Financial institutions are now authorized to offer payroll deduction loans to beneficiaries of Auxilio Brasil, the federal government’s flagship cash-transfer program.
The program will allow people to commit up to 40 percent of their monthly income with the loans — which will come with higher interest rates than similar lending instruments for federal civil servants and private workers.
Auxilio Brasil benefits are currently paid to over 20 million households in Brazil, with a minimum monthly cash stipend of BRL 600 (USD 115). Under current legislation, this value will only last until December, reverting back to the original BRL 400 in January.
The Auxilio Brasil got a temporary hike of 50 percent with the approval of the so-called “Desperation Bill” in July, which placed the country in a state of emergency and authorized the government to spend an extra BRL 41.2 billion on social policies and stimulus programs until the end of the year — hoping to curry favor among the populace ahead of the presidential election.
Payroll deduction loans will allow the poorest Brazilians to borrow up to 24 installments of BRL 160 (USD 30), with an interest rate of up to 3.5 percent a month (adding up to 51 percent a year). Even if a household loses access to the Auxilio Brasil program, it will still have to pay back the money borrowed.
One of the financial institutions authorized to operate the new Auxilio Brasil payroll loans is Zema Financeira, part of the conglomerate belonging to the family of Minas Gerais Governor Romeu Zema, who last week endorsed President Jair Bolsonaro ahead of the election runoff.