According to Scalvi (2006), during the nineteenth and early twentieth centuries, Turkish32 and Jewish merchants were popular figures who circulated all over Brazil with their door to door sales of various products. They were the first ones in the country to sell in instalments. The most famous Jewish merchant was Samuel Klein, whose occupation as a peddler provided a precious know-how that was subsequently used for the construction of Casas Bahia’s33 empire (Awad, 2003).
In São Paulo, immediate payment was the general rule during the first half of the twentieth century. The exception was the use of Livro do Fiado34, very common in small shops. The first institutionalized experience of in-store instalment sales is usually associated with Singer, a sewing machine shop that opened its doors in 1888, in Rio de Janeiro. But this is considered to be an isolated case. It is believed that the generalization
32 The term "Turkish" was actually a generalization of the Arabic immigrant, coming from different parts of
the world.
33 One of the biggest and most popular retail stores in Brazil.
34 It was a book that contained the names of all customers who had committed to settle their purchases in
of the practice started from 1926, when Nilo de Souza Carvalho introduced the instalment scheme in his shirt store in São Paulo, Camisaria A Capital - a scheme that he had imported from Argentina. In those early days, Carvalho held the patent on the word crediário35, but both the scheme and the word were quickly becoming popular.
Carvalho was also a pioneer in the process of popularization of the instalment sales system. In 1941, he launched another successful business, a shop called Modas A Exposição Clipper. The businessman soon perceived the growth of a segment composed by less well-off consumers. This segment was fuelled by the huge influx of Brazilians coming from other states, especially from the Northeast, attracted by the allures of the emerging process of industrialization. In 1944, he expanded his crediário system, previously reserved to the richest clients – a moment well captured by the add below. The store’s advertising contained the following message: "You just have to be a decent man to have credit at A Exposição":
Figure 5.1 Instalment sales’ advertisement.
Source: Scalvi (2006), pg. 17.
In the post-World War II period, São Paulo’s commerce flourished rapidly. Supermarkets and big retailers offering a wide range of products started to pop up. Among
35 Credit line for the purchase of goods offered by retailers, who issue a carnet that must be periodically
these products, the first nationally produced units of home appliances were appearing. Within this context, the practice of selling in instalments was spreading quickly.
But the experience of buying on credit was cumbersome. In order to request credit, an extensive list of documents was required, along with a few commercial references, which were consulted by informants. The informants were employees of stores or banks, whose job was to search for facts and situations attesting (or not) the good reputation of the prospective client. Along the streets and squares they passed, they shared information, originating the famous Brazilian expression of “estar com o nome sujo na praça”36, used in reference to someone who has a bad credit record. With the rapid pace of urban growth that brought about an increasingly anonymized society, informants were replaced by the creation of the Central Service of Credit Protection (SCPC), a unified record of defaulters, based on information given by listed firms. By the time of its opening, SCPC had 36 associated companies and a list of 15.000 defaulters.
At that moment, the main barrier to the growth of consumer credit was financial. In order to finance the crediários, retailers depended on their own resources or on a banking system with a strong short-term bias. The latter was a product of high inflation and the Usury Law - which limited nominal interest rates to 12% per year. This way, banks rarely did business with maturities greater than 90-120 days (Neuhaus and Magalhães, 1976). On the assets’ side, there was a virtually non-existent supply of funds for longer periods. On the liabilities’ side, the resources captured were basically term deposits (Pellegrini, 1990). But retailers needed a way to finance medium-term working capital. And the SCFIs emerged to fill that gap, the first record of which dates back to 1940 (and a few of them were created in the following decade). However, an institutionality that regulated and promoted SCFIs did not exist at the time.
In sum, the emergence of consumer credit in Brazil came about spontaneously in the retail sector to meet the demands of a growing precarious urban population. Funding constraints were the main impediment to the multiplication of such credit. The SCFIs emerged as a promising solution - but it was only after a regulatory process was implemented did they become propellants of consumer credit in the country. This process is the subject of the next section.