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Undoubtedly, football, carnival cel­ebrations, samba dances, and, not least, the syncretic worship of Orisa that offers a breathtaking blending of Yoruba Orisha veneration with other reli­gious traditions, predominantly Catholicism and Christianity, are boisterous features that one can count on Brazil for learning. Beyond these cultural expressions, there exists an­other valuable lesson that we, offshore, can learn from Brazil prudently, and this pertains to the significant role played by banking and financial services in fostering the growth and development of Small and Medium-sized En­terprises (SMEs) within the country.

Generally speaking, Small and Medi­um-sized Enterprises (SMEs) are widely recognised across the globe by an array of ex­perts as vital catalysts for economic advance­ment, innovation, and job creation. Despite their crucial role, one of the most significant challenges faced by SMEs in many countries is securing access to financial services that are both affordable and dependable, with clear potential for growth.

Brazil, however, has emerged as a notewor­thy example, having made remarkable prog­ress in establishing a resilient and compre­hensive SME banking sector. This has been achieved through a strategic combination of regulatory frameworks, innovative finan­cial solutions, and effective collaboration be­tween public institutions and private sector entities. Today, let us explore Brazil’s SME banking ecosystem as a successful model, of­fering valuable insights and best practices that other emerging and developed econo­mies can draw upon to enhance their support for small and medium-sized enterprises.

In Brazil, small and medium-sized en­terprises (SMEs), commonly referred to as micro and small enterprises (MPEs), form a vital and enduring foundation of the nation’s economy. These businesses represent approx­imately 99% of all companies operating with­in the country and provide employment for over half of Brazil’s formal workforce. Their influence on the national economy is both substantial and far-reaching, encompassing sectors such as manufacturing, retail, agri­culture, and various service industries.

Recognising their crucial economic im­portance, Brazilian policymakers, together with financial institutions, have actively endeavoured to address and diminish sys­temic obstacles — including limited access to credit, high interest rates, and overly bu­reaucratic banking procedures — which have historically impeded the capacity for SME growth and development. Efforts continue to be made to foster an environment that sup­ports the sustainable growth of these vital enterprises, thereby strengthening Brazil’s overall economic stability and resilience.

A key factor contributing to the success of small and medium-sized enterprise (SME) banking in Brazil is the proactive involve­ment of the Central Bank of Brazil (Banco Central do Brasil). The institution has tak­en significant steps to promote financial inclusion across the country. For example, initiatives such as the Financial Citizenship Programme and the establishment of the Na­tional Financial System Credit Bureau have played a pivotal role in this effort. These pro­grammes aim to enhance transparency with­in the financial sector and encourage the use of credit scoring systems that incorporate alternative data sources. Such developments have considerably simplified the process for small and medium-sized enterprises to be ac­curately evaluated and subsequently granted access to credit facilities, thereby fostering a more inclusive and supportive financial environment.

Brazil has also introduced open banking reforms and encouraged the adoption of dig­ital financial services as a means to broaden banking access into previously underserved regions. These regulatory frameworks have facilitated the participation of non-tradi­tional lenders and fintech startups in small and medium-sized enterprise (SME) finance, thereby enhancing competition within the sector and diminishing reliance on conven­tional banking institutions.

Public policy initiatives and development banks also play an important role within the financial system. For instance, the Brazilian Development Bank (BNDES) has been instrumental in supporting small and medium-sized enterprises (SMEs) through its function as a second-tier financial in­stitution. It provides wholesale funding to commercial banks and credit cooperatives, which enables these smaller institutions— those that operate much closer to local mar­kets and SMEs—to access liquidity more easily.

This arrangement helps them offer more competitive loan products tailored to the needs of small businesses. One of BNDES’s notable successes is the ‘BNDES Card’, a pre-approved credit facility designed specif­ically for small enterprises. This card allows businesses to purchase capital goods and ser­vices from a vetted list of suppliers. The pro­gramme reflects a strategic effort, combining government backing, technological ease akin to fintech innovations, and the infrastructure of commercial banks, demonstrating how well-structured public-private partnerships can effectively support SME development and financing in Brazil.

As can easily be imagined, the sectors of financial technology (fintech) and digital in­novation are experiencing rapid growth with­in this type of ecosystem. Brazil has emerged as one of Latin America’s most dynamic and thriving fintech hubs, particularly in the area of small and medium-sized enterprise (SME) banking. Several pioneering companies, in­cluding Nubank, Creditas, and Geru, have in­troduced groundbreaking methods for credit assessment, loan distribution, and support for businesses.

These fintech enterprises leverage artifi­cial intelligence (AI) for credit scoring, offer invoice financing solutions, and facilitate peer-to-peer lending platforms, thereby en­abling small and medium-sized enterprises— previously marginalised from traditional banking channels—to access vital financial services. Furthermore, the Central Bank’s implementation of PIX, a low-cost, real-time payment system, has significantly lowered transaction expenses and enhanced liquidity for small businesses, fostering a more inclu­sive and efficient financial environment.

For those willing to learn, Brazil’s ap­proach to SME banking demonstrates how policy, innovation, and institutional commit­ment can come together to develop an inclu­sive and resilient financial system. Although there are still challenges—such as regional differences and regulatory requirements for very small firms—Brazil continues to im­prove its model in ways that offer valuable insights for countries aiming to strengthen their SME banking sectors. By creating an environment that combines digital tools, ac­cess to credit, and institutional cooperation, Brazil has established a standard for best practices in SME finance.

The key guiding principles for willing bankers, economists, and development ex­perts include the development of a coordinat­ed national strategy centredaround essential areas such as regulatory reforms, initiatives to improve public financial management, and the enhancement of technological infrastruc­ture. It is essential to highlight that in Brazil, fintech companies are not viewed as a threat to the traditional banking sector, and conven­tional banks are not excessively protected by the central bank. The most significant and fundamental lesson, however, remains the recognition and appreciation of the vital role played by small and medium-sized enterpris­es (SMEs) in driving economic growth and stability.

Join me, @anthonykila, if you can, to con­tinue these conversations.

Anthony Kila is a Jean Monnet Professor of Strategy and Development at the Common­wealth Institute for Advanced and Profession­al Studies