Collective microcredit is the meeting of crowdfunding with microcredit. It fits into the crowdlending logic as an innovative tool for low-income people to finance their projects. On the one hand, is someone who needs a loan and on the other is one or more people, willing to finance the project.
Good Finance is the first collective microcredit platform in Brazil. You can become a social investor (Hero Good Finance) with values starting at R $ 25.
The English term, literally means: crowd funding. It is a valuable tool to leverage a project and has existed in Brazil since 2011. The proposal is to use the internet to disseminate the details of the development of a project and to raise the necessary capital to carry it out. On the other hand, Internet users access the content and decide whether they want to help make it viable, contributing money. There are four types of crowdfunding:
- Collective donation financing – In this modality, the only reward is knowing that it has contributed to a greater good.
- Reward crowdfunding – Supporters receive products or services developed by people who have decided to help.
- Equity crowdfunding – The supporter, also called an investor, receives a percentage of the company that is asking for financing.
- Collective loan – Supporter is also seen as an investor because he receives financial income (interest) on his loan.
Microcredit and social impact
Microcredit was invented in the 1980s as a credit modality aimed at low-income people and earned a Nobel Peace Prize for its creator, Muhammad Yunus. Practiced with low interest rates, the idea of microcredit is that, by making credit accessible and fair to everyone, we will build a better world, without poverty in the future.
To give you an idea, 120 million people live on less than the minimum wage in Brazil. However, together they handled around R $ 800 billion in 2010. More than 60% of the Brazilian population is in the CDE classes and 40% of these citizens do not have a bank account, according to a study by the CDE Plan in partnership with FGV. 80 million people are excluded from the financial system and from all the opportunities that this system brings, but microcredit has the potential to reverse this scenario.
This is the target audience for microcredit. Giving access to capital for those at the base of the pyramid is an open door to social impact. When directed at entrepreneurs, microcredit further increases its potential for impact. To embrace this cause means supporting access to financial services, the generation of decent jobs, entrepreneurship and so on.
Find out more about what Good Finance did in 2017 and what are the expectations for 2018.
The problem to be solved
Motivated by a mixture of opportunity and need, almost a quarter of the Brazilian population, which is at the base of the pyramid, undertakes. There are more than 25 million micro entrepreneurs spread across the peripheries and slums of large and small cities that face a daily battle to maintain and grow their own businesses.
Traditionally, when a micro-entrepreneur needs a loan to invest in his business, he goes to the bank and ends up facing a discriminatory environment, high interest rates (4% per month on average), and a complicated bureaucracy that prevents him from evolving.
The solution: collective microcredit
Brazil is full of microentrepreneurs who want to invest in their businesses, but are unable to obtain financing in the traditional way. The solution is to decentralize capital. This is possible through a collective microcredit platform. Now we don’t have to go to the bank to ask for a loan anymore, we can do it through Good Finance. Entrepreneurs can raise up to R $ 15,000 to invest in their business and on the other hand, social investors can start with values starting at R $ 25.
How does Good Finance work?
The mission is to provide access to fair microcredit for low-income entrepreneurs. But there is a curatorship before, not all entrepreneurs can be financed by the network. First, the entrepreneur must be appointed by a strategic partner who works with entrepreneurial training.
Then he must answer a financial profile questionnaire and send documents that prove the financial health of the business. Once approved, start your campaign.
What are the benefits for the entrepreneur?
– A fair way to get credit: without discrimination, cheap and without bureaucracy.
– Loans up to R $ 3,000 have no interest.
– Loans from R $ 3,001 to R $ 9,000 with interest of 6% per year.
– Loans from R $ 9,001 to R $ 15,000 with interest of up to 12% per year.
– Financing can be paid up to 24x and has a grace period of 1 month.
– An administrative fee is charged to Good Finance of up to 10% of the total amount collected in all campaigns.
What are the benefits for the investor?
– Make a social impact investment, which will support the development of microentrepreneurs and the improvement of their quality of life.
– Receive the money back with income above savings.
– Receive reports on the evolution of the entrepreneurs and the impact generated by the financing.
– All this without leaving home.