SED Transforms Microcredit System and Saves Social Financial Program With OutSystems

Secretaria de Desenvolvimento do Estado de Goiás needed to deliver a new microcredit solution for a financial program that had been helping small entrepreneurs launch and keep their businesses. Time was of the essence because the program was at risk of being shut down. With OutSystems, the government unit was able to recover the program while saving 50 percent of the budget they would have spent if they’d used traditional development methods.

1 app

1 app

90 days instead of 18 months

90 days instead of 18 months

50 percent cheaper

50 percent cheaper

2 developers

2 developers

To Modernize or Shutdown, That Is the Question

Challenge - Secretaria de Desenvolvimento do Estado de Goiás (SED) is a government unit focused on the economic development of the federal state of Goiás, Brazil.

A few years ago, SED inherited Fundo de Financiamento do Banco do Povo. This financial program was created to help the people of Goiás who needed credit to launch or maintain their businesses, but didn’t have access to the commercial banks or were not able to pay the interest charged by those institutions. Banco do Povo granted microcredit of up to $3,800 to these small entrepreneurs, like seamstresses or local restaurant owners, who needed a small investment to survive.

When SED incorporated Banco do Povo, however, the program was in a catastrophic situation. The system used to manage the whole loan process—request, evaluation, approval, and granting—had severe security issues and lacked a maintenance contract. Plus, the system hadn’t been created specifically for Banco do Povo, and thus, it never met the real needs of the program.

But these issues were just the tip of the iceberg.

The situation escalated when the Public Prosecution charged Banco do Povo with fraud and suggested that the program be shut down because it didn’t meet the requirements set by the Central Bank of Brazil.

When that happened, Bruno Póvoa Leal, planning manager at SED, and his team analyzed the source code of the inherited system and found security breaches. So, to save the program, Bruno knew there was just one thing to do: build a new microcredit system from scratch.

“There were some investigations in progress, and we were risking prosecution for the architectural instability of the system. Also due to the security breaches, there was the possibility of dealing with serious financial losses to the point where we had to stop offering this service to the people who didn’t have any other option for their businesses.” Bruno Póvoa Leal, Planning Manager at SED

90 Days to Build a Microcredit System

Solution - With the entire program at stake, Bruno started looking for a platform that would allow SED to develop the new solution in just 90 days. The problem? SED only had three developers—including a junior and an intern—who were already overloaded with maintaining 16 other SED systems. Plus, even if they had a large and highly skilled team, it would still have taken them at least 18 months to develop a new solution, which would have been too late to save the program.

Bruno needed to find a better way.

That’s when SED launched a public tender to find the right company that could help them deliver a new system in such a short amount of time. The only company that met the deadline was GT1, an OutSystems partner.

“I’d heard of OutSystems before when I was in the Public Security Department back in 2011. We were struggling with keeping up with our development needs, and I encountered OutSystems while looking for new technology. So when GT1 presented OutSystems as the solution to deliver the new system in the established deadline, I completely believed in it.” Bruno Póvoa Leal, Planning Manager at SED

Why OutSystems?

OutSystems was the perfect fit for SED because it offered the following features and capabilities:

  • Visual development: Training SED’s small development team on the technology had to be fast and easy because hiring an expensive and difficult-to-find highly skilled team was out of the question. The visual development aspect of OutSystems allowed exactly that.
  • Easy to change: SED needed a future-proof system because new notifications must be incorporated continuously. OutSystems offered easy development, change, and publishing, something that is not possible to do in a short time with traditional tools. The quick-change capability was definitely a determining factor in selecting the platform.
  • Flowcharts: For a small team, keeping documentation up to date can be difficult. But with OutSystems, people can read a flowchart to understand the context. Therefore, SED was able to free the developers from the burden of documenting every single step.
  • No vendor lock-in: Because it is a public body, there is always the possibility that SED might have to use a different vendor in the future. So, they wanted to be able to save the source code and keep the system. OutSystems promises no vendor lock-in, thereby meeting this essential requirement.

The New Microcredit Solution

Just like the previous system, with the new web application, anyone who wants to open a small business in Goiás can go to a Banco do Povo facility and apply for microcredit. The difference is, once they register, Banco do Povo receives the information and analyzes if that person is eligible or not. The new solution also has a mobile component so an applicant can request the loan directly from a mobile device.

When the agent goes to the store where the applicant wants to open the business to take a few pictures and prepare the report, these are immediately attached to the system. And after the credit is approved, it’s sent directly to the provider. This way, if a tailor needs credit to buy fabric, the money goes directly to the fabric provider, and Banco do Povo is able to keep track of whether the money is being used for what was originally intended.

The system also integrates with the banking system. When the applicant pays a monthly installment, the system receives that information and automatically updates the remaining value of the debt.

Reducing Development Costs by 50 Percent

Results - When the Public Prosecution reported cases of fraud and was ready to shut down the program, Banco do Povo was forbidden to grant any loans because of the lack of control over the process. With the new solution, Banco do Povo is back in service.

The new system gives Banco do Povo more control over the loans. They can make sure the money is being used properly, keep track of the amounts granted, and stay current on what the applicant still owes.

Using OutSystems, SED delivered the new solution in just three months, instead of the 18-24 months promised by traditional methods. In addition, SED would have had to hire external labor, which was going to cost them more than $255,000. But thanks to the use of OutSystems and the skills of GT1, the cost of the new platform was 46 percent lower.

Since the implementation of the new system, Banco do Povo has been helping small entrepreneurs like Marcelo Alves Teodoro, an entrepreneur in the area of sports bikes. With Banco do Povo’s investment, Marcelo was able to modernize his store by replacing the furniture and add new pieces to its inventory. As a result, he ensured his presence in the market, increased the number of customers, was able to keep his employees, and hired a new collaborator.

Currently, SED is saving more than $41,000 every year just for digitizing Banco do Povo activities. The savings keep on growing as the system keeps on evolving.

As for the future, SED intends to use OutSystems for every new project they need to create from scratch while optimizing human resources.

“Without the implementation of the system, Banco do Povo wasn’t granting any credit and didn’t have control over the money that had been loaned. With the new system, we were able to open our doors again and comply with the policies of the Central Bank of Brazil. Today, we manage assets of over $7,745 million dollars, and we know exactly where it’s being used and the stages of every operation.” Bruno Póvoa Leal, Planning Manager at SED