Takeaways and the impact of the first impactMarket’s microcredit pilot in Brazil
Stories from the borrowers, lessons learned, and the next steps of impactMarket’s microcredit.
At impactMarket, we believe that the benefits of blockchain technology include the opportunity to connect a network of people in a matter of seconds and the ability to raise that network to the potential of building a powerful world for everyone. We recently published an insightful Medium article about Microcredit as a key driver of financial empowerment. We then introduced our first pilot in Brazil, which explored the steps through which it was implemented and the key stakeholders who made it possible. In this article, we are thrilled to share our takeaways that will shape impactMarket’s microcredit journey, as well as share a few inspiring stories from the borrowers in this pilot. The pilot proved a 100% repayment rate, along with relevant impacts on the borrowers and the community at large. As you read, you will also learn of our next steps for impactMarket’s microcredit which focuses on using blockchain as a scaled-up tool for human empowerment and sustainable economies in other parts of the world!
Empowering individuals for a collective change
15 microentrepreneurs were carefully selected for the pilot in Favela do Coroadinho, north of Brazil, of which 14 are black women. We are talking about 15 individuals who have their small businesses as the main source of income for themselves and their families and who actively contribute to the local economy of their community. People who are often overlooked when it comes to access to financial services like loans, which limits their opportunities to invest in their businesses and expand them to the point of empowerment and independence.
Entrepreneurs are supported in areas of work such as food and beverage, sustainable handicraft art, beauty services, and small essential items shops.
Thaynara is a talented braider who requested a loan to start her own braid salon, which she named Ateliê de Tranças. As a black woman from Brazil, Thaynara knows firsthand the importance of braids and doing them well. Braids not only have significant cultural and historical significance but they also serve as a way to express creativity and individuality. Thanks to the microcredit she received, Thaynara was able to turn her passion for braiding into a thriving business, empowering individuals along the way in the ways that they want. It’s inspiring to see how microcredit can empower entrepreneurs like Thaynara to pursue their dreams and preserve cultural traditions with a trendy spin on them.
Francisco Bruno is a florist who sells various flowers and plants at local markets. He applied to participate in the microcredit program aiming to transform his booth into a mobile cart so he could reach more customers. Thanks to the loan, Francisco was able to make this transformation a reality. Now, he can travel to different locations selling bouquets of flowers and expand his business.
On the ground, the pilot was led by the community manager Christiane Mendes, leader of the organization NEDUC in Favela do Coroadinho. Christiane, who manages the Unconditional Basic Income (UBI) program in this community, in addition to other projects developed by NEDUC, was the mobile banker selected for the microcredit pilot. Her close relationship with the community members and her active leadership made a difference in the success of this pilot project. “It’s incredible to see how a small loan can have such a positive impact on a business and the livelihood of these entrepreneurs, having a ripple effect that contributes also to the whole community as the local economy evolves”, says Christiane.
Key takeaways from the success of impactMarket’s pilot in Brazil
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.
Power of Community: Engagement, impact, and good repayment rates were observed, indicating that the power of community plays a crucial role in the success of microcredit for underserved populations. It was reported to us that borrowers felt more inclined to make regular repayments given observing their peers work hard to make it as well.
Benefits of Blockchain: Thanks to blockchain technology, we had the ability to track every transaction on Celo Explorer, from mobile banker to borrower. In some cases, business payments were also seen to be made in cUSD to the borrower’s Libera address. Using the Celo blockchain also enabled borrowers to depend less on making and receiving payments in cash, which they report allowed them to track their finances more efficiently.
Empowering Leaders in the Community: Delegating responsibility to community members that have dedicated their time to our previous interventions allowed our microcredit pilot to be community-centric all through. It provided a sense of authority to the local mobile banker, which in turn encouraged fellow community members to make repayments on time. Additionally, monetary compensation, a portion of the total repaid amount, incentivized the mobile banker making them more likely to perform their duties effectively.
Building Trust: Trust and relationship-building with the target community, established from impactMarket’s UBI program, ensured transparency in this pilot’s operations, and communicating with borrowers regularly helped build trust and reinforce the program’s credibility. It was reported that borrowers felt more comfortable borrowing money from an institution that has proven an intention for social impact rather than a traditional bank.
