"Offering credit to save micro and small businesses is not a priority for the government," says a representative of Caixa bank employees.

The government's "aid" to micro and small businesses is nowhere near satisfactory. This is revealed in a study conducted by the Getúlio Vargas Foundation (FGV) on the estimated credit needed to finance the working capital of these companies this year. According to FGV researchers, the demand for credit will be R$ 472 billion. Furthermore, based on the Central Bank's credit supply in 2019, the survey indicates that R$ 202 billion will not be met by financial institutions.

Data from the so-called "Loan Meter" (a tool from the Ministry of Economy with information on the supply of credit to micro and small businesses) shows that up to the 10th of this month, the financial system lent R$ 17,69 billion, which corresponds to only 8,75% of the amount that companies will need and will not receive. If the gross value of the credit demand is considered — which is R$ 472 billion — the government's assistance does not reach 4%.

According to Sérgio Takemoto, president of the National Federation of Associations of Caixa Econômica Federal Employees (Fenae), the lack of credit has an explanation. “Aid to micro and small businesses isn't reaching them because the Minister of Economy himself [Paulo Guedes] stated that [the government] makes money lending to large companies, but loses money helping small ones,” he analyzes. The statement cited by Takemoto was made by Minister Paulo Guedes at the ministerial meeting on April 22nd, widely reported in the press. “It is not a priority for this government to offer credit to save micro and small businesses,” reinforces the president of Fenae.

The data from Emprestômetro focuses on the following government credit line programs: National Program for Support to Micro and Small Businesses (Pronampe), Guarantee Fund for Micro and Small Businesses (Fampe), Emergency Program to Support Employment (Pese), and the Investment Guarantee Fund (FGI), administered by BNDES.

FGV STUDY — The survey considered 17,3 million individual micro-entrepreneurs, micro-enterprises, and small-sized enterprises (SMEs). To arrive at the figures, researchers calculated the estimated revenue these companies would have under normal circumstances and the drop in revenue caused by the coronavirus pandemic. Then, they estimated the credit needed to finance working capital and compared it with the credit available from the financial system.

According to the study, the resumption of sales is essential for these companies because, due to a lack of credit, they often use their own resources to finance their working capital needs; mainly, the anticipation of sales on credit cards, for example. With the pandemic and the closure of businesses, sales fell sharply. Therefore, many companies had to lay off employees to reduce costs, causing more unemployment and exacerbating the economic and social crisis.

"The availability of credit is therefore necessary to mitigate the effects of the pandemic in both areas," says Sérgio Takemoto.

The FGV study also reveals that, even before the crisis, the supply of credit to meet the needs of micro, small and medium-sized enterprises (MSMEs) was already insufficient. Furthermore, it states: "It is worth noting that these figures disregard the fact that banks are granting considerably less credit in 2020 than in 2019."

HELP ARRIVES TOO LATE — Of the government's credit lines, Pronampe is the one that lends the most. But the R$ 15,9 billion available for micro-enterprises with annual revenue of up to R$ 4,8 million is coming to an end.

The Caixa Econômica Federal, the first bank to operate the program, has already reached the limit of R$ 5,9 billion authorized by the Guarantee Fund for Operations (FGO). Added to the R$ 1,8 billion granted by another credit line, Fampe, the public bank has contracted R$ 7,7 billion.

Banco do Brasil also increased its limit, from R$ 3,74 billion to R$ 4,98 billion. Itaú, the only private bank that started lending through Pronampe, reached its limit of R$ 3,7 billion in just five days.

“This demonstrates the desperation of small business owners to save their businesses and the jobs of their employees,” emphasizes the president of Fenae. He believes that the aid arrived too late for many companies. “We were in crisis before the pandemic, and these companies were already unable to obtain credit from banks. It is important to remember that they are the ones that employ the most people. Without aid to small businesses, they don't employ; without jobs, we won't get out of the crisis,” warns Sérgio Takemoto.

IMPACT ON SMALL BUSINESSES — The 5th edition of the research “The impact of the coronavirus pandemic on small businesses”, carried out by the Brazilian Micro and Small Business Support Service (Sebrae) and the Getúlio Vargas Foundation (FGV), was released this week. It indicates that small businesses are showing signs of slow recovery.

The research also reveals that credit granting has not yet kept pace with the significant increase in demand for loans from these companies. Between the 4th and 5th editions of the survey, the percentage of entrepreneurs seeking credit rose from 39% to 46%. The survey interviewed 6.470 small business owners from the 26 states and the Federal District, between June 26 and 30.

Timid and Inept Government Actions — According to economist and professor Luiz Gonzaga Belluzzo, aid to small businesses is crucial because it is one of the sectors that generates the most jobs. “The service sector, commerce, restaurants, and shops will suffer very significant and serious damage. It should be supported because it is a sector that has a very strong commitment to employment,” he assesses.

According to Belluzzo, the government's "timid and inept actions" will hinder the economic recovery in the post-crisis period. He believes it is necessary to save businesses and guarantee people's income.

Luiz Gonzaga Belluzzo also defends maintaining the emergency aid of R$ 600 until the end of the year. “It will be spent to guarantee people's income, which in turn will be used to spend. And therefore, this income returns to companies, which will also spend and generate tax revenue. Explaining it this way, it seems obvious, but it's not what goes through the minds of the people in government,” criticizes the economist.

CREDIT WITH FGTS GUARANTEE — Caixa Econômica Federal and Banco do Brasil announced, this Wednesday (15), that they will offer credit to individuals with the guarantee of the FGTS (Severance Pay Guarantee Fund) anniversary withdrawal. According to the director of the Fund Management Department of the Ministry of Economy, Gustavo Tillmann, there are five financial institutions able to offer the loan. According to Tillmann, the guarantee of the anniversary withdrawal will help to make the cost of credit cheaper for private sector workers.

Caixa's Vice President of Retail, Celso Leonardo Barbosa, stated that this type of credit "will be an innovative product"; however, it is not a payroll loan: "It's an alternative to it [payroll loans]." Barbosa said the interest rate will be low. However, he did not detail the fees. The vice president also stated that the bank will begin offering credit to businesses via card payment terminals.