Transforming the Lives of Low-Income Microentrepreneurs in Brazil

Challenges and Opportunities for Microentrepreneurs

In the developed world, about 80 percent of the food services sector is made up of stable, profitable businesses. In Brazil, the reverse is true: 80 percent of its food-related businesses are small, informal—and economically vulnerable. Making and selling food is a popular entrepreneurial activity, as barriers to entry are low, no education is needed, and preparation work can often be done in a home kitchen with equipment that is already available. However, a lack of basic management skills, resources, and experience means fledgling microentrepreneurs in the food services sector have a hard time earning a modest living, let alone making their businesses profitable and successful. They are unable to position and market their businesses in a way that makes them to stand out against the competition. Without access to working capital, they lose time

and money every day by buying ingredients at retail prices because they do not have enough cash on hand to buy in bulk and benefit from economies of scale. They are also unable to buy the equipment or hire the employees that would allow them to expand beyond the “micro” stage of entrepreneurship.

A Recipe for Success

Tenda Atacado Ltda., a leading wholesale retailer in the state of São Paulo, sells food in bulk and other consumer goods at discount prices. Another company in the Tenda Group, Vox Cred S/A, offers a variety of credit services to Tenda’s clients, the majority of whom are microentrepreneurs. Based on its experience, Tenda is developing a new program, Mundo Vox Tenda, which targets low-income microentrepreneurs in the food services sector, providing them not only with financing options to cover working capital needs and buy equipment and materials, but also with training in basic business knowledge: financial literacy, marketing, food safety practices, and the process of business formalization. As an added incentive, participants who complete the business training program will receive lower interest rates.

Tenda expects to reach between 55,000 and 90,000 microentrepreneurs with its new Mundo Vox Tenda program. The loans will be financed in part by a US$10 million loan from Opportunities for the Majority. A US$270,000 technical cooperation grant will help cover the costs of developing and implementing the training program.

This business model is potentially scalable throughout Brazil and replicable throughout the region. By giving microentrepreneurs the training they need to run successful businesses, and access to credit that will help them not only grow their microenterprises but also participate in the formal economy, the Mundo Vox Tenda program may transform the economic prospects of transformadores at the base of the pyramid.

Providing New Tools to Culinary Microentrepreneurs

In Brazil, people who make and sell simple ready-made food items are known as transformadores because of their skill in transforming raw ingredients into popular meals and snacks. But no matter how delicious their wares, without access to working capital or basic business knowledge, these microentrepreneurs face challenging odds in making a living from their businesses.

With support from the Inter-American Development Bank’s (IDB’s) Opportunities for the Majority Initiative, São Paulo-based food wholesaler Tenda Atacado Ltda. is offering new tools to help culinary microentrepreneurs establish thriving businesses, including credit for financing the purchase of equipment and ingredients, and training in management skills.

For more information about the program, contact: OM-IDB@iadb.org