The new management of Caixa Econômica Federal under President Jair Bolsonaro is preparing to open up a new company which will oversee a program that will boost Brazil's microcredit to around 30 bilion reais from 4.9 billion reais, O Globo reported.
According to the publication, the 10-year plan, which will likely be presented to the public in February, is aimed at introducing some 30 million Brazilians to the banking system through loans averaging 1,000 reais.
In comparison, state-run Caixa currently only operates around 80 million reais in microcredits and the government wants the new company to dominate the segment in the years to come, the report said.
The new entity would reportedly form a partnership with Banco do Nordeste do Brasil SA, the state-run development bank in Fortaleza, in Brazil's poverty-stricken Northeastern region.
The bank, known as BNB, has offered microcredits with so-called solidarity guarantees, for lower-income families and micro-sized enterprises, where several peers take loans together. That model has low default rates at 2% which has convinced the government to replicate the strategy for the new company.
The news comes as Economy Minister Paulo Guedes and his team are looking to restructure Brazil's state-run banks and sell off parts of their operations, while also urging the entities to refocus on their core operations.
As of Jan. 15, US$1 was equivalent to 3.72 Brazilian reais.