APPROACH AND METHODOLOGY
sitawi supports mission-driven organizations that have:
- Clear and recognizable social impact, with a direct and relevant contribution to solving social and environmental challenges in Brazil
- Realistic operational and financial plan (to ensure high probability of loan repayment) stemming from a structured view of their social business and its market
- Relevant scale with at least a two-year history of revenue/surplus generation and an inability to access adequate credit to finance their social enterprise
- Open-minded management that is willing and able to incorporate advice, leveraging sitawi's expertise in various themes
- Employees and leaders with strong ethics
sitawi's social loan methodology is a cross between a bank's, a venture capital's, and a foundation's model, in which it does a rigorous analysis of the social enterprise's business plan, historical and projected performance, and its current and potential social capital.
The loan objectives currently cover three categories: Working Capital, Growth Capital and Debt Replacement
IMPLEMENTATION, TIMELINE, AND DELIVERABLES
Long-term 'operational scale' will be achieved once the Social Fund reaches -15 million. The current commitment to increase the fund to $ 1.5 million in the next years takes sitawi to an intermediate step, from 'proof of concept' phase to the 'pilot stage.'
sitawi commits to convert 100% of donated dollars into social loans that fit the aforementioned criteria. Within the current portfolio, loans have averaged ,000 with a time horizon of nine months, impacting over 1,000 people each.
sitawi's ability to scale its business model, rests on three factors: (1) proven success of the Social Loans - the ability of borrowers to repay loans, recycling resources back into the Social Fund, and ultimately committing more capital back into the social sector; (2) knowledge development - the experience and improvement of the social loan methodology, and (3) visibility/partnerships - the legitimacy of Brazil's impact investing space, bringing more relevant partners to the table to engage with sitawi and its target clients.
Brazil is plagued with a plethora of problems: the continuous deforestation of the Amazon (at a rate of 2,000 square kilometers every year), poor health standards (only 17% of the rural poor population has basic sewage), low education performance (Brazil consistently scores in the bottom 10-20% of countries in the PISA tests), and widespread poverty (40 million people of Brazil's 192 million population lives below the poverty line). Today, mission-driven organizations have to work with limited support from government to meet the country's most pressing social and environmental challenges. However, despite the urgency to do so, these organizations have to compete for .5 billion of donations per year (or ~ ,000 for each one of the 300,000 social organizations); not nearly enough to confront these myriad challenges. On the other hand, if these social enterprises could gain access to the billion corporate credit market, there would be a fighting chance. Unfortunately, with interest rates currently ranging from 30-50% per year along with the demands for collateral, the social sector is, in practice, shut out of the traditional credit market, and potential impact remains locked.
sitawi is developing a social loan methodology that can be adopted by traditional financial institutions to unlock availability of commercial funds to the sector, and ultimately doing for the social sector, what microfinance has done for the 'unbankable' at the base of the pyramid.
SITAWI-Finance for Good is seeking financial resources and implementing partners that will allow it to create and launch sector- and issue-specific social funds to grow the Brazilian social sector and social business sector by disbursing donations and below-market loans. Implementing partners should be focused on regional or national scale initiatives that promote women's empowerment, sport, education, or structural development of the social sector in Brazil.
In addition, SITAWI offers partnership as an implementing partner in Brazil to create social funds with key focuses on women's empowerment, sport, education, and structural development of the social sector in Brazil. On an international level, SITAWI would be able to offer support with best practice information and support third parties looking to create collaborative financial solutions for the Brazilian social sector.