10. From solo operations to partnerships

In the beginning, it was a challenge for Instituto Palmas to manage the network’s expansion due a lack of certain specific competencies and experience in the field. Moreover, an additional challenge was that the Brazilian society in general was not familiar with the role and functions of community banks. To overcome these challenges, Instituto Palmas developed partnerships with other financial institutions which had, for example, competencies in diagnosing demographic zones where community banks are needed and in providing support in start-up activities.

Among the first partnerships, was the one created in 2005 between Instituto Palmas and Brazil’s largest banking institution – Banco do Brasil – to develop a shared microcredit operation in Conjunto Palmeiras. The partnership combined the strengths of each party whereby on the one hand, Banco do Brasil had extensive access to funds, as well as technological tools and back-office systems to support large-scale credit operations, but lacked knowledge of lending methodologies for microcredit clients. On the other hand, Instituto Palmas possessed expertise in microcredit practices and methodologies, but had limited access to funds and technology.

The partnership involved an initial allocation of R$ 270,000 ($160,000) from Banco do Brasil to Instituto Palmas to be employed in offering microcredit to local residents. This resulted in a huge increase in the amount of funds available to Banco Palmas for microcredit purposes growing from R$ 30,000 ($18,000) to R$ 300,000 ($180,000). However, in accordance with Banco do Brasil’s operational policies, microcredit loans had to be issued in Reals. Plus, Banco do Brasil charges Banco Palmas a monthly interest rate of 2% which is transferred to the microcredit loans. Although other aspects of Banco Palmas’ lending methodology remained unchanged, these two specific requirements represented a significant shift from its original principles and philosophy of no interest loans and the use of a social currency.

Instituto Palmas established other partnerships, such as with the Secretaria Nacional de Economia Solidária[1] (SENAE; National Secretariat for Economic Solidarity) and the Banco Nacional de Desenvolvimento Econômico e Social(BNDES; National Bank for Economic and Social Development in Brazil), to develop the network of community banks in Brazil.


[1] Under the aegis of the Ministry of Labour and Employment of Brazil.

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