Effectiveness of Loan Terms: The pilot program demonstrated the effectiveness of customizing loan terms to borrowers’ economic levels and business needs. Designing loan terms that cater to the specific needs and realities of favela residents is essential. This could include offering flexible repayment options, such as longer repayment periods or lower interest rates, to accommodate the borrowers’ unique financial situations. This approach can help ensure borrowers have the financial support they need to start or expand their businesses successfully, without the sense of burden that many loan borrowers report feeling.
Exclusion of Businesses and Communities: Traditional loan systems may exclude certain types of businesses and communities from accessing them. From experience of working closely with these communities, impactMarket understands that entrepreneurship is not so black and white, which is why our mission is to make microcredit accessible and approachable by all kinds of entrepreneurs. It has been proven that supporting entrepreneurs is an essential tool for promoting economic growth and empowerment in underserved areas, and these entrepreneurs may not always fit the regular categories of business.
Community Support: Community support is crucial for reinforcing the requirement to pay and keep to due dates. Being close in proximity, community members can provide each other with support and encouragement, making it easier to stay on top of loan payments.
Potential for Replication: The success of the pilot program and its potential for scalability indicate the potential for replication in other underserved communities across the world. However, it is important to consider the unique needs and challenges of each community and the region it belongs to in order to adapt the microcredit program accordingly.
The necessity for Financial Education: Financial education is crucial for empowering borrowers to make informed decisions about their finances and manage their loan repayments effectively. Providing financial education as part of the microcredit program can increase its effectiveness and impact. It is reported that the entrepreneurs from the favelas did not have any specific training to do what they’re doing today, so they feel reaching their businesses to heights can be catalyzed by a practice of bookkeeping and a basic understanding of finances.
Level of Sustainability of Businesses: The microcredit program’s effectiveness is measured in terms of the sustainability of the businesses after its support. The program ensures that borrowers have the resources and support they need to maintain and grow their businesses beyond the loan period, and even apply for another loan to further increase their and their businesses’ capabilities and potential.
Level of Sustainability of Microcredit Program: The microcredit program’s sustainability of itself is another important success metric that we consider. The program is designed in a way that ensures its long-term viability and ability to continue supporting underserved communities in multiple regions, and blockchain is a great contributor to this mission.
The program’s impact on Economic Well-Being and Income Levels: For obvious reasons, the program’s impact on economic well-being and income levels is one of the most crucial metrics for evaluating our success. The program aims to improve the economic well-being of borrowers and increase their income levels from the time they receive their microcredit amount to well past its maturity period. We are closely tracking these metrics over time with each borrower.
Fees and Costs: All fees associated with the microcredit program, including interest rates and administrative costs, are pre-determined and informed to all participants and stakeholders of the program. This clarity helps ensure transparency and prevents borrowers from being exploited by unscrupulous lenders or fees. It is reported that the borrowers from the favelas are often in the dark about the terms of their loans or other financial services used, so impactMarket upholds transparency and clarity in our microcredit endeavors as well.
Importance of Measuring Impact: Measuring the impact of the microcredit program is essential for evaluating its effectiveness and identifying areas for improvement, as well as understanding and sharing with stakeholders how individual lives and businesses are being transformed. Regular monitoring and evaluation help ensure that the program is achieving its intended goals and making a positive impact on underserved communities. We will continue to track whether the measures we have in place are making its expected impact.
Facilities for Post-Repayment Sustainability: Beyond loan repayment, borrowers often require additional support and resources to ensure the sustainability of their businesses. The microcredit program supports borrowers in this regard by providing facilities like Learn & Earn for micro-entrepreneurs, and resources like another loan to further expand their enterprises. Also provided on request are business mentoring, networking opportunities, and access to more financial services. This poses a well-rounded approach to empowering oneself and one’s community financially and economically.
Insights for Future Efforts: The insights gained from the pilot program provide valuable information for future efforts to promote economic growth and empowerment in favelas and other underserved communities. This information can help inform impactMarket’s future microcredit designs, implementation, and scalability.
What’s Next?
Following this successful pilot in Brazil, impactMarket gives another step to bring its microcredit further: a new pilot in Uganda, which started on 14th April 2023. We aim to explore microcredit in a different market and context in order to develop a product that best suits the needs of our users from all over the world. Keep following us here on Medium and on social media to get to know more about our pilot in Uganda and other news about impactMarket’s products, operations, and impact.
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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.
