Trends in Social Finance in Brazil

“I would like to challenge each of you to think beyond the present moment and imagine the next pages of the Brazilian history books in 2035. Will we write about lost opportunities, or describe how we are on our way to a more prosperous and less unequal reality, through innovation and creativity, despite the occasional challenges of the road?”

IMG_4654With these words, Columbia SIPA professor Sidney Nakahodo opened his speech at the Social Finance Trends event, organized by Finance for Good Brazil, in June in New York. Leonardo Letelier spoke about trends in social finance in Brazil and has shared some of SITAWI’s experience in recent years. Also participating in the event were Antony Bugg-Levine, from the Nonprofit Finance Fund; Julia Wilkison and Andrea Armeni from Finance for Good Brazil.

With journalist Di Pinheiro serving as moderator, Leonardo presented the work that SITAWI develops in Brazil and how it is connected to the socioeconomic context of the country.

“Although Brazil is an economic power and its middle class has grown in recent years, it remains one of the most unequal countries in the world. Commitments to philanthropy remain a fraction of what they are in the US and are less sophisticated in their management and allocation,” he commented.

He stated that access to capital remains expensive for traditional entrepreneurs by about 30 to 40% per year; and venture capital commitments are still a fraction of the developed markets. According to him, social enterprises often remain excluded from traditional financing opportunities.

To tackle this issue, Leonardo discussed SITAWI’s experience with social and environmental loans. He specifically cited granting of low-rate credit to non-profit organizations and social businesses with sustainable models, which generally do not meet the criteria of commercial banks.

“An example of an organization benefiting from this mechanism is CIES, an impact business that conducts medical diagnostics in mobile health units that serve vulnerable areas in partnership with corporations and the public sector. With three loans from SITAWI, CIES was able to increase the number of calls. By 2015 they had served 390,000 patients with low-cost medical examinations, diagnoses and surgeries, and trained 19,500 nurses and doctors to provide similar basic services in their communities,” he said.

Today, SITAWI is also working with the state of Ceará to launch the country’s first Social Impact Bond (SIB) focused on health. A Social Impact Bond  is a pay-as-you-go mechanism used in several countries, with the collaboration of investors and governments.

IMG_4682Antony Bugg-Levine, a social finance leader and CEO of the Nonprofit Finance Fund, made the closing statement of the event. He told the story of the NFF – which was launched more than 37 years ago and which inspired the creation of SITAWI – and is  one of the largest community investment funds in the United States today. To date, it has provided  US$ 620 million in financing and access to capital that supports US$ 2.3 billion in projects for thousands of organizations across the country.

He reminded everyone about the critical role of social finance organizations in supporting innovation and civil society, and the challenges faced by entrepreneurs who may not have the same institutional and philanthropic support that the NFF has leveraged over the years in the US.

“Organizations such as SITAWI and Finance for Good Brazil can strengthen the social finance sector in Brazil so that social entrepreneurs have the tools they need to solve major problems,” said Antony.

Julia Wilkinson of Finance for Good Brazil commented on her expectations for the ecosystem:

“We believe in a Brazil where a strong social finance ecosystem offers entrepreneurs the capital and support they need to create and scale solutions to challenges such as inequality and climate change,” said Wilkinson.

SITAWI will be the pilot beneficiary of Finance for Good Brazil. The initiative is born with the objective of raising funds in the United States to support Brazilian organizations that are innovating in the field of Social Finance. Therefore, US residents who wish to do philanthropy in Brazil can contact FFG-Brazil to assist in the process. Learn more about how to support: http://www.financeforgoodbrazil.org/