LíLIAN SILVA

Brazil,

Lílian is supporting young entrepreneurs in Brazil to access credit and enhance their businesses. More than 600 young entrepreneurs started businesses in 7 Brazilian cities with the help of Acreditar.

This profile below was prepared when Lílian Silva was elected to the Ashoka Fellowship in 2008.

INTRODUCTION

In light of the rapid advance of sugar cane monoculture in Brazil, the devaluing of family-scale agriculture, and the deepening of social inequalities in the Northeastern backlands, Lílian do Prado Silva supports youth entrepreneurship in the field of organic family agriculture, offering access to credit and formal guidance in the implementation of businesses.




THE NEW IDEA

Lílian believes that youth in rural areas can be significant forces for change when they are supported as entrepreneurs. She created Acreditar (To Believe), a microcredit organization administered and formed by youth, for youth, that helps members start their own businesses based on a model of local sustainable development. In poor rural regions, Lílian recognized that access to credit is not only key for income generation but also helpful in ending the vicious cycle of youth disenfranchisement.

By investing in the future of young people, this approach combats both the rural exodus and the negative impact of agribusiness. The enterprises created allow young Brazilians to stay in the countryside while following the principles of organic family agriculture and generating an income for their family and local communities. Lílian believes that this model, if integrated with other projects, could be a powerful agent of change throughout the region and is thus formalizing it in partnership with other development organizations and financial institutions.




THE PROBLEM

In the last few decades, rural enterprise—the central axis of the local economy—has been strongly devalued in the Northeastern region of Brazil. Due to increased poverty, many people have left the countryside for work in the cities and urbanization is now growing most rapidly in municipalities that traditionally had the most rural vocations. Urban centers in these areas are having difficulties absorbing the steady influx of migrants. What trends are to blame? The planting of sugar cane is predominant in agriculture because it has the lowest production cost and is therefore more profitable for the small number of families who own sugar mills in the region. Meanwhile, the majority of laborers continue to be exploited for their work and small-scale farmers are realizing that they can not compete with the low prices offered for their harvests. With the prospective of increased internal and external investment in the ethanol sector in Brazil, a new wave of sugar cane planting in the northeast is predicted. The results of this could be even more disastrous: Intensification of the concentration of income, a rural exodus from the region, destruction of the environment, and further impoverishment among the local population.

The level of development in the municipalities of the sertao (backland) region of Pernambuco State is extremely low. The municipality of Gloria do Goita, for example, has a monthly per capita income of approximately R$84.50 (Brazilian Reais) and 71 percent of the population has an income below R$75.50 per month. By contrast, the same indices for the city of Aracoiba da Serra, in Southeastern Brazil, are R$308.36 per head and only 13.9 percent of the population has an income less than R$75.50 per month.

In such dire circumstances, young people are left with few options in the rural areas; the number of young people migrating to urban areas is increasing while the average age of migrants is decreasing. Life in urban centers can seem appealing; in the countryside young people, on average, study two years and eight months less than their counterparts in the city. On the other hand, the number of rural youth who work is two times higher than the total who study, while in the cities this proportion is inversed (UNESCO 2003; PNAD 2001). It is no wonder then that in their youth, rural children come to believe that family agriculture will never provide them with a good quality of life—they grow up observing the phenomenon of rural evasion while their parents’ generation remains strongly resistant to the idea of utilizing new types of agricultural production, such as organic farming.

Many social organizations do contribute educational programs and professional training to youth in the rural regions of the Northeast in order to change this situation. However, they have still not been able to guarantee that this knowledge acquired by the young people is then transformed into income generation and subsequent improvement in their living conditions. The young people who do have new ideas for more appropriate development in the region are not able to act on these innovations because in the end, they still lack the access to capital or credit needed to get their enterprises off the ground.

