Credit lending in Brazil grew by BRL 155.28 billion (USD 30.11 billion) over the first half of 2020, according to a report by the Central Bank. This increase was more than double the BRL 64.46 billion rise recorded in 2019 over the same period. The total volume of financial credit operations in 2020 reached BRL 3.624 trillion in June – its highest level since 2013.
Aside from the higher demand for access to credit lines during the Covid-19 pandemic, the biggest factor driving these operations has been the lower interest rates set by the Central Bank, intended to offer more financing resources to banks amid the economic crisis.
Average credit interest rates for both individuals and companies fell significantly in comparison to 2019, dropping from 18.7 percent to 13 percent for individuals and from 51.9 percent to 40.7 percent for companies in 2020.
The Central Bank’s benchmark interest rate has also been slashed to an all-time low of 2.25 percent per year – a move that has increased the attractiveness of Brazilian stocks over the short term.
So far, individual financing leads out of all credit activities, accounting for BRL 2.042 trillion of total credit figures, while Brazilian businesses received the remaining BRL 1.58 trillion.
A light at the end of the tunnel
Since the start of the Covid-19 pandemic, the creation of credit lines has been one of the most effective government policies to weather the economic fallout of strict isolation measures.
Access to credit lines has been especially important in salvaging small to medium enterprises (SMEs) from going bankrupt and preventing a greater economic collapse. These firms account for over 95 percent of Brazilian businesses.
In late June, the National Program for Support of Micro and Small Businesses (Pronampe) offered an initial BRL 20 billion credit line exclusive to SMEs, which was later doubled to BRL 40 billion due to high demand from struggling businesses.
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