Creditas, a Brazilian start-up specializing in insurance, consumer loans and used car sales, has raised $260 million in a funding round that valued the company at $4.8 billion.

As the Financial Times reported, this financing comes as investors continue to bet on the burgeoning FinTech sector in Latin America.

“We want to continue growing fast,” said Creditas Founder and CEO Sergio Furio. “And that means that we need to invest in bringing in customers, so that over time, those customers generate the revenues in the recurring model we have.”

The new funding came a little more than a year after Creditas gained unicorn status following a $255 million funding round that valued the firm at $1.75 billion.

Founded 10 years ago, Creditas employs more than 4,000 workers and offers services in Brazil and Mexico. Its six funding rounds have yielded a total equity of $829 million. The company accepts three types of collateral — homes, vehicles and salaries — but instead of holding loans on its balance sheet, its credit portfolio is securitized and sold.

Furio declined to comment when asked if his company was planning to go public.

Last year saw Latin America receive record levels of venture capitalist funding, with $9.4 billion being funneled into companies in that region, more than double the amount from 2020. Nearly 75% of that money went to FinTech, eCommerce and PropTech companies. VCs backed 650 deals last year, with 16 FinTechs achieving unicorn status.

Original Story: Pymnts.com| News 
Photo: Creditas website
Edition: Prime Yield

Brazilians have been facing difficulties to keep their bills on time and, in 12 months, doubled the number of late payments in the revolving credit card.

Data from the Central Bank shows that in November, 19.13% of customers who use the revolving credit card were behind on their payments between 15 and 90 days. The percentage is almost double that seen a year earlier, when it was 9.68%.

The revolving card is the part of the account that is not paid in the month and is pushed to the next invoice. With this surge in delays, the revolving already has the second highest rate of delays in the historical series – and only loses for May 2015, when 19.18% of customers were late.

Isabela Tavares, credit analyst at Tendências Consultoria, says that this phenomenon can be attributed to deteriorating economic conditions, especially the high inflation and weakness in the labour market.

She explains that, faced with financial difficulties, consumers take emergency credit and without improvement in income in the following months, begin to delay payments.

“The revolving credit is a modality of easy access and high interest. Normally, it is used in emergency situations. The use of this credit has grown in the last four or five months due to high inflation and pressure on income. And now the delays have started to appear,” she says.

In November, Brazilians had R$48.5 billion in debt on their credit cards. This is the highest amount in history. As Isabela Tavares explained, the demand for this emergency credit – just like overdrafts – grows in times of economic difficulty: In the average of the past 12 months, Brazilians took R$17.9 billion per month in overdrafts.

In other words, customers have pushed almost R$18 billion per month in debt to the next month’s bill in the hope that their financial situation will improve.

The problem is that this is the most expensive credit currently available in the financial system. On average, the interest on this operation was 346.1% per year in November – the most recent data from the Central Bank. This means that a R$1,000 debt becomes R$4,461 after 12 months.

With such high interest rates and no significant improvement in the job market or in income, delinquency – when the debt is more than 90 days past due – already reaches 33.29%.

In other words, a third of customers who use the revolving credit card end up defaulting on their loans. That, economists say, is behind the high interest on this operation.

Isabela Tavares notes that this worsening risk of default already influences the interest rates charged by banks. “The credit risk is already perceived and, since the 3rd quarter of 2021, it is possible to see an increase in margins on these operations. Banks are passing on the increased risk”.

Original Story: CNN Brazil|Fernando Nakagawa 
Photo: Photo by Lotus Head in FreeImages
Edition: Prime Yield

Brazilian savings accounts suffered their biggest outflow in five years in 2021, official figures showed, as financial conditions deteriorated for families and companies amid double-digit inflation and aggressive interest rate hikes.

Brazilians boosted their bank savings by a net 7.7 billion reais in December, the lowest figure for the month in six years.

That took the annual total to a 35.5 billion reais ($6.23 billion) outflow, the first negative number since 2016. The balance of savings accounts in Latin America’s largest economy ended the year at 1.03 trillion reais.

In contrast, savings accounts grew by a record 166.3 billion reais in 2020 as the government spent heavily to combat the effects of the COVID-19 pandemic, including via cash transfers to the poorest, a program that was substantially reduced in 2021.

Also, from March, an increase in the Selic benchmark interest rate amid rising inflation made savings rates less competitive compared to other fixed income investments.

The central bank more than quadrupled its benchmark rate last year to 9.25% from 2% and has already signalled another 150 basis point hike in February.

The annual rate of inflation in mid-December stood at 10.42%, far above the central bank’s year-end target for consumer price inflation of 3.75%. The central bank acknowledged inflation has proven to be more persistent than anticipated, stirred by surging fuel and energy prices.

Original Story: Reuters| Marcela Ayres 
Photo: Photo by Magda S in FreeImages
Edition: Prime Yield