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The franchise proposal is estimated at 6 times less than the actual demand

The franchise proposal is estimated at 6 times less than the actual demand

Credit given by Brazil aid Da Caixa was the target of controversy from the beginning, due to the weak target audience and the possibility of electoral appeal. A more in-depth analysis reveals that the proposal submitted to the bank’s leadership does indicate disagreements. The document estimated a concession worth R$1.2 billion in one semester, however, during the three months that the product was available, Caixa lent six times as much Through this method.

Warnings and Risks for the Consignee Auxílio Brasil

The bank’s technical areas issued warnings about payroll deductible credit risks. Brazil aidHowever, he did not take a position against this proposal. The document recognizes that the beneficiaries of the social program, future customers of the new product, are financially vulnerable. Despite this, the responsible regions did not explain in detail the basis on which the estimate was calculated, which ended up being much lower than the actual loan volume.

Caixa exceeded expectations of R$1.2 billion in just seven days, giving away more than R$1.8 billion in the first week. High demand delayed the release of resources by only ten days. Until the cancellation of the offer in January, Caixa had awarded R$7.6 billion.

Controversy and cancellation

Credit given by Brazil aid It was launched by Caixa in October 2022, during the election campaign of then-President Jair Bolsonaro. The line allows aid beneficiaries to obtain loans with installments deducted directly from the benefit. However, the administration of current President Rita Serrano canceled the product after taking office.

Recently, a Caixa director was fired after documents related to a shipment containing hidden information were revealed. The method is also examined by monitoring bodies.

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Banks and other risks

Although all banks can offer Auxílio Brasil payroll loans, Caixa was the only one among the large institutions to join the line. Other banks considered the risks too high. Banco do Brasil, which is also controlled by the union, chose not to offer the product.

Validation of the STF and its impact on Caixa’s capital

This week, the Federal Supreme Court unanimously approved allocations for beneficiaries of social programs. The regions responsible for the concession’s estimate of R$1.2 billion believed that the line would not have a relevant impact on Caixa’s capital ratios. However, after the election period, the bank was forced to stop almost all other lines of credit.

People close to the previous administration say that although the size of the concessions exceeded estimates, the bank had no limit on each product and there was no impact on global capital limits overseen by the central bank. Caixa also stressed that credit is granted in a responsible manner.

Cross selling opportunity

Caixa saw custom accreditation from Brazil aid As an opportunity to promote the application box has And sell more products and services to aid beneficiaries. The proposal included offering credit life insurance, in conjunction with the credit process.

INSS model and interest rate

The proposal prepared by the Presidency of Retail Trade and the Retail Products Directorate aims to expand the consignment franchise model to beneficiaries of INSS For the Auxílio Brasil audience. The document proposed solutions such as simplifying the language of contractual terms and specifying the mandatory nature of the pre-employment financial education questionnaire.

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One risk highlighted by Caixa’s technical space is customer over-indebtedness. However, the proposal relativized these risks, emphasizing that payroll loans are limited to the amount corresponding to the customer’s monthly payment capacity. Despite the adjustments, the interest rate on Auxílio was higher than that exercised on retirees and pensioners in the country. INSS.

Results and changes in management

Current Caixa management suspended Auxílio Brasil’s salary offer in January and permanently removed it from the portfolio in March, following technical studies. The Foundation has opened an internal investigation to investigate possible irregularities related to the product and is cooperating with investigations conducted by the Federal Police, the Federal Public Ministry and the Federal Court of Audit.

Caixa stressed that the current administration has strengthened responsible credit granting and that the results of the first half of 2023 bear witness to the solidity of the bank and its role in the country’s development.

Proposing granting a payroll deductible credit Brazil aid Caixa estimated a value far lower than the actual lending volume. The product generated controversy from the beginning, considering its weak target audience and potential electoral appeal. Other banks chose not to offer the line because of the risks involved. Despite the controversies and product cancellations, Caixa reaffirms its commitment to responsible credit.