Partnership Lessons 13: Brazil Small Business Formalization with Sebrae
EGAP Researcher: Martin Valdivia, Cesar Zucco Jr.
Other authors: Anna-Katharina Lenz, Rafael Goldszmidt, Patricia Reis Pereira dos Santos, Carla Geraldo de Moraes Teixeira Panisset
Geographical region: Latin America and the Caribbean
Preparer: Alexander Singal
As part of the second round of the Metaketa Initiative, a team of principal investigators consisting of Anna-Katharina Lenz, Cesar Zucco, and Rafael Goldszmidt from the Getulio Vargas Foundation in Brazil, along with Martin Valdivia from the Group for the Analysis of Development in Peru, designed an experiment to test various interventions to encourage formalization of microentrepreneurs’ businesses and increasing their access to social security. The investigators worked with Sebrae, the main organization that promotes the development of small businesses in Brazil, to implement the experiment.
The experiment took place between March and October 2018 in Rio de Janeiro, with the target businesses being randomly assigned to one of six groups varying in intensity of intervention, from a control group on one end to businesses that received one-on-one consulting on the other. The experiment was completed successfully, with the researchers evaluating the effectiveness of each intervention based on the rate of formalization in the target businesses. They found that providing face-to-face assistance at the place of business with the offer of follow-up technical help increased formalization rates by approximately five percentage points, a substantial increase in this context. Less hands-on interventions such as WhatsApp messages increased knowledge of the formalization program but had no effect on formalization rates. Evidence also pointed to the interventions having a greater impact on individuals with lower incomes and/or less education.
EGAP interviewed Patricia Reis Pereira dos Santos and Carla Geraldo de Moraes Teixeira Panisset, two employees of Sebrae, to discuss their experience serving as the implementing partner on this project.
Decisions to Partner with the Research Team
The partnership between the principal investigators and Sebrae was a natural fit, as promoting formalization is a major component of Sebrae’s work. Sebrae held internal meetings to discuss the benefits of working with the principal investigators, as they do for any potential partnership with an external group. They ultimately decided to move forward, confident that it would be a collaborative effort with open lines of communication between the two sides, and this would ensure both parties were able to benefit from the work.
While Sebrae was eager to assess the efficacy of their programs, doing so in a scientifically rigorous manner has not always been feasible within their day-to-day operations. “In most of our daily activities, it isn’t possible to do this type of experiment due to the complexity of it and the time needed to obtain the results.” They also recognized that a certain degree of expertise is required to ensure this kind of impact assessment is done properly, saying “It is crucial to have a partnership with an institution with the knowledge and experience to carry it out.”
Working with the Team
The implementing partner described a positive working relationship, with the research team making efforts to complement Sebrae’s existing work and not requiring them to make adjustments to their daily operations. “It was an easy adaptation since the research team worked according to our preferences. No changes needed to be made in the way that we work.” Additionally, they felt that Sebrae’s needs were carefully considered by the research team, which contributed to the positive, collaborative environment. “Everything was jointly discussed, and our opinions were taken into consideration.”
The Sebrae team was able to provide helpful, on-the-ground context in figuring out the best places to undertake the experiment. “We selected the best slums to do the research, considering the density of entrepreneurs and our experience working there, providing information we had about the entrepreneurial activity in the region.” Additionally, the Sebrae staff worked with researchers to facilitate conversations with business owners and provide guidance on the formalization process. “We made available our consultants who work in these communities to guide the researchers and to gain access to the entrepreneurs there. And we trained the field team on the specifics of formalization with an experienced professional from our institution.”
Dissemination of Findings
The implementing partner said the research team provided ongoing feedback over the course of the experiment and has been in regular contact since. “The sharing process has happened at all times. We had several meetings to discuss the intermediate results and then a final presentation where each finding was presented in a clear, objective, and simple way. In addition, we had constant feedback from the research team and held meetings throughout the course of the project and since its completion.”
In addition to the presentation at the Sebrae office in Rio de Janeiro, the research team also presented at Sebrae’s office in São Paulo and produced a video to be shared with other Sebrae offices across the country. The video explains the research team’s findings in Portuguese, but English subtitles make sharing with research teams and potential collaborators in other countries a possibility for the future as well.
Sebrae says they have already been able to make use of the research team’s findings in order to improve their operation. “Based on the results, we are adapting our products and methodologies to better support our clients.”
Overall, the implementing partner felt that this was a positive collaboration and did not have much to offer in terms of changes they would make. One suggestion was that they may have attempted to roll other aspects of their program into the experiment, so that they could test the impact of other operations which weren’t covered by this project. But in general, the implementing partner was pleased with the collaboration. “We have enjoyed the partnership with a quality educational institution, the exchange of knowledge, and having the opportunity to test new ideas and get a clear assessment of their benefits.”
Additionally, the implementing partner said the research helped confirm the value of their work. “The partnership was important to our institution to understand how our actions impact the entrepreneurs. It reinforces to Sebrae how important our work is to this part of the population.”