13. Ingredients for success
Instituto Palmas maintains that main ingredient for the success of community banks is not financial services or microcredit since these are not sufficient for promoting social inclusion. Cohesion between the people of the community is the indispensable ingredient for success. Asier explains that“the more structure a community has, in terms of social contact, basically how people relate to each other within the community, the higher the chances are that a community bank will succeed… And this challenge is huge, because the bank not only needs to manage and deal with financial inclusion, but also deal with extreme social exclusion where people do not even know about their own territory.”
Another important element for success is Instituto Palmas’ ‘territorial approach’ based on creating financial and non-financial tools designed to respond to the different needs, realities and expectations of different territories. The ultimate goal is to stimulate empowerment of each territory and encourage eventual autonomy from the institute and the government. In some cases, Instituto Palmas has to monitor and support the banks for a few years, in order to consolidate the latter’s management and to encourage them to independently create partnerships with other supporting organizations.
The presence or absence of local factories, businesses and producers also determines the impact and the success of community banks. In communities where local associations are active, opening a community bank leverages the existing local economic dynamic and generates wealth and growth. Asier summarizes the conditions that allow a community bank to blossom: “So, which factors affect that local ecosystem? I would say, local social fabrics including local associations that have credibility with the community. Educational capacity in the location, support from the local government, and a clear idea of what runs the economic life of the territory also helps.”