Brazil: Foreign Equity Investments In Microfinance Institutions In Brazil*

Last Updated: 12 May 2011
Article by Walter Stuber

A Brazilian Microfinance Institution (MFI) must be set up as a Sociedade de Crédito ao Microempreendedor e à Empresa de Pequeno Porte (SCMEPP), a company governed by CMN Resolution nº 3.567, of May 29, 2008, issued by the Brazilian Monetary Council (Conselho Monetário Nacional - CMN), which is a legal entity subject to the authorization and supervision of the Central Bank of Brazil (Banco Central do Brasil - Bacen).

This type of company can be incorporated either in the form of a closely-held company (companhia fechada), pursuant to the terms of the Brazilian Corporation Law (Law nº 6.404, of December 15, 1976, as subsequently amended), or as a limited liability company (sociedade limitada).

A Brazilian MFI is eligible to lend resources to micro and small entrepreneurs, but cannot take deposits from the public or from institutional investors, except for specific purposes defined by the Brazilian applicable law and regulations.

Under Brazilian law, any foreign organization can make an equity investment at a MFI or in any other legal entity subject to the authorization and supervision of Bacen, provided that such investment is duly authorized in accordance with the procedure outlined herein.

Article 52 of the Transitory Provisions to the 1988 Federal Constitution established that any investment by foreign individuals or corporate entities in Brazilian financial institutions, including setting up new, foreign-controlled institutions and the purchase of any interest, controlling or otherwise, in existing institutions, will be permitted only if authorized by the Brazilian government as a consequence of international treaties or reciprocal treatment, or because the investment is of interest to the Brazilian government.

The government has delegated to CMN the responsibility for analyzing and making recommendations regarding applications for foreign investment in the sector. As a result, a substantial number of investments by foreign investors in Brazilian financial institutions, most involving the control of such institutions, have been approved on a case-by-case basis and authorized by Presidential Decree. All these cases have been considered "investment of interest to the Brazilian government".

Once authorization has been granted, foreign investors and Brazilian investors will receive equal treatment unless express provisions of applicable law determine otherwise. Foreign investment in financial institutions must be registered with Bacen in the same manner as foreign investment in other sectors of the economy.

The same requirements applied to foreign investments in Brazilian financial institutions must also be observed in the case of an investment in a MFI, which is a legal entity subject to the authorization and supervision of Bacen.

Therefore, in order to make an equity investment at a Brazilian MFI, a foreign investor will have to obtain the Presidential Decree authorization. The application for this purpose will be made through Bacen at the time that the project will be submitted to Bacen´s approval by the founding partners of the MFI. Then Bacen will present this application to CMN, which is composed by three persons: (a) the Minister of Finance, as the chair; (b) the Minister of Planning, Budget and Management; and (c) the President of Bacen. After reviewing the merit of the case, CMN will recommend the issue of the Presidential Decree authorizing the investment as a matter of interest to the Brazilian government. This authorization process should take approximately from 90 to 180 days as from the date the application is presented to Bacen.

In summary, the government agency which will give the permission for the foreign investor to make an equity investment in the MFI is Bacen, and for this purpose the Presidential Decree authorization must be issued, and the process to obtain such authorization usually takes 90 to 180 days.

The fact that the foreign legal entity willing to make the investment is not a financial institution supervised by a central bank will not affect the granting of the authorization. The foreign investor will be qualified to own shares (quotas) in a Brazilian MFI to the extent that it is possible to demonstrate to Bacen that the foreign investor is duly authorized by the laws of the place of its incorporation to make this type of investment in the domestic market and in other important financial centers.

To achieve this goal, the following documents must be presented to Bacen: (i) the articles of incorporation or bylaws of the foreign legal entity, evidencing the types of activities carried out by it; (ii) the legislation that supports that the foreign legal entity is entitled to invest in MFIs in other countries; and (iii) a legal opinion issued by lawyers duly licensed in the place of its incorporation, confirming the foreign investor´s ability to make such investments in other countries. In order to produce legal effects in Brazil, all these documents must be: (a) certified by a local Notary Public and subsequently legalized at the nearest Brazilian Consulate or Embassy; (b) sent to Brazil to be translated into Portuguese by a sworn translator admitted as such by the Commercial Registry of the State of São Paulo; and (c) duly registered with the Registry of Titles and Deeds of the City of São Paulo.

Other commercial activities or private businesses, such as the acquisition of shares or quotas of small and medium enterprises (SMEs) to increase the production capacity of the Brazilian recipient companies, do not require any prior governmental authorization, and can be made by a foreign investor without any restriction whatsoever.

There are no limitations on selling stakes or repatriating capital or on the collection and transfer of dividends in both common and preferred shares, nor regulations creating any such restrictions. Obviously, if the foreign investor decides to sell to another foreign investor part or all of its equity investment in a Brazilian MFI or any other company which is subject to the authorization and control of Bacen, then the transaction will have to be previously approved by Bacen and the Presidential Decree authorization will also be required from the prospective buyer.


* This article has been prepared for the annual conference edition of the International Bar Association (IBA) Banking Law Newsletter to be published prior to the IBA 2011 Annual Conference in Dubai on 31 October - 4 November.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Walter Stuber
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.