Microcredit and Innovative Local Development in Fortaleza, Brazil: The Case of Banco Palmas

microcredit in brazil

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This article describes the history of Banco Palmas, a particular Brazilian microcredit undertaking initiated about ten years ago by a neighbourhood association representing 30,000 inhabitants located in a very poor district of North-Eastern Brazil. Combining three innovative mechanisms--social currency, professional training, and local consumption and production mapping--Banco Palmas has developed a local, home-grown methodology to scale down microcredit and foster social development.

> Cet article decrit l'histoire de Banco Palmas, une experience particuliere de microcredit lancee au Nord-est bresilien il y a dix ans par une association de quartier qui represente 30 000 habitants a revenus modestes. Conjuguant trois mecanismes innovateurs--monnaie sociale, formation professionnelle et cartographie de la production et de la consommation locales--Banco Palmas a elabore et ancre localement une methodologie qui adapte le microcredit et soutient le developpement social.


Microcredit is increasingly perceived as a powerful instrument for poverty reduction and income generation for low-income population segments in developing countries. The United Nations' proclamation of 2005 as the International Year of Microcredit, as well as the Nobel Peace Prize awarded in 2006 to Muhammad Yunus, are both clear signs of this recognition.

Within this international context, and beginning in 1999, the Brazilian government launched a number of regulatory measures aimed at promoting microcredit. As a result, in recent years, an incipient Brazilian microcredit industry has started to flourish, with a variety of microcredit programs being led by NGOs, by for-profit organizations, and even by mainstream banks. However, as the country does not have a strong tradition of microcredit or know-how in the area, most of these newly emerged operations are based on the implementation of microcredit "best practices" or methodologies imported from other countries. No matter how successful such practices might have been in their original settings, the

extent to which their simple replication can achieve satisfactory results in such a complex geo-economic environment is a question that still calls for debate. So far, despite almost ten years of policy efforts, Brazilian microcredit penetration rates still rank among the lowest in the world.

This paper describes one particular Brazilian microcredit initiative which, unlike most of its counterparts, has developed a local, home-grown methodology to scale microcredit and foster social development. The experience, called Banco Palmas, was initiated about ten years ago by ASMOCONP (Associacao dos Moradores do Conjunto Palmeiras), the neighbourhood association of "Conjunto Palmeiras," a peri-urban slum district of 30,000 inhabitants located on the outskirts of Fortaleza, the capital of the state of Ceara, in North-Eastern Brazil. What mainly differentiates Banco Palmas from conventional microcredit initiatives is its preoccupation with sustainable territorial development, rather than with the success of individual microentrepreneurs. In technical terms, while virtually all Brazilian microcredit organizations adopt what is called a "minimalist" model of microcredit, Banco Palmas has developed a more "integrated" approach (Ledgerwood 1999; Nitin and Tang 2001; Woller and Woodworth 2001).

The aim of this paper is, therefore, to provide a concrete illustration of a socially and historically situated microcredit initiative that, due to its innovative nature, we believe is worth studying as a possible model for Brazilian and Latin-American microcredit organizations and policymakers. Out research question consists in identifying how the Banco Palmas' "integrated" microcredit approach was historically developed, how the project is currently applied, and how it affects the local community of Conjunto Palmeiras. …

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