32% of black entrepreneurs have been denied credit without explanation
By Marques Travae with info from Folha PE
Despite moving BRL 1.7 trillion (reais) a year, 32% of black and brown entrepreneurs had one or more credit requests denied by their banks, without any explaination of the reasons.
At the height of his communications agency, businessman Sérgio All, 45, realized that technology was constantly evolving and therefore needed to invest more in his business to keep up with it.
He then decided to request personal credit from the bank of which he had been a client for ten years and, to his surprise, he received a ‘no’ for an answer.
“At the time, I wanted to understand why I couldn’t have this access,” says the businessman. “I had an agency that handled a lot of money, I had the necessary score [Serasa score]. I was no different than the others.”
Sérgio All’s case isn’t isolated. Although they move BRL $1.7 trillion a year in Brazil’s economy, 32% of preto (black) and pardo (brown/mixed) entrepreneurs had one or more requests for credit denied by their banks, without so much as a justification. Considering that black Brazilians are denied credit three times more than white Brazilians, this should have come as no suprise.
This is what the Study of mpreendedorismo Negro no Brasil (Black Entrepreneurship in Brazil) says, an unprecedented survey conducted by PretaHub in partnership with Plano CDE and JP Morgan.
The survey interviewed 1,220 black and white people all over Brazil, from every economic class, to discover the profiles and main impediments to Afro-Brazilian entrepreneurship.
Instead of giving up, Sérgio, a publicist and a finance specialist, used the incident as motivation to create his own bank, specifically targeting at blacks and people of low-income.
“A little after [having my credit denied] I realized that it was a social, racial and selective issue, which made me go further”, he says. “I asked myself: how many guys like me go through this?”
Having been born on the outskirts of São Paulo, the businessman was already familiar with the financial difficulties affecting his target audience. With this in mind, in 2017, he started Conta Black, the first digital account created by blacks among the more than 500 fintechs -startups falling under the category of financial services in Brazil.
Since its founding, the company has maintained operations in five of Brazil’s 26 states, already attracting 3,000 registered accounts with a goal of serving 50,000 in 2020. Considering his own experiences and that of black and poor citizens, Sérgio’s company promotes less bureaucratization of access to financial services by offering lower rates and transparency in services.
In an attempt to distance itself from the term “bank” and come closer to what he and his partners call personality, Conta Black wants to broaden a new way of conducting financial services, the so-called “financial communities”, a new strategy of which it is a pioneer.
The approach of these communities includes targeting the base of the financial pyramid, meaning that parcel of the population that doesn’t have bank accounts. A recent study conducted by the Instituto Locomotiva revealed that, 45 million Brazilians have no access to the credit banking system.
The desire to implement social impact is a perfect compliment for realizing the lucrative potential of this segment of the population that is often ignored. As traditional financial institution continues to ignore this population, Conta Black seeks to offer services to millions of people who have no bank acocunts, but still annually move over BRL 800 billion (reais) in Brazil’s economy.
Despite the benefits offered to black entrepreneurs, including education tools and business financial management, few thought the idea that eventually became Conta Black had potential.
Even so, in line with the myth of the racial democracy, according to the same study, only 3% of black entrepreneurs believe that race plays a factor in the denial of credit they regularly experience. Incredible how much energy Afro-Brazilian social groups have put into exposing Brazilian racism for what it is, and still, in the 21st century there are still so many people who can’t see the writing on the wall.
Adriana Barbosa, founder of PretaHub and the successul annual black expo event known as Feira Preta, the charting done through the research is necessary for black entrepreneurship to gain a narrative of power where scarcity has always existed. Barbosa, a social entrepreneur, was the winner of the 2019 Troféu Grão (award) which awards small initiatives that are judged as having great social impact.
A clear example of this scarcity is the lack of access to credit that is yet another facet of the institutionalized racism existing in Brazil.
“Blacks have been at a disadvantage for many years and in a systematic way, and this exclusion means that we don’t fit the criteria of banks for access to credit,” says the member of the Network of Socio-Environmental Entrepreneurs.
Rodrigo Portela, 31, is an audiovisual producer and entrepreneur, who has had an account at the same bank for more than five years, but still had his request for personal credit rejected the first time he applied.
The rejection, the same that Sérgio experienced, also led him to think of alternative methods to attain access to capital. Portela, founder of Terra Preta Produções, a media production company founded in 2017 and focusing on the black population, decided to make his company totally sustainable after receiving the cold shoulder treatment from banks.
Familiar with the issue, Portela also believes that the denial of financing to black entrepreneurs is connected to the question of race. For Portela, a clear sign of the invisible hand of the race issue was when opted to apply for a bank loan shortly after founding Terra Preta. He decided to try his luck after the owner of the production company where he previously worked spoke of the availability of “easy credit” at a bank.
“He got credit at the bank every month so he could pay us, saying it was ‘good’. And, the first time I tried it, I didn’t succeed,” says the entrepreneur. “But of course: he was white, I’m not.”
In her testimony for the Social Entrepreneur Award 2019, entrepreneur Sheila Makeda also opined on the differences in the treatment of black account holders by bank clerks.
“You go to the bank and are looked at it in a different way, as if you can’t afford to have an account there,” says the owner of Makeda Cosméticos.
For years, banks in Brazil have been notorious in their treatment of their black clients. Last year, one of the biggest controversies of the year involved a client at a Caixa Econômica Federal bank branch in Salvador, Bahia.
Crispim Terral, a micro-business owner and Caixa client went to settle some business at one of the bank’s branches along with his 15-year-old daughter. After having waited some time to be attended and then disrepcted by a branch manager, Terral was then approached and put in a headlock by bank security.
Questioned about the possibility of skin color being a possible hindrance to the access of lines of credit in some bank branches, Febraban (Brazilian Federation of Banks) confirmed that each bank has its own specific policy for granting access to lines of credit, with two conditions being the client/bank relationship and payment history.
“It’s worth mentioning that the Banking Self-Regulation System (Sarb) determines that banks act in an ethical manner and treat consumers in a fair, dignified and transparent manner”, added the federation.
With information from Folha PE