Solidarity finance through community development banks as a strategy for reshaping local economies: lessons from Banco Palmas

Abstract

The purpose of this paper is to reflect on the possibilities and challenges of Community Development Banks (CDBs) as an innovative method of socioeconomic management of microcredit for poor populations. To this end, we will discuss the case of Banco Palmas in Conjunto Palmeiras in the city of Fortaleza, in the northeastern state of Ceará, as an empirical case study. The analyses presented here are based on information obtained from Banco Palmas between late 2011 and early 2012. In addition, previous studies by other researchers on the bank and other studies on CDBs were important. The primary data collected at Banco Palmas came from documents made available by the bank, such as reports and mappings. The analyses describe some of the characteristics of the granting of microcredit and allow one to situate it in the universe of microfinance and solidarity finance. They also show the significant growth of local consumption, mostly through the use of the Palmas social currency. The Banco Palmas experience, aside from influencing national public policies of solidarity finance, initiated a CDBs network that encourages the replication of these experiences throughout the country.