Banco Palmas is an initiative of local currency and microcredit which has been practiced since 1998 at the Palmeira neighborhood in Fortaleza, Brazil. Ashoka Fellow João Joaquim de Melo Neto Segundo founded Banco Palmas as a strategy to address a larger cycle of poverty and stalled economic growth as a result of the lack of credit in poorer regions. This bank provides small-amount loans not in real, Brazil's official currency, but in palma which circulates only within this neighbourhood. The parity (1 palma = 1 real) makes it easier for businesses to use and accept this currency. Credit cards as well as loans for house reforms are given to some users too. For each Palma in circulation, one Real is held in reserve by the association. Since the currency is good only within the boundaries of the neighborhood, borrowers tend to spend these resources on local purchases. As a result, this generates positive effects in the local economy.
Banco Palmas effectively meets the need for financing for low-income citizens by working within the unique requirements of the favelas. For example, credit offered by the Palmas Bank does not require documents, or any registered guarantees, such as the larger, institutionalized banks. Rather, neighbors vouch for the person receiving credit, giving assurances that the person is responsible and has experience in the intended field of activity. In addition, community validation increases the collaborative nature
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.
Although it is hard for most inhabitants at Palmeira with limited income to get loans from ordinary commercial banks, or they are obliged to pay quite high interest rate in case they are financed, Banco Palmas gives them cheaper loans, helping people financially too. This has allowed creating more than 1,000 jobs in a neighbourhood of more than 30,000 inhabitants. Credit cards as well as loans for house reforms are given to some users too. Ten years after the Banco Palmas project was initiated, and despite difficulties due to a lack of financial resources, especially in the initial years of operation, ASMONCOP estimates that 1 600 people have been capacitated, as well as 700 direct and 2 500 indirect jobs having been created. In addition, local merchants have registered an increase of 30% to 40% in their sales.
Other poor districts of Brazil have been receiving training in order to start similar projects in their own communities. This evolved to the constitution of the already mentioned Bd France too.
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