The NGO Centro de Assistência Social Nossa Senhora da Piedade (Caspiedade) is involved in at-risk community development in São Paulo, serving close to 1500 families with vocational training, food banks, and social services.

Problem: Since most of Caspiedade´s budget was financed by government grants that distribute at fixed dates, the organization needed a working capital loan to be able to finance their interim operating expenses.

Solution: SITAWI lent Caspiedade R$230k, as well as providing financial consulting advice to refinance their debt portfolio at lower rates, improve their cash flow management, and assist in the structuring of their new social enterprises.

Social Impact:  With SITAWI´s help, Caspiedade was temporarily able to keep operating its 12 service centers.  However, their rapid growth meant increased indirect financial commitments, such as HR and administrative expenses, which the low margins of government contracts (2.3 percent of income on average in this case) could not cover. In response, it did what a lot of nonprofits find themselves doing: creating additional income through a social business. Caspiedade rented out a sports pitch and started a project to produce handicrafts for sale. Despite generating $100,000 in income, the project had a net loss of $50,000 in the first year. In the for-profit world, this shortfall would be met by reserves until the project reached breakeven; but in the nonprofit world, with no sure opportunity to reach sustainability, it needed to scale back the project and book the losses.

Simultaneously, Caspiedade had between $500,000 and $750,000 in pending government contract payments at any one time. In many countries, organizations providing services to government must—and should—continue providing the service despite late payments. In Brazil, organizations must also stay up-to-date on their taxes every month. SITAWI’s social loan allowed Caspiedade to remain solvent, but as the amount of taxes it owed grew, it was increasingly unable to keep its operations going. During 2012, SITAWI provided management advice to Caspiedade, but by early 2013, the challenges were too great and Caspiedade ceased operations.

To read more on the Caspiedade loan click on the below link for the Stanford Social Innovation Review article “Ups and Downs of Social Finance” written by Rob Packer, SITAWI´s loan portfolio manager.