6. Palma: a social currency
A local alternative currency – a social currency called Palma – was created by ASMOCONP to encourage local production and consumption. At the time of its creation, the Palma was such a novelty, that it led to strong resistance from Brazilian authorities. It is reported that in 1998, when Banco Palmas was preparing to be launched, the police raided its then tiny office, following complaints from Brazil’s Central Bank. The Palmas had not yet been printed, but the police seized a handwritten ledger and 1000 Reals. Joaquim had to convince the government that the Palma was not a threat to the Real because it was pegged against the latter and that it was as legitimate as a coupon. Hence, the Palma (see Figure 7) which is printed on special paper with security coding to prevent forgery, is backed by the Real at one-to-one parity, so that for each Palma in circulation one Real is held in reserve by ASMOCONP.
Figure 7: Palmas are issued on security paper to prevent forgery
Hence, when obtaining a microcredit loan, the borrowers will receive Palma notes instead of Reals from Banco Palmas. As the Palma currency is only accepted within the boundaries of the neighbourhood, borrowers tend to spend the currency on local purchases. Converting the Palma into Reals can be done at any time at ASMOCONP, but this is discouraged through the imposition of a two percent administration fee. Today, the Palma circulates side-by-side to the official Brazilian currency and is accepted by local merchants.
As mentioned earlier, the aim of this local social currency is to promote a production and consumption cycle within the community, so as to ensure that the multiplicative, income-generating effects of the microcredit loans remain in the local economy. To further ensure these positive effects, two lines of microcredit are offered in the Palma currency: one that finances producers and merchants, and another that finances local consumers. To obtain either type of microcredit loan, the borrower does not have to present any documentation or formal guarantees like those required by formal credit institutions. Rather, the system is based simply on the borrower’s local reputation, with neighbors giving assurance that the person applying for the loan is responsible and trustworthy. Additionally, loans issued in the social currency do not carry any interest. It is in those regards, that the Banco Palmas conditionality is different from those of traditional banks.
Figure 8: The PalmaCard
Today, the residents of Conjunto Palmeira can also use a PalmaCard (Figure 8) in conjunction with the Palma currency. The PalmaCard, developed by Banco Palmas, functions like a credit card and enables families to buy goods in local stores and pay for them, interest-free, the following month. The card therefore allows families to obtain goods ahead of earnings, but like the Palma, also ensures that local products and services are bought within the community.
 Prada, P., 2011. In pockets of Booming Brazil, A Mint Idea Gains Currency, Wall Street Journal, September 20.