12. A diversity of challenges and barriers
The expansion of community banks across Brazil has revealed a diverse set of challenges and barriers to Instituto Palmas.
Firstly, community banks can operate in Brazil under different legal configurations. There is no unifying legal configuration to encompass their mission, activities and products. As a consequence, a community bank can operate under different forms such as a NGO, a local association, a local union or an Organização da Sociedade Civil de Interesse Público (OSCIP; a civil society organization for public interests). None of these aforementioned forms are adequately suited to the proper functioning of community banks.
Secondly, public bureaucracy at the level of Federal or Local Governments has become the Achilles’ heel of community banks. With time and experience, Instituto Palmas has learned how to deal with public bureaucracy. Nevertheless, public bureaucracy remains a barrier in the development of community banks since public policies and procedures vary from one territory to next, and community banks seldom have the organisational and administrative structures to handle these territorial differences.
Thirdly, the most common barrier in creating a community bank is insufficient funds. Very often, the creation of a community bank can be stalled because the initial estimates for capital fell short of the real level of funds required by the project.
Fourthly, in some cases the community can also be an obstacle to the creation of a bank. Thus, to avoid community resistance the first task that Instituto Palmas performs is explaining to the residents what a community bank is, its mission, activities and objectives. The longer it takes the residents to understand the basic concepts of a community bank, the longer it takes Instituto Palmas to decide on the currency and the products or banking correspondence which will be offered.
Once these above challenges and barriers are overcome, the institute must undertake the following steps in setting up a community bank. First, it sends technicians to the community in order to establish contact with the residents and explain the structure, purposes and the functioning of the bank. Second, the institute tracks local associations who may be interested in managing the bank. Third, Instituto Palmas instructors will search for, recruit, hire and train local individuals who are comfortable with the methodological procedures which are imperative to the daily operations of the bank. Asier describes the arduous nature of the process “… to find the right people to manage the bank… who will be the bank manager, the cashier, the loan agent, the loan officer… Training them to make sure that they will work well; this is the most difficult thing. Because it is a work that is very detail oriented, and with which we have to be very careful, and we work in communities where people have a very limited education.”