Group lending: Cristiane and Helena show how it works
A woman finds herself in crisis and is supported by another making a success of her business. In this story of solidarity amongst women you can discover how group lending works, and through our Brazilian partner BPCS, how Oikocredit serves hard to reach people.
Note: this interview with clients of BPCS was done before the Covid-19 pandemic. To learn more about how BPCS supports its clients in these challenging times, read more below.
Oikocredit’s mission is not driven by the recognition of our success, but by the social impact we achieve. Success is not just about providing loans and capacity building, it is about a lot more. Here lies a key ambition at the heart of our strategy: we want to use our global network as a catalyst for positive change in the world, by bringing like-minded people and organisations together.
One ingredient to success is often simple human solidarity. Here we tell the compelling story of what happened when Cristiane met Helena, starting with Cristiane’s story.
Cristiane: from false promises to hope
Cristiane G. Monteiro has had to overcome personal difficulties as well as becoming homeless and having no food to eat. She had arrived in São Paulo after following false promises of work. Despite this and with a smile full of hope and courage, she told Oikocredit how her determination, her faith, and the simple kindness of people helped her.
When Cristiane first arrived in São Paulo she had nothing. Some people gave her a place to stay until she could rent a room with her partner. A friend gave her snacks which she sold with fruit and then, talking to Helena de Jesus Oliveira, she learned about Banco do Povo Crédito Solidário (BPCS).
Being new to the region and with no business track record, she would ordinarily have had little chance of obtaining a loan to start a business. But BPCS solidarity group loans are different. In October 2018, Cristiane took out her first loan of BRL 1,300 (around EUR 212) and was able to buy the equipment and materials she needed to start her own business.
Helena: building her business and offering solidarity
Helena de Jesus Oliveira had started work aged just 15, selling bags and newspapers. She had discovered a shop where she could buy scraps of fabrics and started making bedcovers. But this wasn’t enough for a sustainable income and so she joined a BPCS loan group.
With a loan she was able to stock material and produce more products. When she met Cristiane, Helena had a street stand where she sold bedcovers and other items and her business was growing steadily.
Solidarity group lending matters
Helena’s loan group is called the Power of Union and is a reminder of why solidarity group lending matters.
Worldwide you will find various models for group lending. For our partner BPCS it is their own “solidarity group loan” model. A BPCS group loan is a loan to a group of entrepreneurs of four to seven people with small businesses, who then assume co-responsibility for the total amount borrowed. In other group models, there can be individual responsibility for loans.
BPCS also offers individual loans, but solidarity loans are by far (91%) the favoured route for most clients. There are three steps to a new loan:
- Form a solidarity group of neighbours, friends or business relationships, but not members of the same household.
- BPCS then organises meetings at an agreed “service point” location to better understand the group and explain the joint obligations.
- Finally, the loan is disbursed to the members of the group.
There are many reasons why this group model really matters and suits particularly those end-clients who can be hard to reach. A primary motivation for end-clients is that the model overcomes some of the restrictions on individual loans, such as where there is a lack of guarantees/collateral, or where people have a negative credit history at a bureau.
Up to two members of a new loan group may have negative consumer credit history. They could be late repaying a bill and are waiting on income from their new business. Now they can be supported by the other more established members of the group.
More generally, group loans can help overcome the fears about borrowing money, by feeling more secure in a small group. Group loans are also welcoming to new businesses where people lack banking history. This helps escape the vicious circle of no trading history leading to being rejected for a loan, which in turn means that no trading history can be built up.
Through this methodology of solidarity group lending, BPCS can make its operations sustainable while providing loans at the bottom of the wealth pyramid in Brazil.
Cristiane and Helena’s lives have changed
Now Cristiane is settled with her stand next to Helena’s, where Cristiane prepares delicious “tapiocas”, a northeast Brazilian dish, as well as selling soft drinks and other snacks. Cristiane’s life has changed since she joined BPCS. She is both proud and grateful of what she has achieved, and confident to progress further.
Helenaand herfamily previously had only one room. Since she obtained credit her income has improved, and she has been able to extend her house, building bedrooms and a small workshop where she does the sewing for many of her products.
Both women are happy with BPCS, because they say that their rates and conditions are more accessible than those of traditional banks and, as Helena explains, they treat her well. When she goes to the branch Helena says: “They help me with good ideas and advice”.
Banco do Povo Crédito Solidário (BPCS)
BPCS is a Brazilian NGO which started in 1997 in Santo André, a municipality of São Paulo. BPCS provides financial services to micro and small entrepreneurs in the southeast metropolitan region of São Paulo.
BPCS has been recognised as one of Brazil’s leading social impact lenders by external agencies. Its Civil Society Organisation of Public Interest status and participation in the National Programme for Targeted Productive Microcredit, ensures good client practices. BPCS are developing new products, such as experimenting with social housing loans.
The solidarity group method is a tool for women empowerment
We asked BPCS why a solidarity group is beneficial for women? Fabio Maschio, BPCS Executive Director, told us: “The solidarity group method is a tool for women empowerment, who represent 63% of the entrepreneurs supported by BPCS. Within these groups they find ways to develop their productive activities, take care of their families and develop other activities in the community. The choice of a group name has special meaning for the women, as it is always loaded with symbolism. The choice symbolises the daily struggle of each one, such as: Women Warriors, Strength and Faith".
New challenges through Covid-19
Brazil has been particularly badly hit by the Covid-19 pandemic. “I am in regular contact with BPCS during this crisis,” says Nicolas Viedma, Senior Investment Officer for Oikocredit in Brazil. “I am impressed with the great work they are doing in supporting their clients while following social distancing recommendations”.
Fabio Maschio from BPCS said: “The metropolitan region of São Paulo, where BPCS operates, had a significant first wave of Covid-19 cases. This affected the region's health system and caused the closure of non-essential activities for several weeks. BPCS’s end-clients are essentially microentrepreneurs, most of them creative and flexible, daily adapting their businesses for different needs. Despite the challenges, several entrepreneurs started to manufacture facemasks, commercialise hygiene products, adapted their food services for delivery, and began to support high risk groups for their daily purchases and activities. Likewise, BPCS also adapted its activities, by implementing social distancing protocols in its branches and limiting the number of group meetings. It also changed its approval processes to avoid unnecessary visits of loan officers. In many cases they made only short visits to check regular business operation, without leaving the car”.
Oikocredit solidarity with BPCS
BPCS is a good fit with one of Oikocredit’s priority sectors: focusing on low income people and communities for financial inclusion. We look to maximise social impact and BPCS has that shared goal.
Solidarity has been at the heart of the mission of Oikocredit since 1975. We recognise solidarity in our investors, bringing their investment and volunteering, to improve the lives of end-clients and their communities. So, it was hardly surprising that the solidarity model of BPCS caught the eye of Oikocredit and we wanted to find out more. BPCS has been a partner of Oikocredit since 2015.
During the Covid-19 pandemic, Oikocredit also showed solidarity by providing a small donation from our coronavirus solidarity fund. This enabled BPCS to provide 100 entrepreneurs with hygiene kits to enable them to be compliant with Covid-19 regulations and continue their businesses.
The BPCS model shown in Cristiane and Helena’s story, demonstrates that it’s not just about loans and capacity building, it also takes a willingness among people to see the opportunities to mutually support each other and believe in one another.
Oikocredit’s strategy seeks to develop partnerships rather than simply conclude transactions or projects. We want to lead positive change as a catalyst organisation, using our local contacts and global network to connect our partners to a wider network of opportunities. Cristiane and Helena’s spirit of solidarity is a simple example of how this can work.