Country: Brazil
Organization: Associação dos Moradores do Conjunto Palmeira
2) Sector of activity: Financial Services
3) Description of your products or services: The Associação dos Moradores do Conjunto Palmeira which is based in a poor area around Fortaleza-Ce/Brazil of around 30 thousand inhabitants, created Banco Palmas, a community economic system that offers alternative lines of microcredit (for producers and consumers), instruments of local consumption (credit card and its own social currency) as well as marketing alternatives (fairs and solidarity stores), all of which locally promote the creation of jobs and income. The social currency called PALMAS runs in parallel with the official currency (Real) and is accepted and recognized by neighbourhood producers, storekeepers and consumers creating a supportive and alternative market between families. Banco Palmas’ philosophy consists of forming a local network where the inhabitants of the neighbourhood buy from local businesses in the community. Banco Palmas has currently created companies for clothing (Palmafashion), leather (Palmacouros), cleaning products (Palmalimpe), natural soaps (Palmanatus) and handicrafts (Palmart). Within the partnership of local businesses there are special discounts for those buying in the local currency. It is possible to get up to 10% discount on products and services at the gas station, the household gas company, the neighbourhood stores in general and the collective transport service.
4) Description of the operational model: Banco Palmas issues loans to the locals so that they can organize their businesses collectively and on an informal basis if possible. They may then use the bank’s brand PALMAS and thus a local business network is created. They are all independent but contribute collectively to the payment of services such as product marketing, water rates, and telephone among others. The businesses market their products primarily in the local stores or directly in the production areas. The inhabitants are encouraged to buy local products using a credit card (PALMACARD). This card enables purchase and payment up to 30 days later. Another way of aiding the marketing of products is by using the social currency PALMAS. In addition to this, there is a permanent campaign in the local schools, churches and other local groups inviting people to consume products from local businesses. This campaign is entitled: NEIGHBOURHOOD PURCHASES: MORE JOBS. Other popular communication methods include broadcasting on community radios, videos, popular theatre and photo novels in which the local producers are the protagonists.
5) Description of the financial model: the financial system created by Banco Palmas has four sustainability strategies: a) low interest rates for loans in official currencies (Real). Interest rate is around 1.5% per month which is very low considering the rates in Brazil. The loans in social currency have no interest rates. b) every time a producer or storekeeper goes to Banco Palmas to exchange money, whether Palmas for Reales ro the other way around, and administration fee of 1% is charged. c) contribution sfrom businesses of the Banco Palmas network amount to 3% of their annual profits. d) administration fees for paymentso f services such as water, electricity and telephone among others. Banco Palmas’ financial system will be sustainable once they have a portfolio of approximately 30 thousand Reales, 30 thousand Palmas and around 2 million clients. Given the current figures, we hope to reach this balance in January 2007. Currently only 40% of the system costs are self-sustaining.
Client fees represent this approximate percentage of operational budget: 40%
6) Key operational partnership: the biggest partnership is with associations, schools, churches and other organized groups in the neighbourhood who encourage the people of the area to buy local products. Another strategic partnership is with the Asociaoción Comercial Del Barrio (neighbourhood business association) who give priority to local products and accept the PALMAS currency. Other important businesses (such as gas stations, household gas companies and collective transport owners) are very important to the strategy of encouraging the flow of social currency through the neighbourhood as well as guaranteeing low prices to the public. We are also consider partnerships with public authorities to be very important, however we have not had any success so far in that area. The biggest restraint to establishing the company is showing to businesses clearly that real gain is possible with a social currency. Once they increase their billing and maintain a constant awareness campaign so that people buy from local businesses which in turn will generate employment for the community and improve the quality of life for all the locals.
7) Current outreach:
We are at the Scaling Up stage. Banco Palmas has been in existence for 7 years and we are in expansion within 11 municipalities in Estado do Ceará.
How many clients have benefited from your product/service in total? Over the last year? Banco Palmas has 1200 clients, ie the number of people who have taken out loans with the bank (in Reales or in Palmas), take part in fairs, are members of any of the Banco Palmas Business network or have a business that takes the Palmas credit card or the Palmas currency. All of these are considered members of the network and are as such clients. Given all the products and services provided by the bank that are benefited the people in general, we can say that the number of clients goes from 1200 to 30 thousand people.
What percentage of your clients is below the poverty line ($2 per day)? 60% All the inhabitants of the neighbourhood are considered clients. In this case, 60% of
them are below the poverty line.
What is the order of magnitude of the potential demand for your products or services? Which
other low-income groups, countries or regions could benefit from it? Try to quantify (number
of clients, market size in currency):
it is possible to benefit all the inhabitants of the Palmeira area (around 30 thousand people) with the financial system created by Banco Palmas. The methodology can be applied to any neighbourhood or municipality that suffers from poverty. Last year the methodology was applied in Paracuru-Ce, which is a 90km from Fortaleza with very good results. There are currently 11 other municipalities that are receiving training from Banco Palmas technicians in order to implant community banks in their cities before the end of 2005, primarily with the view of benefiting families that receive money form the federal government welfare programs.
8) Scale-up strategy:
How many low-income individuals do you plan to benefit in three years from now? How are you planning to scale up or replicate your solution? What are the major constraints to scale up?
Banco Palmas methodology will have to expand in small Brazilian municipalities (less than 20 thousand inhabitants) and in very poor regions. We think that in the next 3 years we will have approximately 500 community banks in Brazil benefiting around a million low income families.
Which specific areas - and why - in your field would benefit most from investment by corporations, foundations, and other investors:
We are currently setting up five Community Banks in the Estado de Ceará. The National Economic Solidarity Secretary (SENAES), which belongs to the federal government ministry of work and employment, invited Banco Palmas to form a proposal to expand the methodology of Community Banks over the whole national territory as they believe it to be innovative and efficient in generating income for families that live beneath the poverty line and who receive aid from government welfare programs. Community Banks will have the role of organizing productive activities for these families, creating local consumer networks and setting up social currency systems so that economic solidarity goes hand in hand with existing economic processes.
9) The organization: How does the initiative fit with your overall organization's strategic goals and priorities? How did the initiative start?
Our mission is to fight urban poverty through local development projects, using the principles of economic solidarity as a basis. The Community Bank fits in perfectly with the institutional mission of the Associação dos Moradores do Conjunto Palmeira and works with those who are poorest while organizing and mobilizing the community towards local development. The Bank generates income for families by using the basis of the organizational process, mobilizing the local actors such as businesses, social organizations, public authorities and the inhabitants in general.
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10) On the mosaic diagram, which of these factors is the primary focus of your work?
- Factor: Limited purchasing power of individual clients
- Principle: Design products and services that tap into the wealth of poor
Contact Information:
Name: João Joaquim de Melo Neto Segundo
Organization: Associação dos Moradores do Conjunto Palmeira
Mailing address: Av. Val Paraiso, 698 Conjunto Palmeira - Fortaleza-Ceará
Country: Brazil
Email: bancopalmas@uol.com.br
Tel: 0055 85 3250-8279
Fax: 0055 85 3250-8279
Organization's legal status: Association
Number of Employees: 6
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