By Xiu Ying, Contributing Reporter
RIO DE JANEIRO, BRAZIL – A complementary law that creates the legal entity of ESC (Empresa Simples de Crédito – Simple Credit Company), will be sanctioned this Wednesday (24th) by President Bolsonaro.
The proposal should facilitate access to and lower the cost of financing for small businesses, such as MPEs (Micro e Pequenas Empresas – Micro and Small Businesses) and MEIs (Microeemprendedores Individuais – Individual Micro-Entrepreneurs).
The proposal was approved on March 19th by the Federal Senate and had the direct participation of the former Sebrae president, Guilherme Afifi Domingos, who is now a special advisor to the Minister of Economy, Paulo Guedes.
Through the implementation of ESC, the tendency is for increased competitiveness between banks offering credit alternatives with lower interest rates to small entrepreneurs where large institutions often do not act.
According to research conducted by Sebrae in 2018, the reduction of interest rates would be fundamental to facilitate borrowing for 51 percent of business owners in that segment. For 17 percent, reducing bureaucracy would be a means of bringing the sector closer to the financial system.
“The idea – which is the result of the combined efforts of Sebrae and the Joint Parliamentary Front of Micro and Small Enterprises – essentially aims to reduce bureaucracy and increase access of small businesses to credit,” says Carlos Melles, the new president of the national Sebrae.
Initial assessment by Sebrae demonstrates that by reaching the level of one thousand Simple Credit Companies in operation, there should be an injection of approximately R$20 billion per year in micro and small companies, according to the president of the institution. This represents 10 percent growth in the credit market for small Brazilian businesses.
“In addition to injecting more resources into the country’s economy, we concluded that ESC should also lower interest rates for small businesses,” concludes Melles.