Palmas Bank

Palmas Bank

Brazil
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Even the poorer territories are able to embrace economic development. For that to happen, we need to protect their internal saving, creating a local economic cycle.

About You
Location
Project Street Address
Project City
Project Province/State
Project Postal/Zip Code
Project Country
Your idea
Year initiative/program began:

1998

Field of work

Banking/Financial Services

If Field of Work is "Other" please define in 1-2 words below (and explain in detail in the entry form):
Service / Activity focus (If "other" please explain in entry form)

Transaction

Year organization founded (yyyy)

2003

YouTube Upload

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Positioning of your initiative on the Mosaic of Solutions™ diagram:
Which of these barriers is the primary focus of your work?

Lack of access to markets or products

Which of the principles is the primary focus of your work?

Prove that social return doesn’t preclude financial gain

If you believe some other barrier or principle should be included in the mosaic, please describe it and how it would affect the positioning of your initiative in the mosaic

This field has not been completed. (333 words or less)

Innovation
What is your signature innovation, your new idea, in one sentence?

Even the poorer territories are able to embrace economic development. For that to happen, we need to protect their internal saving, creating a local economic cycle.

Describe what makes your idea unique—different from all others in the field.

Banco Palmas operates with to currencies, the official country currency (the Brazilian Real) and a social currency owned by the bank (the Palmas currency). The bank has ris owned and managed by their own community. It offers productive credit to stimulate the emergence of local enterprise and consumer credit for products and services produced inside the community, creating thus a local financial circuit based on a network of produconsumers (producers and consumers). The local social currency is used as a strategy to guarantee the financial circulation inside the community. These tools aims to generate local economic development in a very original way, by protecting the financial resources generated locally. Other innovations are a partnership with Banco do Brazil (the largest bank in Brazil), which makes possible the offer of bank services to Banco Palmas (bank account, credit receivables, pension, bill payments, among others) and the use of a sophisticated software for finance management, leveraging the activities of this community bank.

How do you implement your innovation and apply it to the challenge/problem you are addressing?

In 2005, the National Secretariat for Solidarity Economy (SENAES) of the Ministry of Labor and Employment and Banco do Brasil invited Palmas Institute to transfer the Banco Palmas methodology to other municipalities. By june 2008, this consulting project made possible to reach a number of 33 community banks working in Brazil, in 06 states. Banco do Brasil made credit available for these banks, as well as technological structure and software to follow all credit operation and articulate this network of banks.

Do you have any existing partnerships, and if so, how did you create them?

Palmas Institute has a strategic partnership (more than 3 years) with SENAES and Banco do Brasil. SENAES guarantees resources for the creation of new community banks (technical educations, agent and credit managers capacity buiding, local production and consumption mapping, among others). Banco do Brasil (BB) contacted Palmas Institute to manage the BB network closer to the low-income communities, making possible to incorporate a ATM in several community banks, and thus making available various bank services for population currently excluded from the financial system. In addition to that, this partnership guarantee resources for the community banks that receive a payment for operations done in its ATMs, as well as ensures the technological support under sue in the BB official branches. We have partners for over 2 years with CORDAID (dutch NGO) and with Petrobras. More recent partnerships (up to a year) include Itau, Banco do Nordeste, local municipalities and others).

In which sector do these partners work? (Check all that apply)

Impact
Provide one sentence describing your impact/intended impact.

90% of Conjunto Palmas population declared to have improved their quality of living as a resulto f Banco Palmas activities (source: Federal University of Ceara).

Please list any other measures of the impact of your innovation.

- 1,800 direct jobs and 400 indirect were created.
- 6 community micro-enterprises were created
- 1,000 youngsters were trained
- 100 women living at risk have their lives change
The unnourished child index was reduced in 76% (source: Centro de nutrição do Conjunto Palmeira);

Local commerce increased sales by 30%, and became one of the main trade points in the poor areas of Fortaleza (source: Commercial Census - Federação do Comércio de Fortaleza-2007);

Consolidate, original and effective methodology for using microcredit to fight poverty (source: sustainability analysis of Banco Palmas- DIKAIOS/Fundação Brava- jan-2007)

International expansion to Venezuela. 200 community banks created in that country. (source MINEP-Venezuela – Memorandum de Entendimiento para la Cooperación Económica y Social entre el Ministerio del Poder Popular para la Economía Comunal de la República Bolivariana de Venezuela, y el Banco Palmas de la República Federativa del Brasil.

Does your innovation address and/or change banking regulations?

Banco Palmas has been influencing the practices of the financial and banking system in Brazil. The partnerships with Banco do Brasil and with the Ministry proof the recognition of this approach by the financial system and by the general public. Besides that, there is a Bill in the Brazilian National Congress (law 97/2007), from Federal Deputy Luiza Erundina, that proposes the creation of the legal concept of community bank of development. Another important fact is the progressive negotiation with the brazilian Central Bank (BC). In 2005, the BC installed a legal process against Banco Palmas, claiming the social currency system is irregular. After Banco Palmas was considered innocent by the judicial court, it submitted to the Central Bank a petition to legalize and regulate the social currency system. At the moment, the BC recognizes there is no illegal fact in the alternative currency system, and has also invited Palmas Institute to write articles for their specialized magazines as well as give lectures in several seminar organized by the Central Bank

How many people does your innovation serve or plan to serve? Exactly who will benefit from your innovation?

