Banco Palmas is a Brazilian community bank founded in 1998 in Conjunto Palmeiras, a neighborhood of 32,000 inhabitants located in the suburbs of Fortaleza - Ceará, Brazil operating under the principle of the "Solidarity Socio-Economy."
It is the first of currently 52 similarly structured community banks - also known as "community development banks" (CDBs) - throughout Brazil. It is managed locally by the Association of Residents of Conjunto Palmeira (Associação dos Moradores do Conjunto Palmeira), known by its acronym ASMOCONP, the staff of which is mostly volunteer. Its mission is to implement programs and projects for work and income generation using solidarity economy systems primarily focused on overcoming urban and rural poverty. Its objective is to ensure micro-credits for local production and consumption with low interest rates and no requirements for registration, proof of income, or guarantor, (the neighbors guarantee the borrower's reliability). Its mission is also to provide access to banking services to residents of poorer communities who generally would not otherwise have access to them in traditional banks, based on lack of credit history or financial collateral and/or physical distance.
History
The origin of the Palmeira neighborhood dates back to the 1970s. Due to redevelopment initiatives along the coast of the city enacted by the municipal government, fishing communities and other inhabitants were uprooted and forced to move inland. The inland district, known today as Conjunto Palmeira, was devoid of basic infrastructure such as water, roads, and electricity, thereby leaving the neighborhood vulnerable to floods and other natural and economic stability problems. Furthermore, the move inland left the primarily fishing-based community without a stable source of income. In 1981, the residents came together to improve their community, thereby creating ASMOCONP.
In January 1998, ASMOCONP created Banco Palmas as a strategy to face unemployment, creating locally work and income opportunities for residents. As such, Banco Palmas was created as a popular finance tool operating under the principles and values of the solidarity economy.
In 2000, Banco Palmas created the social currency palmas, which circulates in local commerce.
In March 2003, ASMOCONP also established the Instituto Palmas de Desenvolvimento e Socioeconomia Solidária (a.k.a. Instituto Palmas), a non-profit, civil society organization created from the experience of ASMOCONP.
By 2003, the solidarity finances methodology of CDBs was being discussed in several municipalities as an effective instrument in income generation for the poor. One year later, in September 2004, the second CDB opened under the name Banco Par, in the municipality of Paracuru, Ceará, 70 kilometers from Fortaleza.
By 2005, two more banks were established in the state of Espírito Santo – Banco Bem (Municipality of Vitoria) and Banco Terra (Municipality of Vila Velha). By 2008, there were 34 community banks in operation. As of February 2011, there are 52 community banks throughout 12 states in Brazil.
In January 2006, Banco Popular do Brasil became a partner of the Brazilian Network of Community Development Banks as a guarantor of credit lines to the CDBs, through an agreement with the National Secretariat of Solidarity Economy (Secretaria Nacional de Economia Solidaria do MTE). The agreement allowed not only Banco Palmas, but the entire network of community banks to have access to credit and to act as banking correspondents of Banco Popular do Brasil. During that same year, Petrobras decided to support the establishment of new CDBs in two other municipalities; adding up to twelve working CDBs in Brazil by the end of 2006.
Recently, the banks Caixa Econômica Federal (a.k.a. Caixa) and BNDES have become the main financial partners of Banco Palmas - Caixa offering banking correspondent services and limited credit, and BNDES offering credit and institutional development support as of 2011. Zurich Brasil has also played a substantial role in the development of the bank's new line of insurance products, beginning with life insurance (launched in September 2010) and expanding to other programs in the coming years. From 2011, the National Program for Community Banks launched by SENAES - The National Secretary of the Solidarity Economy (Secretaria Nacional de Economia Solidária) will be responsible for the continued growth of the Brazilian Network of Community Banks.
Theory The main theory behind Banco Palmas, its actions, its achievements, and its history, is that an inherently economically poor territory (be it neighborhood, region, or municipality) does not exist. Territories become poor after repeatedly losing their own savings. Despite the level of poverty of any given territory, it is always capable of achieving economic development. Said development must be autonomous, from within, otherwise, it will not be sustainable.
Local Currency Formally known as "local social circulating currency" or, informally, “local currency” or “social currency” (moeda local or moeda social), is a currency complementary to the real (Brazilian national currency - R$) and created by each community bank. The banks provide small amount loans in real and in the local currency, which circulates only within the neighborhood. (The social currency of Banco Palmas is the “palma,” for example. Each community has its own with its own proper name.) One unit of local currency is equal to one real, and both currencies can be exchanged freely at any time. Incentives for local merchants and consumers exist to use the local currency by providing discounts to users.
The social currency aims to make the "money" circulate in the community, thereby expanding the power of local commerce, increasing circulating wealth in the community, and generating both employment and income. The social currency, therefore, becomes an essential component in the strategies of community banks. Credits can help the economic growth of the district or county by creating new wealth. Local currencies ensure development by promoting that wealth circulates in the community itself.
