Fintechs deliver $ 935M USD package for the government to bring more resources to SMEs impacted by quarantine in Brazil

April 5, 2020
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Program would bring more resources to micro, small and medium-sized companies, a group that has been strongly impacted by the quarantine period.

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Representatives of the “fintechs” submitted proposals to the Central Bank to increase the number of these companies that can adhere to the measures launched to mitigate the effects of coronavirus on the economy and to reduce the costs and taxes of their activities.

The program, which has an estimated value of R $ 5 billion, would bring more resources to micro, small and medium-sized companies, a group that has been strongly impacted by the quarantine period and has been seeking loans from fintechs, in view of the attitude of greater risk aversion of banks.

Initiatives launched by the BC so far include regulated fintechs. On March 26, the National Monetary Council (CMN) allowed Direct Credit Societies (SCD) and Individual Loan Companies (SEP) to issue cards, transfer funds from BNDES and securitize their portfolios to a greater number of investors.

“They were positive measures, but they are concentrated only in those regulated entities. Our demand is to extend these measures to other fintechs as well, ”says Ingrid Barth, executive director of the Brazilian Association of Fintechs (ABFintechs).

Regulated fintechs are licensed to act as a payment institution, a category that covers digital banks, and as SEP or SCD. The others partner with regulated financial institutions, acting as banking correspondents, which covers about 90% of the total cases. Data from the Finnovation consultancy show that Brazil has 504 fintechs, 17% of them in the credit area.

The regulator's concern with extending the new measures to other fintechs is due to the fact that it does not have the same control over them. “It is not trivial to inspect those who are not regulated”, says Bruno Diniz, head for South America of the Financial Data and Technology Association (FDATA). "But I agree that fintechs are a quick channel for making resources reach small and medium-sized Brazilian companies".

According to ABFintechs, the BC is able to control the financial institution itself that is partnering with fintech, based on frequent reports on the financial situation of these companies, something that would allow more control of the business and be more sure that the initiatives of help are really reaching small businesses.

The regulator's measures come at a time when fintechs are in high demand. Invested by BTG Pactual, the Finpass platform, which connects small and medium-sized companies seeking credit to financiers, saw demand grow seven times in the past five days.

In total, the company has 350 funds, fintechs, banks and financial companies registered to lend to 100 thousand companies - a month, it receives an average of 3 thousand registrations, which have jumped in the last weeks. The platform has already created R $ 5 billion in financing and loan proposals to customers.

According to Dan Cohen, a partner at Finpass, banks simply stopped offering offers to customers, while other lenders are more selective. "They want to lend to the same sectors: food, pharmaceuticals, personal hygiene, while other sectors simply do not have money available," he said.

In the executive's opinion, BNDES transfers to smaller companies should consider those that are in sectors without access to resources at this time. "BNDES should not be concerned only with increasing the number of players for the money to reach the market, but with the fact that the money reaches those who need it."

The executive director of ABFintechs also said that, among the proposals submitted to the regulator, are the reduction of operating costs for fintechs, many of them related to banking services, such as the transfer of resources, and the reduction of taxes for the period between four and five months.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Latam Fintech Market, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la platafomra. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.

Representatives of the “fintechs” submitted proposals to the Central Bank to increase the number of these companies that can adhere to the measures launched to mitigate the effects of coronavirus on the economy and to reduce the costs and taxes of their activities.

The program, which has an estimated value of R $ 5 billion, would bring more resources to micro, small and medium-sized companies, a group that has been strongly impacted by the quarantine period and has been seeking loans from fintechs, in view of the attitude of greater risk aversion of banks.

Initiatives launched by the BC so far include regulated fintechs. On March 26, the National Monetary Council (CMN) allowed Direct Credit Societies (SCD) and Individual Loan Companies (SEP) to issue cards, transfer funds from BNDES and securitize their portfolios to a greater number of investors.

“They were positive measures, but they are concentrated only in those regulated entities. Our demand is to extend these measures to other fintechs as well, ”says Ingrid Barth, executive director of the Brazilian Association of Fintechs (ABFintechs).

Regulated fintechs are licensed to act as a payment institution, a category that covers digital banks, and as SEP or SCD. The others partner with regulated financial institutions, acting as banking correspondents, which covers about 90% of the total cases. Data from the Finnovation consultancy show that Brazil has 504 fintechs, 17% of them in the credit area.

The regulator's concern with extending the new measures to other fintechs is due to the fact that it does not have the same control over them. “It is not trivial to inspect those who are not regulated”, says Bruno Diniz, head for South America of the Financial Data and Technology Association (FDATA). "But I agree that fintechs are a quick channel for making resources reach small and medium-sized Brazilian companies".

According to ABFintechs, the BC is able to control the financial institution itself that is partnering with fintech, based on frequent reports on the financial situation of these companies, something that would allow more control of the business and be more sure that the initiatives of help are really reaching small businesses.

The regulator's measures come at a time when fintechs are in high demand. Invested by BTG Pactual, the Finpass platform, which connects small and medium-sized companies seeking credit to financiers, saw demand grow seven times in the past five days.

In total, the company has 350 funds, fintechs, banks and financial companies registered to lend to 100 thousand companies - a month, it receives an average of 3 thousand registrations, which have jumped in the last weeks. The platform has already created R $ 5 billion in financing and loan proposals to customers.

According to Dan Cohen, a partner at Finpass, banks simply stopped offering offers to customers, while other lenders are more selective. "They want to lend to the same sectors: food, pharmaceuticals, personal hygiene, while other sectors simply do not have money available," he said.

In the executive's opinion, BNDES transfers to smaller companies should consider those that are in sectors without access to resources at this time. "BNDES should not be concerned only with increasing the number of players for the money to reach the market, but with the fact that the money reaches those who need it."

The executive director of ABFintechs also said that, among the proposals submitted to the regulator, are the reduction of operating costs for fintechs, many of them related to banking services, such as the transfer of resources, and the reduction of taxes for the period between four and five months.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y solamente sus autores son responsables de ellas. No reflejan ni comprometen el pensamiento o la opinión del equipo de Latam Fintech Hub y, por lo tanto, no pueden interpretarse como recomendaciones emitidas por la plataforma. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista en el ecosistema Fintech.
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