The financial restrictions in the Northeastern rural region have deep and damaging effects on the local communities. The majority of municipalities do not even have a local bank, and those individuals who risk taking out loans from the few commercial banks and small microcredit organizations unable to provide quality technical support have difficulty repaying their loans. Loan default is often the result of technical deficiencies and restricted access to new technologies throughout the rural region. Unexpected delays in establishing operations and unforeseen costs not only threaten instability for new businesses but also force banks to aggressively demand repayment or to take higher risks as well. Unfortunately, borrowers assume the most risk and often end up deeply in debt, with their names put on the list of the credit protection service. This situation generates intense distrust with regard to the financial system and strong antagonism between small-scale producers and the banks.

Additionally, public authorities have been ineffective in formulating public polices to reverse this situation. The central role of the local governments is to transfer, on a monthly basis, the resources from the Family Grant Program (Bolsa Familia) to the poorest families in the region whom, in many cases, have no alternative source of income at their disposal. This dependency allows corrupt local governors to demand votes from the families who directly benefit. Despite having some lines of credit directed towards family-scale and organic agriculture, the resources of Pronaf—the National Program of Family Agriculture—are difficult to access due to the program’s bureaucratic procedures.

The absence of governmental resources oriented toward family agriculture means that many organizations seek to take on the role of developers of this productive activity in the region. However, most of these groups have limited resources at their disposal and, therefore, little potential for long-term impact. The alarming need for investment in rural areas has been recognized by banks, governments, and citizen organizations, but small-scale farmers still struggle and youth seek opportunities elsewhere.




THE STRATEGY

Under Lílian’s leadership, Acreditar has grown from an idea into a model agricultural microfinance institution with a unique twist—it is led by and focused on youth. Acreditar has gained regional and international recognition and financial support and been replicated throughout the region.

Acreditar was born during Lílian’s time at Alternative Technology Service (SERTA). It was here that she saw the importance of youth involvement in the search for new forms of agricultural production. She knew young people are most inclined to put new ideas into practice and most aligned with the model of sustainable development in the region. From the beginning, the Acreditar team was made up of youth who deeply understood the challenges their entrepreneurial peers faced and who were highly capable of counseling them through doubt. In a few years Acreditar acquired legal and methodological independence when its model of work by youth and for youth generated excellent results and proved its effectiveness.

The support provided by Acreditar includes advice on how to deal with family conservatism, training in techniques of cultivation and organic agriculture, and lessons in business management. In addition to a regular accompaniment by the credit agents, youth who obtain loans with Acreditar have access to training courses developed in an accessible language and format that clearly present business plans and practices. With the help of the organization, borrowers are able to prepare a very careful business plan, calculate the appropriate value of the loan and budget, and plan for repayments. The organization also offers technical and financial support and seeks to demonstrate that this form of production, despite demanding greater technical knowledge, is capable of generating a large increase in the income of the local population.

Its borrowers however, are what makes Acreditar truly extraordinary. Young people in rural regions are the target recipients for credit granted by Acreditar, with the goal of offering 70 to 80 percent of loans to this group. In what might seem like a risk to other lenders, young people at Acreditar are allowed to solicit a loan to create an enterprise without any proof of income. Prospective borrowers must be serious, determined, and committed to their business, as well as the Acreditar program. The local perceptions of mistrust between lender and borrower begin to dissolve as parties communicate and, with these extra programs in place, loans are repaid on time. The process of credit liberation can last from one week to six months, according to a very close and rigorous evaluation of the conditions of the young person to take the loan. As was Lílian’s experience when she first arrived at SERTA and started Acreditar, youth involved in the organization achieve an elevated degree of empowerment and are able to influence the producers of the region to undertake a transformation in the area of family and organic agriculture.

With Lílian’s commitment and intuition combined with the technical support of the National Agency of Micro-Business Development (ANDE), Acreditar has overcome early technical problems and achieved a successful model of finance, earning the title of Micro-Financial Institution, as designated and regulated by the Central Bank. To date, the organization has granted credit to more than 600 families and with the current rate of growth, the favorable business environment, and partnerships established with other organizations, Lílian predicts that Acreditar will attain sustainability in five years. In the last quarter alone it grew by 33 percent.

