Eco-Axial & Instituto Estrela

Instituto Estrela is a microcredit association that has been recognized by the Organization of the Civil Society in the Public Interest (OSCIP). It was created in 2005 with the mission of overcoming a gap in the access of small businesses in the Brazilian semi-arid region to working-capital credit. The microcredit association started with an initial grant by the Sandoz Foundation to begin their operations in the municipality of Sousa, in the State of Paraiba.

Currently they count with a portfolio of 9,000 customers and have collected a committed capital of USD 5 billion formed by the Institute’s own financial assets and capital allocations by the BNDES (Brazilian Development Bank) and Oikocredit.

Rio de Una is a food company with its own brand in the market selling both organic and conventional vegetables to grocery stores, retail shops and fast food chains. The company was founded in the south of Brazil in the city of Castro. In 2016, they took the decision to start operations in the northeast region in order to provide fresh food products to the region’s market and fast food chains, which until then had to import them from the south region.

In 2017, Rio de Una and Instituto Estrela started a collaboration to develop a system of microcredit and guaranteed purchase that would allow developing smallholder farmers to organize their plantations and become suppliers of Rio de Una.

In this system, Instituto Estrela provides two sorts of credit lines to smallholder farmers. The first one is directed to infrastructure setup. The second one is formed by a short-cycle loan for working capital, which is aligned with the crop plantation cycle and associated with the product delivery to Rio de Una.

To view the full case study click here

Rio de Una, on the other hand, has established guaranteed purchase contracts with selected smallholder farmers. This contract serves as collateral for Instituto Estrela’s microcredit loan. It is also a kind of reconfirming assurance for producers that their products have guaranteed access to consumer markets.

The agreed guaranteed purchase by Rio de Una totals 200 boxes of lettuce per week. Overproduction is also purchased by the company, providing producers with a real entrepreneurial experience: if they invest in infrastructure and technical support, the produce volume will be higher, and for that overproduction there is a guaranteed purchase. Extra produced amounts are also purchased by Rio de Una. This has the positive side affect that smallholder farmers see a value in investing in their production areas, generate more income and develop an entrepreneurial mind-set.

Naldinha Guaranteed purchase is a risk mitigation strategy in providing microcredit to smallholder farmers.
(Edinalda Lima, director of Instituto Estrela)