming microcredit pilots.
With a 100% repayment rate and impactful stories from the borrowers, we consider this first pilot a success. It enabled us to validate the concept of microcredit on-chain among impactMarket’s users, understanding its contribution to an extended financial empowerment journey in which microcredit is one of the game-changer solutions they can access and benefit from to thrive in their larger economies.
Curious to know more about the outcomes and learnings from the first impactMarket’s microcredit pilot in Brazil? Stay tuned to our next medium article that will go deeper into this and how the loan contributed to empowering each borrower and their businesses. Also, keep an eye out for the journey that impactMarket is on in establishing innovative solutions and contributions to the world of microcredit, especially as our new and major product.
You can find impactMarket also on Twitter, LinkedIn, Facebook, Instagram, GitHub, Youtube, Telegram, and Discord.
impactMarket (The Human Empowerment Protocol)
impactMarket provides accessible financial solutions to empower underprivileged people all over the world, unlocking opportunities and human potential. Our inclusive protocol is transparent, reliable, and borderless. It operates as a DAO on top of the Celo network, using $PACT as its governance token while running autonomously through smart contracts.
impactLabs (the company)
impactLabs Lda, based in Portugal, was founded in Nov 2020 by Marco Barbosa, Bernardo Vieira, Afonso Barbosa, and eSolidar. The company is focused on building accessible decentralized systems to unleash human potential and disrupt access to finance while driving DeFi adoption.