Lílian wants others to be able to share this similar success. As a strategy for replication, she seeks to decentralize the entire management process inside Acreditar so that all members of the team are prepared to lead other organizations that may develop based on Acreditar’s experiences. Some initiatives have already arisen in this process including Banco Vivo, a bank created by youth living in semi-arid areas that use products of the region as exchange currency, and Credit Committees in twelve municipalities throughout the region that monitor the experiences of youth-led enterprises and receive resources from Petrobras via SERTA.

In addition to a close relationship with the development organization SERTA, Lílian has established partner relationships with other large development institutions in Northeastern Brazil. These banks are active in the region and are opening doors for Acreditar. They include: Bank Itau, which offers financial and technical support and systematizes the methodology for later dissemination, and the National Bank of Economic and Social Development, which recently granted Acreditar a substantial loan.

Another very strong line of Acreditar’s programming is developed together with the Kellogg Foundation which, for more than ten years, has invested in the youth of the Northeast. Lílian was able to influence them to include the program of microcredit for youth in the Integrated Cluster of Projects (CIPs), which bring together diverse social projects and organizations in support of rural development from across the whole Northeastern region. At these forums, Acreditar disseminates information on the importance and relevance of access to credit for local development and shows how microcredit, together with other social projects, is a powerful agent of development. The CIP of Gloira do Goita (the region where Lílian works) was only recently created; however, discussion is underway about the creation of a Support Fund for youth who already practice or would like to practice activities in the agricultural sector.

Lílian’s work has had a deep impact on rural communities in the Northeast. Through the decentralization and duplicability of her processes, the nurturing of a wide range of partnerships, and the dissemination of her findings, her successes are likely to spread quickly throughout the region.




THE PERSON

Lílian was born into extreme poverty in the rural zone of the municipality of Gloria do Goita in Pernambuco, and from a young age dreamt of a more promising future. When she was fourteen she had an accident which injured her arm and made it impossible for her to continue to work with her family on the plantation. Lílian, influenced by her friend, managed to convince her mother to allow her to increase her study time and try to enter SERTA. Despite the fact that many of the people around Lílian did not believe in her potential, she studied with great dedication and passed the difficult selection process to become an Agent of Local Development (ADL) with SERTA.

This moment profoundly marked her life trajectory. All of the experiences that she had inside the institution offered her personal development, new perspectives, and a clear vision of the most appropriate pathway to the development—an investment in youth.

After passing the training required of an ADL, and beginning a course in company administration, she brought together other young students to demonstrate to the directors of SERTA that the incentives of youth entrepreneurialism could lead to concrete results if young people could obtain access to economic resources to make their enterprises viable. Lílian participated in all of the group’s discussions as they developed the format of the new microcredit initiative to be created within SERTA. The pressure exerted by this group culminated in the formation of the Rotary Fund, designed to finance the opening and maintenance of enterprises created by youth.

The initiative generated great expectations on the part of all of the youth who competed to participate in the management group. The first group elected was formed entirely of males who almost abandoned the program before it could even get off the ground. Lílian intervened and with the support of her colleagues, was able to enter the group as its first and only woman. Soon after being elected she assumed leadership of the group and over time came to understand the failings in the process of administering loans that were not appropriate on the local level. She researched this problem and based on her practical understanding of the difficulties faced by the youth of the region and with the support of institutions with credentials in this sector (SEBRAE, ANDE, and the Itau Social Foundation), she was able to alter some institutional policies and consolidate a methodology that was recognized as being ground-breaking for the region.

At Acreditar’s helm, Lílian is significantly curbing the exodus of youth from the rural Northeast region by providing tools and resources they need to lift themselves out of poverty. In Lílian’s vision however, the impact of microcredit goes beyond the individual development of clients and deeply affects the region as a whole—since all of her actions motivate the engagement of youth in the wider process of local development based on small, family-scale, organic agriculture.