Banco Palmas is a community bank in Fortaleza, Brazil, that issues a local currency since 2000. The bank offers microcredits in the Palmas currency (interest-free) and in Brazil’s national Real currency (interest rate 2%).
Purpose
The objective of Banco Palmas is to ensure the availability of microcredit loans to encourage local production and consumption with either no interest or very low interest rates with no requirements for registration, proof of income, or guarantor. The social currency aims to make the money circulate in the community, thereby promoting local commerce, increasing the circulation of wealth within the community, and generating both employment and income 1.
Community Overview
Banco Palmas was founded in 1998 in Conjunto Palmeiras, a neighbourhood of 32,000 inhabitants located in the suburbs of Fortaleza, Brazil. The origin of the Palmeira neighbourhood dates back to 1973, when coastal inhabitans of Fortaleza were forced to move inland and rebuild their community (See next section).
Banco Palmas was founded by members of the Association of Residents of Conjunto Palmeira (Associação dos Moradores do Conjunto Palmeira), known by its acronym ASMOCONP. Since 2003, Instituto Palmas was founded from the experience of Banco Palmas and the Palmas currency.
Banco Palmas is supported by Banco do Brasil, the nation’s largest bank.
Organisation and History
Due to redevelopment initiatives along the coast of the city of Fortaleza, enacted by the municipal government in the 1970s, fishing communities and other inhabitants were uprooted and forced to move inland, where they started living in favelas (shanty towns). The inland district, known today as Conjunto Palmeiras, was devoid of basic infrastructure such as water, roads, and electricity, thereby leaving the neighbourhoods vulnerable to flooding and other natural disaster and economic shocks. Furthermore, the move inland left the primarily fishing-based community without a stable source of income 2.
In 1981, the residents came together to improve their community, thereby creating the Association of Residents of Conjunto Palmeira (Associação dos Moradores do Conjunto Palmeira), known by its acronym ASMOCONP. Its mission was to implement programs and projects for work and income generation using ‘solidarity economy’ systems primarily focused on overcoming urban and rural poverty.
When ASMOCONP reviewed their achievements in 1997, they saw that they had not created enough permanent jobs in the area and there was no reliable income for the desired developments. They heard about microcredit and other solutions, but there was no infrastructure to introduce such programmes. It was then that they decided to create their own bank to give loans to entrepreneurs 3.
Banco Palmas launched in January 1998 with a grant of 800 Euros from a French organisation. Because of instantaneous success, other international organisations lent money to allow the bank to create more microcredit loans in the following months.
In 2000, Banco Palmas embarked on the creation of a local currency. The very first initiative in terms of creating a social currency – which first name was Palmeirins – was lead by ASMOCONP members alone and it was based on the Argentinian “Clube das Trocas”. This first project failed. Then, a second social currency – the Palmas – was initiated, supported this time by processes and systems proposed by STRO 4.
From 2003 onwards, the process and systems of Banco Palmas was replicated by other community banks. In addition, in 2005 a partnership was signed with Banco do Brasil, the largest banking institution in the country, which allowed it to receive a R$300,000 (US$150,000) productive credit portfolio in exchange for implementing banking sevices at its local development banks. In 2008, a parallel organization was created, the Instituto Palmas, in order to coordinate the other local development banks’ operations and make the link between them and Banco do Brasil 5.
Impact
Palmeiras residents (32,000) spent 5.65 million Réais (2.29 million Euros) each month in 2011, compared to 1.5 million Réais per month in 2002. Sales from local trade have risen by 30% and it has become one of the main trade corridors of the outskirts of Fortaleza. In 1997, 80% of the inhabitants’ purchases were made outside the community; by 2011, 93% were made in the district 6.
Sixty six community banks have been started around Brazil by 2011, including in Rio de Janeiro’s worst slum, Cidade de Deus. The most exponential rise occurred in 2008 when the number of community banks jumped from 15 to 37, which meant an increase of about 146% in a single year 7. The whole community banks network had a circulation of 212,000 Réais equivalent 8.
Currency Details
a. The system in numbers
Around 270 businesses participate in the Palmas currency. 46,000 Palmas were in circulation in 2011, worth 20,000 Euro at that time 9.
b. Function and Unit of Account
The Palmas currency is a local currency aimed at increasing velocity and enhancing the local economy.
c. Issuance – Backing
Individuals can get local currency issued in three different ways: they exchange them with national currency (one Palmas = one Real); they receive them in wages; they get microcredits for local consumption. People getting microcredits automatically join the community association that runs the bank, other people receiving currency do not have to join.
Palmas – printed on special paper with security coding to prevent forgery – are backed by Reals at one-to-one parity, so that that for each Palma in circulation one Real is held in reserve by the Association. When getting a loan from the Banco Palmas project, individuals receive Palma notes instead of Reals. Conversion into reals is possible at any time at ASMOCONP, although it is discouraged, thanks to a two-percent administration fee.
d. Funding – Business Model
There are six fulltime employees with an average age of 25, who get 800 hours of training in management, accounting and retailing. They receive 20% of their wages in local currency. Operating costs of the bank are recovered from fees for opening bank accounts, transaction fees and grants. ‘Community consultants’ are trained by the bank’s youth training programme (Palma Tech) to talk to shop owners and organisations to help them to find ways to earn and spend currency: public bodies and a few companies with offices in the area pay 5 to 20% of employees’ salaries in Palmas. People may also pay part of their utility bills in local currency at the bank 10.