Investing in Ice Cream – and Dreams

There are countless entrepreneurs around the world with big dreams and few resources. Waldemar Marques Carneiro was one of them. He began selling ice cream and sweets out of a single room in his home in Icapuí, Brazil. Thanks to a local microcredit organization, he now has a spacious shop with tables and chairs for 20 customers.

His store, Encontro de Amigos – "Meeting of Friends" – has become a reality thanks in part to loans and training from Orgape (the Portuguese acronym for "The Organization to Support Small Enterprises").

Orgape's small loan size, and its location – in the small towns where businesses are incubated rather than in distant capital cities – distinguish it from other Brazilian microcredit organizations.

"Hardly anyone else lends such tiny amounts," said Orgape’s founder Francisco de Oliveira Rebouças Neto. "But even 100 reais (US $42) can make a big difference to someone with absolutely no capital."

Neto launched Orgape in 1996, combining microcredit loans with business management training. He is giving his impoverished neighbors a sense of hope in this region’s otherwise gloomy economic landscape.

The beauty salons, cafés, clothing boutiques and butcher shops started through Orgape generate a profit after receiving an average of three loans, each paid back over six to nine months. According to Neto, 54 percent of Orgape clients make a profit, and the program has achieved the lowest loan default rate in all of Brazil.

From the moment an applicant first approaches an Orgape credit agent, the difference between a formal bank and Orgape's more "flexible and local" approach is clear. Orgape does not require extensive guarantees, insisting that almost anyone with a little courage and basic business training can make sustainable profits a reality.

As Neto puts it, "Character is our collateral." Applicants provide three personal references and an Orgape credit agent, an individual born and raised in Icapuí, conducts a thorough background check.

Budgeting large sums of money is just one of the obstacles that small producers face, but Orgape's training creates an appreciation for practical economics. Between loan approval and receiving a check, borrowers undergo one week of training – four hours per day for five days. During this week, Neto uses hands-on exercises modified for adults with little formal schooling. This tailor-made approach generates immediate and relevant results.

"I've learned how to manage money," Carneiro said. "Even when I have a new project in mind – we've just repainted – I don't take out the loan until I'm on the brink of spending it."

Neto also plans to establish partnerships to help close the demand-supply gap as Orgape expands its outreach to rural microenterprise managers. For example, a button-maker in Pedra Branca can sell locally to a shirt-maker in Aracati, who can sell to a shop in nearby Canoa Quebrada, all without setting foot in the big city.

Credit agents have already begun building these kinds of links between Orgape borrowers by word-of-mouth, with plans to integrate this practice into their general training program. The profits earned by these small producers are sustainable because they meet local needs, provide goods and services at prices that the market will bear, and are re-invested into the business.

Orgape hopes to use these techniques to rear the next generation of entrepreneurs. To stimulate entrepreneurship, Neto plans to combine small business practices with traditional school subjects. Math and budgeting for instance naturally go hand-in-hand, and students in language classes will compose business proposals and newspaper ads in addition to writing letters.

As a next step, Neto envisions creating a separate school course called "Entrepreneurship" for 16- and 17-year-olds. Such subjects could make schoolwork more exciting for students, and would allow them to profitably apply the lessons to their everyday lives.

Orgape has survived in part because it is improving people's lives, Neto said. Four years ago, a broom-maker offered only her horse as collateral. Today, she has nine employees. "These small businesses are already generating employment for other people."

Necessity, it is said, is the mother of invention. With Orgape’s help, she has inspired her Brazilian children to do more with less.