Banks for People, Not Profits: Part I
Banco Palmas // Brazil
In 1998, residents from the impoverished Palmeira neighborhood of Fortaleza, Brazil, decided to take their economic future into their own hands. The strategy they took would soon spread to other communities around Brazil: creating a community development bank, governed and managed by local residents, for local needs.
Banco Palmas’ founding mission was to help revitalize the local economy, create badly needed jobs, and increase the collective self-reliance of the Palmeira district. The bank’s activities are guided by the principles of solidarity economics.
One of Banco Palmas’ key innovations has been to issue a neighborhood-scale alternative currency called the “Palma”. Like other local currencies, the Palma was designed to support local commerce by restricting its circulation to the Palmeira neighborhood, preventing money from leaking out of the community.
The result has been impressive. To date, hundreds of local businesses have signed up to accept Palmas, while the currency has helped strengthen or create thousands of local livelihoods. Moreover, the neighborhood’s spending patterns have seen a dramatic shift since the bank’s founding and the release of the currency. According to one estimate, “In 1997, 80% of [Palmeira] inhabitants’ purchases were made outside the community; by 2011, 93% were made in the district” (from People Money, The Promise of Regional Currencies).
Another key purpose of Banco Palmas has been to extend basic financial services and access to credit to people excluded from — or exploited by — the conventional banking system. The bank provides micro-credit loans for local production and consumption in either Palmas or the national currency (the Brazilian real). Importantly, loans issued in Palmas are interest free, while others are offered at very low interest rates, providing a much-needed alternative to the kind of predatory lenders that exploit people and businesses in other money-poor communities around the world.
What’s more, rather than awarding loans based on credit history, proof of income, or collateral — something many people in Palmeira lack — many are issued using a neighbor guarantee system. Banco Palma has been so successful that it has inspired the creation of over 60 similar initiatives throughout Brazil, and spurred the development of the Brazilian Network of Community Banks.
Today, Banco Palmas’ work extends far beyond the economic sphere. The the bank has sponsored an array of social projects in Palmeira, all based on the principles of the solidarity economy. Just a few of these include the Bairro Escola de Trabalho (“Neighborhood Work School”), the Escola Popular Cooperativa Palmas (The People’s School of the Palmas Cooperative), and the Academia de Moda Periferia (“Academy of Periphery Fashion”) — all designed to help youth, women and minorities living in “social exclusion” improve their own livelihoods and, at the same time, take part in strengthening the local community and economy. There are also a number of social businesses run in connection to the bank, including the Loja Solidária (“Solidarity Shop”), which sells goods produced in the neighborhood and hosts community cultural events, like concerts and art shows. Banco Palmas even supports its own musical youth group, the Bates Palmas Company, which, “represents the culture and the history of the neighborhood while also representing the principles of the solidarity economy movement through the manufacturing and selling of its own artistic and cultural products, including musical instruments, CD recordings, art workshops, and shows” (Banco Palmas). O Fórum Socioeconômico Local (The Local Social Economic Forum) provides a public space for the community to discuss the socioeconomic and cultural issues of the neighborhood and surrounding areas.
All together, Banco Palmas and the many projects it has helped bring to life provide some pretty convincing proof of just how much can be gained by choosing a bank that puts people over profits, and keeps money circulating in local communities.
To get more frequent updates on these projects and more, and to have a chance to connect with people working in their local communities around the world, join the International Alliance for Localization. And check out the Local Futures website to see a longer list of localization initiatives like this one!