With a budget twice the size of the US's Small Business Administration (SBA) and with some 700 centres and 9,500 business consultants reaching 1.5 million business owners, Brazil can lay claim to the world's biggest small business agency - Sebrae.
The resources at its disposal - currently $1.8-billion - dwarves most other small business agencies (see table below). Its budget is 0.1% of Brazil's gross domestic product (GDP), which is about the same level of spending by Chile's Corfo on small businesses, but significantly higher than the SBA (0.06% of GDP).
Where does the money come from?
Sebrae (with its current head Luiz Barreto pictured above) operates as a not-profit organisation, but receives funding from the government via a special tax of between 0.3% and 0.6% levied on employers' payrolls. The tax not only funds the agency's programmes, but those of a number of the government’s training initiatives (collectively known as Sistema S in Brazil).
The SBA itself has an impressive reach, serving about a million small businesses a year - much of this is via a network of 900 Small Business Development Centers. It also relies on over 11 000 of business professionals who volunteer their help.
However Sebrae's performance is perhaps even more impressive, as unlike the SBA which assists firms with up to 500 employees, the Brazilian agency helps only very small firms (with an annual turnover of up to $1.6-million).
On top of this the Brazilian agency, unlike the SBA, spends only on delivering non-financial support such as mentoring and technical skills to business owners(about 30% of its spend went to consultants in 2011, with a further 25% to staff). Much of the US agency's funds however help provide finance to small firms via a long running credit guarantee scheme and equity programme.
The early days
Sebrae has come a long way. After starting as Cebrae in 1972 under Brazilian development bank BNDE (which later became BNDES) and the Planning ministry, the agency quickly developed a number of finance and technical support programmes. A few years later the first business incubators began to surface.
The original aim was to support existing small businesses with help. Only in 1985 did the organisation begin helping start-ups too. The model under Cebrae saw the agency assist business owners through a network of existing business institutions and NGOS, funding 60% of their costs. It was expected that the organisations themselves would cover the remainder or find relevant sponsors in each state to do so.
In 1974 Sebrae had 230 insitutions it was working with in 19 states. By 1979 this had jumped to 1 200 business consultants and organisations.
Programmes created by the Brazilian government in the 1960s to support small businesses (BNDE and Sudene) helped to lay the foundation by creating consultants with technical skills which would later come in use when Cebrae was launched.
Almost killed off
But the Brazilian agency was almost killed off in the late 1980s by politicians, when the federal government began to progressively reduce funding to Cebrae. Staff weren’t paid for three months and in 1990 a total of 110 professionals were dismissed from Cebrae, or half of its then staff complement.
In 1990 a decision was made to turn Cebrae in Sebrae, with a new law that decoupled the agency from the public administration. Instead under the new system the agency was to receive an effective increase in contributions from the public purse, via a tax on company payrolls levied on businesses to fund the Sistema S (the others being Senai, Senac, Sesi e Sesc).
Remembers Carlos Augusto Baião, the then director-president of Cebrae during the transition of 1989 and 1990: “It was open engineering, which featured intensive institution partnerships, participation, and the majority were private institutions in (Sebrae’s) deliberative council”.
Paulo Alvim (pictured left), the present manager of Sebrae's market and financial services unit, said the motive of the restructuring was to switch the focus to assisting firms become more competitive during the opening up of the economy that took place in the 1990s.
In 1993 Sebrae launched its Empretec programme, which has since been adopted by the UN Conference on Trade and Development (Unctad) and a number of countries use it today, including South Africa.
In 2005 Sebrae helped to mobilise about 80 000 people across the country in support of a new law to promote small business, Lei Geral , which culminated in a grand protest in the capital Brasilia when it was presented to the country's Congress of Deputies. The law simplified tax for small businesses (by introducing the Supersimples system) and put in place measures for the government to buy more from small firms.
In 2009 Sebrae also helped bring about the Microempreendedor Individual law which simplified procedures for one-man traders to register their business and receive access to social benefits.
As recently as 2011 Sebrae reached 28% or almost a third of Brazilian small businesses (according to its management report for that year).
The latest data from Sebrae reveals that the share of Brazil's GDP attributed to small and micro enterprises rose from 21% in 1985 to 27% in 2011. Small and micro firms today generate just over half of all jobs in the country and account for 70% of all new jobs. Added to this salaries rose faster between 2002 and 2012 for small firms (grew by 33%) than for larger firms (22% growth).
Sebrae says the growth in the number of small firms (today there are almost nine million registered for the Super Simples tax) is connected to the recent growth in consumers, improved education levels of would-be entrepreneurs and a better regulatory environment for small firms.
A model for others?
Whatever problems Brazil might have (such as a one of the world's worst bureaucracies, poor infrastructure and high business costs) Sebrae is a lesson for policymakers around the world. Access to considerable resources helps, but the agency is also evidence of how strong public-private partnerships and a sold focus on technical skills can over time have a marked impact on small business support. In the end there are many lessons to be drawn from the agency, here from the author are just four:
1-Private organisation, public funds
As it is a private organisation Sebrae is able to partly distance itself from political matters and focus on the professional delivery of service, while still benefiting from public money in a consistent and predictable with the help of the tax that funds Sistema S.
2-Skilled business consultants
Sebrae relies strongly on private-sector consultants, rather than on in-house business advisors who often have little or no business experience. It has its own university to train business consultants and runs bi-annual meetings to train consultants. Added to this its Geor project management system allows the public and business consultants to assess the progress of each project.
3-Use of various channels
Sebrae doesn't just use walk-in centres and business consultants to train business owners, but relies on multiple channels such as a website (www.sebrae.com.br), television channel, radio, distance learning, entrepreneurship fairs, blogs and a telephone hotline. In 2011 566 000 students completed distance learning courses.
4-Underpin planning with research
Without reliable statistics on SMEs you can't help business owners effectively. Sebrae uses its own team of researchers to ensure that there are consistent and reliable statistics on small businesses in the country. The team conducts some research inhouse and collaborates with partners like the Brazilian statistics organisation (IBGE) for other research.
Stephen Timm writes on small business. He stays in São Paulo. Much of the history of Sebrae was gleaned from Sebrae 40 anos. Download the Portuguese copy here. Learn more about Sebrae in this report the author wrote for Trade and Industrial Policy Strategies (TIPS) in 2011: Download the report here.
Stephen Timm is a