AN OPEN PATH FOR FOREIGN INVESTMENT IN BRAZILIAN CREDIT FINTECHS
November of 2018
On October 30, 2018, Decree No. 9,544 was published, recognizing as of interest to the Brazilian Government foreign participation in the capital of Direct Credit Companies (Sociedades de Crédito Direto – SCD) and Peer-to-Peer Lender Companies (Sociedades de Empréstimo entre Pessoas – SEP) authorized to operate by the Central Bank of Brazil (BCB). In practice, this decree allows foreign investment in so-called credit fintechs.
Indeed, since the publication of BCB’s Resolution No. 4,656, on April 26, 2018, it was decided that the SCD and SEP – models created to frame the activities of credit fintechs – should be regarded as financial institutions for the purposes of Law 4,595/64. Thus, foreign participation depended on a lengthy procedure of governmental authorization, which involved the enactment of a decree signed by the President. Such a scenario made it difficult, for example, for the injection of resources through foreign funds in exchange for participation in the capital of the SCD or SEP.
The issuance of Decree No. 9,544, therefore, works as a generic authorization for foreign participation in the capital of the SCD or SEP, satisfying the requirement of article 52 of the Temporary Constitutional Provisions Act, which prohibits foreign investment in financial institutions until a Complementary Law has been issued, except when the country’s interest in such participation is declared by the Brazilian government.
In practice, Resolution No. 4,656 and Decree No. 9,544 are likely to have great impact on the market of fintechs in Brazil, which may gradually become even more important, changing the dynamics of the current banking sector in the country.