Brazil Lets Workers Pledge Their Severance Fund for Cheaper Loans
Brazil has introduced a program allowing formal workers to use part of their FGTS severance fund as collateral for payroll loans. The initiative, launched on June 26, offers lower interest rates of 1.99% per month compared with the average 3.79% rate. Participation is optional, and the pledged funds are only seized if the borrower is dismissed and defaults on the loan.
- ▪The program permits workers to pledge up to 35% of their severance pay, the full dismissal penalty, and 10% of their FGTS balance as guarantee.
- ▪Loans secured with the FGTS guarantee are capped at a monthly interest rate of 1.99%, lower than the April average of 3.79% for similar credit.
- ▪If a borrower is dismissed, the bank can seize the pledged amounts to cover the outstanding debt.
- ▪After fifteen months, the scheme has an active loan book exceeding 133 billion reais and serves about 10 million borrowers.
- ▪Using the FGTS guarantee is voluntary, and the funds remain in the employee’s account unless the guarantee is triggered.
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Brazil Politics and Society Brazil Lets Workers Pledge Their Severance Fund for Cheaper Loans By Arkady Petrov · June 30, 2026 · 4 min read Daily Brief The morning intel from across Latin America. Free. Subscribe By subscribing you agree to our privacy policy. We never share your email. Economy Key Facts —The change. From June 26, formal workers can pledge part of their FGTS severance fund as collateral on a payroll loan. —How much. Up to 35% of severance pay, 100% of the dismissal penalty and 10% of the FGTS balance can be offered as a guarantee. —The payoff. Loans using the guarantee are capped at 1.99% a month, against a 3.79% average for this credit in April. —The catch. If the worker is dismissed, the bank can seize the pledged sums to clear the debt. —The scale.
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Excerpt limited to ~120 words for fair-use compliance. The full article is at The Rio Times.
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