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THIRD TRI NATIONS SUMMIT ON SMALL BUSINESS
Session II: Critical role of finance in building competitive MSMEs
leading the way
Title: BRIDGING FINANCIAL GAPS FOR MSME
PRESENTATION PLAN
• BRAZILIAN ECONOMIC MODEL UNDER BRAZILIAN ECONOMIC MODEL UNDER
THE NEW UNCERTAINTY SCENARIOTHE NEW UNCERTAINTY SCENARIO
• FINANCING SME IN THE BRAZILIAN FINANCING SME IN THE BRAZILIAN CONTEXTCONTEXT
• SEBRAE´S LEADING STRATEGY FOR SEBRAE´S LEADING STRATEGY FOR SUPPORTING MSE FINANCING:SUPPORTING MSE FINANCING:
REDUCING THE GAPSREDUCING THE GAPS
THE BRAZILIAN ECONOMIC MODEL
1. INFLATION TARGET
2. FISCAL RESPONSIBILITY
3. FLOATING EXCHANGE RATES
INFLATION (CPI)
%
0
3
6
9
12
15
18
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
17,24%
consenso2008: 4,5%
Fonte: IBGE, Bacen
12 months
Meta4,5%
PUBLIC SETOR DEBT/GDP
Fonte: BCB
% P
IB
38
42
46
50
54
58
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jul40,6%
US
$ b
ilh
ões
FOREIGN EXCHANGE RESERVES
Fonte: BCB
0
55
110
165
220
Jan03
Jan04
Jan05
Jan06
Jan07
Set08
abr15,9
23 Set206,1
Fonte: BCB
EXTERNAL VULNERABILITY
-5
0
5
10
15
20
25
30
35
2000 2001 2002 2003 2004 2005 2006 2007Ago2008
1
3
5
7
9
11
%
DEBT SERVICES/GDP
DEBT/GDP
%
%
BRAZIL GDP GROWTH RATE
Fonte: IBGE
-1
0
1
2
3
4
5
6
1T99
1T00
1T01
1T02
1T03
1T04
1T05
1T06
1T07
2T08
6,0%
AVG 99-031,9%
AVG 04-084,8%
COMPARING REGIONS...
Fonte: FMI
0
1
2
3
4
5
6
EUA Área Euro Japão Mundo
20062007Estimated 2008 (oct/07)estimated 2008 (atual)estimated 2009 (atual)
%
2,9
0,8
2,8
1,2
5,1
3,9
0
20
40
60
80
100
120
140
Argen
tina
Méx
ico
Brasi
l
Coréia
Filipin
asChile
Tailâ
ndia
Mal
ásia
% d
o P
IB
Source: IMF
37
CREDIT AS % OF THE GDP
THE FAVORABLE IMPACTS FOR MSME ...
1.ECONOMIC STABILITY
2.CREDIT EXPANSION
3.INEQUALITY REDUCTION
Summarizing
THE NEW SCENARIO
AND THE SME CONTEXT
BACKGROUND...
1. THE FINANCIAL CRISIS IS BASED ON THE LONG
PERIOD OF LOW INTEREST RATES IN THE U.S
2. SUBSTANCIAL INCREASE IN CREDIT AND REAL
ASSETS PRICES (SPECIALLY REAL STATE)
3. CREDIT EXPANSION WAS FOLLOWED BY
FINANCIAL INNOVATION THAT ALLOWED
LEVERAGE, WITHOUT PROPER SUPERVISION.
IMPACTS OVER THE BRAZILIAN ECONOMY
1. IN THE LAST FEW YEARS, BRASIL TOOK
ADVANTAGE OF THE FAVORABLE
SCENARIO TO INCREASE ITS CAPACITY
TO EXTERNAL SHOCKS.