We calculate that after 10 years, Banco Palmas has generated 1,800 jobs (most informal). In 33 municipalities of Brazil, thousands of people use the various financial and banking services offered by the community banks. We estimate tha 200,000 people have already used these services, mostly poorer, indigenous, slave-descendents, landless and small produces (both rural and urban).

Sustainability
Financing source
How is your initiative financed (or how do you expect your initiative will be financed)?

A community bank should operate around 5,000 bank transactions monthly and manage a credit portfolio of 200,000 Brazilian reais to become totally sustainable. This sustainability can be reached in 3 to 4 years, considering the particularities of the target group – small groups of people located in the outskirts of urban centers, living in extreme poverty situation. The sources of funding of a community bank are services for Banco do Brasil and the financial results of credit operations.
With 10 years of existence, Banco Palmas is already sustainable. A couple of complementary activities are offered by Banco Palmas, such as professionalization courses, trade fairs, educative campaigns, special assistance to women at risk, among others. These activities are funded by partners and foreign donors.

If known, provide information on your finances and organization:

2007 - R$ 775.641,35
2006 – R$ 759.245,82
2005 – R$ 275.927,05

Sources of funding
15% - Company and Corporate foundations’ donations
13% - International funds
52% - Services (mainly to the governament and Banco do Brasil)
10% - financial results of credit operations
10% -product selling (books, lectures, course and others)

The revenues of Palmas Instituto are?
- Interest and tac surplus from microcredit transactions of community banks (loans in 24 municipalities for low income population)
- Financial surplus of operations as bank representative (Banco do Brasil pays Instituto Palmas for all services done in their ATMs located inside community banks)
- Services to government that pays Instituto Palmas to create new community banks

What are the main financial barriers and how do you plan to address them?

The cost of creating a community bank is around 60,000 reais and the annual operational costs around 18,000 reais. For 2 to 3 years, these costs need to be covered by partners before the bank becomes sustainable. We have searched for funds in the Ministry of Labour to create community banks and with local municipalities to guarantee the operational costs for two years.

Aside from financial sustainability, how do you plan to grow the initiative?

We are seeking fund to create the Palmas Center of Reference, which will become a space with classrooms and accommodation to train technical staff for the community bank, with the aims of having 500 people qualified by 2010. In the National Congress, we are lobbying for the approval of the law mentioned previously. With the Ministry of Labor and Banco do Brasil, we seek new contracts with larger funds. Conversations have already started with other banks and companies to create a endowment fund.

The Story

What was the motivation or defining moment that led to the creation of this innovation? Tell us the story.

In 1981, I entered a catholic monastery in the city of Belém, Pará. In 1984, the bishop of Fortaleza, Daloisio Lorscheides, began an experience with priests from slums which consisted on promoting the sacerdotal training for people living in the slums. Because of that experience, I came to Conjunto Palmeira, a very poor community, lacking all urban infrastructure. During 20 years, I helped organize community ‘mutiroes’ (collective action) to urbanize the neighborhood. We build all infrastructure of Palmeira. In 1997, the residents continue to be very poor and start selling their houses and migrate to other slums, because they could not pay their bills. We started to question why we remain poor and we discovered that we were making ourselves economically poor because all goods we consumed were coming from outside the community, moving thus our financial resources out of the community, and to the large corporations. In order to generate labor and income for the residents, we create the community bank Banco Palmas whose challenge was to stimulate local production and consumption, and therefore developing the local economy. I became the bank coordinator. In 2003, we created the Palmas Institute that organized dozens of other community banks in Brazil.

Please provide a personal bio of the social innovator behind this initiative.

Joaquim Melo, borned in Recife-Pe, popular educator, community leader, teologist, married, 46 years old. Militant of popular movements, Joaquim lived his youth in the community of Conjunto Palmeira, in Fortaleza, where he created the community bank Banco Palmas. In 2005, he started organizing in Brazil a network of community banks in areas characterized by poverty and hunger.

a) Please identify the individuals that your innovation benefits (Please check all that apply)

Producers , Consumers .

b) Do you help the people you serve to buy goods or services using financial innovation? If so, how?

Banco Palmas has created various tools to promote local production and consumption, as it folllows:
- credit loand for production and consumer credit
- social currency circulating among local producers and trade/stores
- local credit card (PalmaCard), which finances local consumption
- fair trade store, where the products produced in the community are sold
- local products fair, organized monthly by the community
- permanent educational campaigns, stimulating local consumers to purchase goods locally produced

c) Do you help the people you serve to sell goods or services using financial innovation? If so, how?

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