1. Innovations in Micro-credit Centrally guaranteed suppliers’ credit as basis for local trade

2. Workshop 3 Janaina Carneiro InStroDi’s Board Member Ma. Development Management English spoken Camilo Ramada Methodological advisor InStroDI Dutch spoken

3. Strategies for development InStroDI 1) VLC (pre-entrepeneurship) 2) Microcrédito (stimulate economic activity) 3) C3 (stimulate circulation and entrepeneurial outreach) Development of entrepreneurship and productive capacity Market penetration

4. Brazil Difficult access to credit and high interest rates Lack of liquidity in the market Stagnating circulation of goods and services Market solutions: –Suppliers’ credit –Pre-dated cheques, circulation of vouchers, etc. –Factoring

5. Micro-credit Potentially effective way to supply capital and liquidity to the local market Expensive because of relative high overhead-costs and risks Expensive because it has to generate interest for capital

6. Trend Many micro-credit institutions unsustainable Micro-credits more expensive than other credits -> competitive disadvantage for micro-enterprise Still the main strategy for capitalizing micro-entrepreneurs

7. Suppliers’ credit Supplier sells goods or services and does not receive immediate cash. Different forms: –deferred payment (30 days, 60 days, etc.) –Installment payments even for small amounts

8. Trend Suppliers’ credit over longer periods Divided over more installments Also for payments of small amounts (consumer-market) High number eventually not paid

9. Risks Many forms of suppliers’ credit have no good guarantee in case of non-payment Suppliers have no good tools to assess the risk of specific clients Level of un-paid accounts is rising

10. Disadvantages Suppliers are not eager to give their clients commercial credit Bureaucratic and strains relationship The value owed by clients is not liquid (i.e.: it cannot be spend with other businesses) Risk of non-payment is charged as cost to client

11. Consumer and Commerce Circuits – C3 Network of businesses and consumers Payments through Cyclos-software Internal Liquidity Backed by money and financial guarantees Option to convert Internal Liquidity into national currency

12. Centralizing of suppliers’ credit through C3 Client A wants to buy 100 $ of product from supplier B Client A asks for an Internal Credit with the C3 of 100$ The C3 asks a financial guarantee of 100$ from client A The C3 gives client A 100 $ worth of Internal Liquidity

13. Centralizing of suppliers’ credit through C3 Client A pays 100 $ of Internal Liquidity to supplier B Supplier B can spend the Internal Liquidity with the other members of the C3, obtaining 100 $ of products Or supplier B can convert the Internal Liquidity into money Conversion is guaranteed, but subject to terms and costs

14. Centralizing of suppliers’ credit through C3 Client A has negotiated with the C3 the terms and conditions of payments of the Internal Credit When payment is due, the C3 gets money, either from client A, or, in case of non-payment, from the financial guarantee

15. Centralizing of suppliers’ credit through C3 Client A has thus the deferred payment, not from his supplier but from the C3 Supplier B has given his suppliers’ credit, not to client A but to the C3 Supplier B does not share the risk of non-payment by client A

16. Advantages The client does not need to negotiate with his supplier, but has the formal procedures of C3 The supplier has no risk of non- payment The value is immediate liquidity within the C3

17. Combination with micro-credit C3 credit does not need to charge interest (does not need to remunerate capital) C3 credit is in itself a form of micro-credit Can be combined with micro- credits in money

18. Combination with micro-credit Comprehensive strategy for business development Creates experience with financial tools in a safer environment Multiplication of effect of available captial for credit (Rabobank Rotating Fund)

19. Total outcome A system that supplies no-risk and interest-free liquidity to the local market Local purchasing-power and resources circulate longer locally, and thereby contribute towards sustainable local socio-economic growth Combination with micro-credit creates synergy