11. Creating community banks
In order to create a community bank, the project must be, in a first instance, backed by an existing organization such as a local foundation or association or an organization from the public or private sectors.
In the case of a local foundation or association, the latter contacts Instituto Palmas and requests for further information on the creation of a community bank. This process is defined as a bottom up approach, since the interest for the creation of a bank comes from the community. It is similar to the process which led to the creation of Banco Palmas through the direct efforts of the community and ASMOCONP.
The public sector, represented by Local or Federal Governments, can also create community banks by having recourse to Instituto Palmas’ services and knowledge. Such public sector initiatives have also been witnessed outside Brazil whereby Instituto Palmas was contracted by the Government of Venezuela to train a team of government officials in launching Venezuelan community banks. This case exemplifies a top down approach, as the initiative comes from the government and not from the Venezuelan local communities.
Private sector initiatives entail private companies which are interested in enhancing development in territories where they are located or wish to locate. A successful example of such a private sector initiative includes the involvement of an electricity company in the creation of a community bank in the state of Rio de Janeiro. The company had to regularly cut electricity supply to the locals due to the latter’s inability to pay their electricity bills. The company realized that providing the locals with access to financial services and loans with attractive interest rates, will not only resolve the issue of unpaid electricity bills but will also lead to local economic development.
Instituto Palmas concentrates its efforts on excluded communities where the impact is the most meaningful. Asier Ansonera, Microcredit Director at Instituto Palmas, is adamant that community banks can only thrive in territories where inhabitants are committed to, and embrace the project. He emphasizes that “…before a bank can be implemented or started anywhere, the community has to be interested… and the community has to be responsible for the management of the community bank…. Because ultimately, it’s up to the community to decide whether they want to have a bank or not.” Communities must not only be committed to the development of the banks, but they must ensure the sustainability of their banks through the creation of partnerships without the intervention of Instituto Palmas. They must show autonomy which is considered as a presage for success.