Nathaniel Lawrence

Crédito Social

Crédito Social is the world’s first social investment platform. We provide the channel through which direct social investment occurs between the United States and Brazil. The platform allows users in the US to lend and/or invest money in Brazilian economic development.

In order to fund projects and provide investors with diversification opportunities, Crédito Social applies crowdfunding to microfinance. Through this model, we offer accessible funds to those in need and provide secure, easy, and socially responsible investments to anyone with money to spare. Unique to Crédito Social, the incentives of all parties are aligned such that economic development is not only desirable but profitable. For example, business owner Nildelene Jovem runs a successful sweets shop out of her home in a favela in central Rio de Janeiro. Demand has been through the roof, and expansion is necessary, yet she has not succeeded in finding an affordable loan to open a larger kitchen. Through the social investment platform, she posts her project along with a requested amount of money and interest rate. Users in the US contribute funds as they see fit, setting a minimum interest rate they will accept. She then repays the loan in monthly installments along with the interest negotiated by both parties. In this model, Crédito Social’s incentive, as well as that of lenders, is the success of Nildelene’s business. Thus, the company provides consulting and financial coaching to guarantee success, and users aid in any way they see fit. Together, Nildelene, lenders, and Crédito Social foster economic activity in a low-income neighborhood, generating profits in the process.

In place of traditional collateral, Crédito Social uses a borrower’s social connections. Solidarity lending–introduced by Nobel laureate Muhammad Yunus–organizes borrowers into groups (credit circles) in which one member borrows at a time. A borrower cannot receive a loan until the previous one is repaid, placing social pressure on the borrower and responsibility on the group to guarantee repayment. The Explore grant will contribute to the company’s second research trip to Brazil, this time to investigate the legal aspects of the business.

Before investment can occur, we must legalize Crédito Social’s structure to establish sound practices that protect all parties. We will meet with lawyers, venture capitalists, and potential borrowers to begin the legalization process, search for funding, and check on business statuses respectively. In total, the trip will last two weeks, with meetings in São Paulo and Rio de Janeiro. In Rio, we will meet with lawyer Pedro Hilton, who has committed to the project pro bono, to 1.) decide in which country to incorporate and 2.) design a contract for borrowers. In addition, we are in the process of developing a full schedule for the time in Brazil. Other important meetings will include Papaya Ventures—a Rio-based startup accelerator—, Banco dos Negócios Inclusivos—a student run microcredit bank in Brazil—, and the accelerator program through the Pontifical Catholic University of Rio de Janeiro—PUC-Rio. Through these meetings, we hope to establish Crédito Social's legal presence in Brazil as well as with potential funders and accelerator programs.  Evaluation of our progress in these early stages will not be easy. Therefore, the main result we anticipate from the research trip will be a timeline for the upcoming year.

Our goal is to begin connecting investment as soon as possible, and a timeline will allow us to measure our progress as a function of time and in comparison to events inside and outside Brazil, such as the World Cup and Olympics.Meeting with these various parties will hopefully provide us with a foothold in Brazil, so ultimately our evaluation will come down to whether or not this has been achieved.

Explore - Grant Report:

On January 11, 2014, Nathaniel Lawrence arrived in Rio de Janeiro, Brazil to meet partner Joaquim Salles with the aid of the Brown Venture Launch Fund Explore Grant in affording the airfare. The plan for the trip was to meet with Crédito Social’s lawyers: Pedro Olmo and Eduardo Pereira; other microfinance institutions in Rio; and our borrowers: Nildelene Santos and Pastor Roberto da Conceição. This was with the ultimate goal of establishing a timeline for the next few months.

The meeting with Nil was partially to discuss her loan but also to film her work with the help of filmmaker Lanna Leite ‘14. Nil’s loan value was set at US$2500 with an interest rate of 10% per year (or .80% per month). She expressed utter disbelief at the possibility of such a rate given current rates in favelas of 5-7% per month. The loan will be for a new oven, new vending carts, and the installation of tile in her kitchen. Pastor Roberto showed Nathaniel his Centro Cultural and the many developments since August, such as a classroom full of chairs and four new computers. His loan was set at US$3000 with an interest rate of 10% per year (or .80% per month). This will be for an air conditioner for the school and a car for the organization to facilitate their management of projects around the city. Each borrower will be sending us the list of other credit circle members to confirm the loan soon through Facebook. The loans will be made in June.  

As a result of this trip and the Explore Grant’s aid in funding it, Crédito Social has established the loan distribution plan and will enact it in early June. It will not, however, be until early June that we approach full service law firm Stocche Forbes with the business plan, so the loans will be personal loans made under Joaquim’s name initially as advised by our attorneys.