IDB Lab Investment Seeks to Digitize Small Businesses in Brazilian Favelas

IDB Lab, the innovation laboratory of the Inter-American Development Bank (IDB) Group, will invest $1.5 million in Brazilian startup, Dolado, to promote the digitalization of micro, small, and medium-sized enterprises (MSMEs) operating in Brazil’s favelas. This capital will allow for the development of a platform that provides small merchants with access to credit and supply chains, as well as management tools that are custom-tailored for their specificities.

Nearly 14 million low-income people live in these informal settlements whose businesses are affected by weak supply chains along with inefficient logistics, high prices, poor payment terms, and poor customer service experiences. IDB Lab’s investment, which joins Valor Capital, Flourish (Omidyar Network Group), Clocktower Ventures, GFC, and Endeavor in a $10 million investment round, will directly benefit more than 35,000 MSME owners and indirectly benefit favela consumers who shop locally and lack access to digital payments or have otherwise been neglected by online shopping and merchandise delivery channels.

Dolado provides a platform allowing merchants a complete digital experience, including an electronic catalog to share with users, finance management, lines of credit or acquisition of goods to resell, the benefits of wholesale purchasing, connections with suppliers, payment terms, safe delivery, and returns. This system makes it possible to overcome the traditional transfers of small merchants to large cities to acquire the products that they will use for sale, avoiding security problems and purchases from illegal distributors, and further formalizing the process.

“Putting technology at the service of the most vulnerable allows us to advance by leaps and bounds in inclusion,” said Irene Arias, CEO of IDB Lab. “The digitalization of small and medium-sized companies operating in Brazilian favelas opens new paths that will translate into both a positive and disruptive impact for underserved populations.”

IDB Lab’s direct financing of this business model, focused on favela communities, is one more step in the IDB Group’s support of early-stage companies using technology and innovation to advance financial inclusion for the benefit of vulnerable communities and joins other initiatives developed by the innovation laboratory in the region. One of them, INTEcGRA, launched an open call in September 2020 to support projects contributing to the continuity and resilience of independent neighborhood stores affected by the COVID-19 pandemic in Latin America and the Caribbean. The call, led by IDB Lab, had the collaboration of IDB Invest, the IDB’s strategic alliances office, and a significant group of large consumer goods companies to finance projects currently in the disbursement phase or close to approval.

This investment is part of IDB Lab’s new direct investment thesis which prioritizes early-stage startups (late seed series to series B), addressing the most relevant development challenges facing Latin America and the Caribbean.