Micro-Financial Services
Microcredit Microcredits are given to those who normally cannot access "official" sources of funding because of bureaucracy; guarantor, income level, and asset requirements; and other banking regulations.
Forms of Microcredit
1. Credit for Production, Consumption, or Service
For the improvement or creation of both formal and informal small businesses. Based in neighbor guarantees (not monetary or asset guarantees) and with the preliminary approval of a Community Credit Agent (Agente Comunitário de Crédito), the loan must be presented to the Credit Committee which ultimately evaluates and approves the loans, made in amounts of up to R$15,000.00 in up to 12 payments. Interest rates are progressive and range from 0.5% to 3.5% monthly.
2. Credit for Productive Inclusion
“Instant credit” allowing the creditor to benefit from the day-to-day opportunities the community market has to offer. Aimed toward families receiving government assistance through the Bolsa Familia Program (up to R$150), beauty product vendors (up to R$400), and street vendors people (up to R$200), loans are re-paid in up to four payments and interest rates range between 1.5% and 2.5% monthly. Credit recipients must present proof of trade or craft and justify the purpose of credit. On average 160 microloans are issued in Banco Palmas alone.
3. “Casa Produtiva”
Instant credit for the purpose of home renovation, with the objective to create or improve an income generating enterprise. The maximum value of the loans is R$450, re-paid in up to six payments with an interest rate of 2.5% monthly.
4. Credit for Local Consumption
Disbursed in social currency palmas in the maximum amount of R$600 payable in up to four payments with no interest. Local businesses offer discounts (5-10% off) for those who buy using the social currency. In 2010, 240 businesses in Conjuno Palmeira were accepting the social currency, offering discounts to those buying with it. The palmas is indexed to the real, is backed by the official country currency, and the exchange between the two currencies is legally permitted. As of 2010, 42,000 palmas were circulating in the neighborhood.
Microinsurance “Palmas Microseguro” was launched in September 2010. It is a microinsurance policy for low income, Banco Palmas clients. At an annual cost of R$27.30, it offers up to R$3,000 life insurance policies (accidental or natural death), funeral cost coverage up to R$1,000, and a R$5,000 lottery every month for one year to clients. Those who buy more than three policies are allowed to pay in as much as six payments per year, (there is a special loan directed at these cases). On average 130 policies are sold per month.
Banking Correspondent Banco Palmas has a strong role as a banking correspondent,Articles.economictimes.indiatimes.com helping the community to locally make and receive payments such as bolsa familia and pension benefits, open checking and savings accounts, as well as other banking services. This role is an important one for community banks in general because it allows basic banking access to communities who may be located very far from traditional banks, thereby making commuting difficult or impossible for elderly or disabled residents. On average 17,000 transactions per month are executed.
Instituto Palmas
In March 2003, ASMOCONP also established the Instituto Palmas de Desenvolvimento e Socioeconomia Solidária (a.k.a. Instituto Palmas), a non-profit, civil society organization created from the experience of ASMOCONP in order to: Negotiate new and manage existing financial partnerships Assist in the implementation of community banks in other communities Gather data about the people and operations throughout the network Release official publications about the community bank experience in Brazil Provide staff and community trainings throughout the network Develop new and manage existing financial products
Legally, Instituto Palmas functions as a Civil Society Organization of Public Interest (OSCIP) of Micro-credit. It acts as an umbrella organization by managing the network and providing legal support to all community banks, many of which are just “local associations” with no institutional structure. As an OSCIP, Instituto Palmas can establish partnerships with the public sector and official banks, thereby generating resources and technologies for the benefit of the community banks that are part of the network.
Legal Framework From a legal standpoint, Banco Palmas (and a majority of the Community Banks) work under the protection of the legal framework of Instituto Palmas. Instituto Palmas is a Civil Society Organization of Public Interest (OSCIP) of Microcredit.
Cooperation with the Central Bank has grown in the last four years, culminating in November 2009 with the announcement of a new partnership between Banco Palmas and the Central Bureau of Solidarity Economy/ Federal Minister of Work (Secretaria Nacional de Economia Solidáriao-SENAES/Ministério do Trabalho do Governo Federal) to create an official bill for the social currencies, thereby creating a sort of “official position” of the Brazilian government on local circulating monies. The process is ongoing, but the relationship with the Central Bank and the Brazilian Network of Community Banks in regard to the use of the social currency has been significantly positive.
The Brazilian Network of Community Banks
Banco Palmas belongs to the Brazilian Network of Community Banks (see below), The Ceará Network of the Solidarity Socio-Economy (a Rede Cearense de Socioeconomia Solidária - RCSES), and the Brazilian Forum of Solidary Economy (o Fórum Brasileiro de Economia Solidária - FBES).