By Sergio Suchodolski
Since early 2020, the world is facing health and economic crisis of immense proportions. Small and medium-sized enterprises (SMEs) have been hard-hit by such economic downturn. SMEs contributions to economic development are vital, however the impact of the crisis to this segment poses critical financing obstacles to their survival and to sustain their role on the economy.
According to the OECD’s SMEs and Entrepreneurship Brazil 2020 Policy, SMEs account for 62% of the nation’s total employment and 50% of national value added. Yet, access to credit at adequate conditions is a growing and critical issue to the segment. SMEs access to credit have contracted since the beginning of the crisis, in addition, the segment deals with higher transaction costs and stricter credit requirements. The credit challenge situation further pressure SMEs that contributes to balancing of gender equality (women led enterprises) and specific sectors such as health and services.
During such challenging times, the Development Bank of Minas Gerais (BDMG) is closely following the impact of the current crisis on the credit access of Brazilian SMEs. Following its mission, the Bank is engaged to maximize efforts to support SMEs during and post-crisis, particularly through offering new financial products and revised credit conditions to respond in an innovative way to the above-mentioned hurdles to SMEs.
In this sense, our project, BDMG Digital, is an online platform created to analyze and grant credit for different needs of SMEs. It is a pioneer initiative among Brazilian development banks. BDMG Digital made online financing possible. Since its launch, more than 75,000 SMEs have requested credit. Credit was granted to 26,000 companies, enabling a disbursement of approximately BRL 1.6 billion.
BDMG Digital main objective is to offer credit in an agile way to a larger number of companies over the 853 municipalities of Minas Gerais. Knowing that SMEs suffer from bureaucracy and strict requirements to obtain credit, the great differential of the platform is to give a quick response to clients without sacrificing operation’s safety. While credit responses before the platform BDMG Digital lasted over 60 days, nowadays the credit result can be delivered in 1 hour. Disbursements can be completed in no later than 4 days after the credit simulation. Especially under COVID-19 circumstances, the agility provided by the platform is crucial to this set of companies.
In addition to the digital channel, BDMG Digital works through a network of credit agents accredited all over Minas Gerais state. This facilitates the financial inclusion of SMEs who are not familiar with digital tools and face lack of Internet access in their regions.
Moreover, the platform is flexible and can work with different financial products, depending on SMEs’ needs. During pandemic, BDMG digital offers distinguish credit lines connected with 2030 Agenda and COVID-19 challenges as: gender inclusion, health, tourism and other SMEs sector companies, and special lines for micro enterprises. They are mainly related to objectives 8 (promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all), 5 (achieve gender equality and empower all women and girls), 3 (ensure healthy lives and promote well-being for all at all ages) and 11 (Make cities and human settlements inclusive, safe, resilient and sustainable), in addition to achieving socioeconomic impacts, such as job creation.
Combining the power of the internet and digital technologies to promote financial inclusion and overcoming some of the barriers that prevent the access of financially excluded groups is one of the great objectives of this important project.
BDMG Digital has been one of the important toolkits to support Brazilian firms to face and beat the Great Lockdown’s economic effects. And over the next months, as we climb out of the current economic abyss, BDMG will be working to amplify the reach and effectiveness of development networks by serving as the last-mile specialist on the ground, identifying opportunities and connecting local actors to global sustainable development-oriented funds.
Views expressed in this publication are the author’s and do not necessarily reflect the views of the Paris Peace Forum.
Sergio Suchodolski is the President of the Development Bank of Minas Gerais (BDMG). He Holds a Master of Laws Degree (LL.M.) from Harvard Law School, a Diplome (M.A.) from the Institut d’Etudes Politiques de Paris –Sciences-Po (Major in International Trade) and an LL.B. from the University of Sao Paulo Law School. Formerly, Mr. Suchodolski also held the positions of Special Advisor and Chief of Foreign Policy Advisor at the Secretariat of Strategic Affairs, under the Office of the President of Brazil.