2. ELIMINATION OF PUBLIC SECTOR
FOREIGN EXCHANGE INDEBTENESS HAS
INTERRUPTED AN OLD VICIOUS CICLE OF
EXTERNAL IMPACT CONTAMINATION
1. TO CONTINUE FOSTERING SUSTAINABLE ECONOMIC GROWTH
2. TO IMPLEMENT COUNTERCICLE CREDIT POLICIES UNDER BANKING RISK AVERSION
3. TO LOWER INTEREST RATES UNDER CURRENCY APPRECIATION AND INFLATIONARY THREATEN
4. TO DEEPEN ECONOMIC AND POLITICAL REFORMS
5. TO SUSTAIN SOCIAL WELFARE EXPENDITURE FOR LOWER GOVERNMENT REVENUES SCENARIO
CHALLENGES FOR THE MODEL UNDER UNCERTAINTY
WHY CREDIT IS SO HARD FOR MSME IN DEVELOPING
COUNTRIES?
1. USUALLY FINANCIAL SECTOR IS THE MOST REGULATED SECTOR
2. LOWER DEVELOPMENT STAGE MEANS HIGHER ASSIMETRY AND LACK OF INFORMATION.
3. FINANCIAL ACTIVITY STILL HIGHLY BASED ON GUARANTEES INSTEAD OF BUSINESS VIABILITY.
4. HIGH INCOME INEQUALITIES
5. LACK OF POLITICAL PRIORITY
IT GETS WORST FOR MSME….
•FINANCIAL TRANSACTIONS HIGH FIXED COSTS FOR
•LACK OF GUARANTEES AND DIFFICULTIES FOR RECOVERING
•NON RELIABLE ACCOUNTING DATA
•THE BUSINESS AND THE BUSINESSMAN ARE THE SAME.
FINANCIAL MARKET AND THEIR TARGETS
LEGAL ADVANCES
• ALTERNATIVE DISTRIBUTION CANALS:–BANKING CORRESPONDENTS–CREDIT UNIONS
• ALTERNATIVE FINANCIAL PRODUCTS AND SERVICES TO BUSINESS SEGMENTS PREVIOUSLY NOT ATTENDED.
SEBRAE´S STRATEGY FOR SUPPORTING MSE FINANCING
SEBRAE IS NOT A FINANCIAL INSTITUTION !!!!
OUR MISSION IS:
TO INDUCE PROXIMITY BETWEEN FINANCIAL SYSTEM AND SMALL BUSINESS TOWARDS HIGHER CREDIT ACCESSMENT AND LOWER
FINANCIAL SERVICES COSTS
Micro and Small Business
National Financial System
COSTS ACCESS
INFORMALSSMALL BUSINESS
INFORMATIONINFORMATION
NEGOTIATION GUARANTEES MICROFINANCE
HOW TO REDUCE INFORMATIONAL COSTS AND CREDIT RISKS?
From the individual analysis and to business groups
COLLECTIVEINDIVIDUAL FIRMS
What are the advantagens of such strategy for the MSE point of view?
Collective demands and commitement
Customized products and
services Better access conditions
Closer relation with the financial
institution
Learning process
Lower costs and risks
Scale
Assimetry of information
reduction
What are the advantages of such strategy for the Financial Institution point of view?
PROGRAMS AND PROJECTS
• MICROFINANCE– MICROCREDIT SUPPORT PROGRAM– CREDIT UNIONS SUPPORT PROGRAM
• SPECIAL FUNDS AND PROJECTS– CREDIT GUARANTEE PROGRAM– VENTURE CAPITAL INVESTOR
• INFORMATION AND CLIENT ORIENTATION
FINAL CONSIDERATIONS...
WHY FINANCING IS SO CRITICAL FOR BUILDING MSMEs COMPETITIVENESS ?
• TO FOSTER INVESTMENT AND ECONOMIC GROWTH, REDUCING INEQUALITIES
• TO STRENGHT CONSUMPTION AND LARGE COMPANIES CHAIN VALUES.
• TO DEVELOP LOCAL AND SECTORIAL MSME ARRANGEMENTS
• TO INDUCE INNOVATION
• TO PURSUE ECONOMIC STABILITY AMONG THE BRAZILIAN FAMILIES PROMOTING SOCIAL PEACE.
1. CREDIT IS NOT A PANACEA
2. TECHNICAL SUPPORT IS DECISIVE FOR MSME
3. CONSISTENT PUBLIC POLICIES
4. PRIVATE AND 3RD SECTOR ARE ALSO IMPORTANT PLAYERS IN FINANCING MSME.
Some remarks...
