Community Development Banks
= "Community Development Banks provide solidarity finances services in a network of associative and communitarian nature, directed towards the generation of jobs and income, having at its base the principles of the Solidarity Economy." [1]
Characteristics
What are the main characteristics of the Community Development Banks?
1. the community itself decides to create the bank, becoming its manager and proprietor;
2. it always acts with two credit lines: one in Real currency (R$) and another one in circulating social currency;
3. its credit lines stimulate the creation of local production and consumption networks, promoting the endogenous development of the area;
4. it supports enterprises, as a commercialization strategy (solidarity shops, fairs, central office for commercialization etc.);
5. it acts in areas characterized by a high degree of exclusion and social inequality;
6. it is aimed at a public characterized by a high degree of social vulnerability, in particular the beneficiaries of governmental programs;
7. it aims to become financially sustainable in the short term, obtaining subsidies justified by their social utility." (http://dowbor.org/ar/community_development_banks-instituto_palmas_methodogy.pdf)
FAQ
What is the objective of a Community Development Bank?
Promote the development of low income areas, through the encouragement and creation of local production and consumption networks, with the support of the economic initiatives of the Solidarity Economy and its diverse scope. For instance: socio-productive enterprises, service provider, support for commercialization (markets, solidarity fairs) and consumer organizations.
What is the management structure of the Community Development Bank?
CDBs are managed from within the structure of the community organizations (associations, councils, forums etc…) and other type of civil society initiatives that are recognized within the community (unions, NGOs, Church). Thus, its functioning involves the establishment of a team in charge of the executive coordination at the heart of the associative organization itself. Accordingly, its management involves a shared dimension with strong components of local social control, based on the mechanisms of direct democracy.
How do you finance Community Development Banks?
Its financing is done through access to public resources as well as a solidarity fund for community investment. This fund is formed by multiple sources of funding, from private donations from people and/or legal entities, membership fees (person or legal entity), commercial services provided that face no competition and other types of services provided." (http://dowbor.org/ar/community_development_banks-instituto_palmas_methodogy.pdf)
Examples
Brazil
Camille Meyer and Leonardo Leal:
"Community Development Banks (CDBs) are a growing and dynamic manifestation of the solidarity economy in Brazil. This unique system of solidarity finance is currently in place in more than 100 Brazilian municipalities. Created by local associations to (re)organize local economies, they develop financial tools (microcredit, social currency, correspondent banking) governed and organized by the users themselves. In this article, we outline a general overview of these initiatives. First, we explain some characteristics of CDBs.
Second, we present the experience of two CDBs, Banco Palmas and Banco Bem, which have excelled in promoting access to the means of production, consumption, education and training for large sections of the population of the neighbourhoods in which they work. Finally, we study the relations between these CDBs and public banks.
With over 100 solidarity economy initiatives in Brazil (Melo and Braz 2013), understanding the phenomenon of Community Development Banks (CDBs) is increasingly important. For one, CDBs are logical responses to a financial system that keeps 40% of the population excluded from access to financial services and banking (according to data from the Financial Inclusion Project from Central Bank). In addition, CDBs are evidence of a dynamic civil society concerned with fundamental public issues, aiming to democratize financial resources so that finance serves the needs of all (Meyer 2013).
In this article, we first introduce some of the principles that guide the actions of CDBs. Second, we present the experiences of two CDBs, Banco Palmas and Banco Bem, which have excelled in promoting access to means of production, consumption, education and training for large sections of the population of the neighbourhoods in which they work. Finally, we study the relations between these CDBs and public banks and how they affect the provision of financial services to the community.
CDBs serve the populations of poor and marginalized areas by financing and advising solidarity enterprises. They stimulate the creation of local networks, promoting endogenous development in order to generate employment and revenue. To do this, CDBs consider it necessary to relocate capital and more generally to strengthen local economies. The concept of “integrated territorial development” as developed by CDBs (Melo and Braz 2013) goes beyond strictly economic indicators and therefore fits a definition of multidimensional wealth creation that is both quantitative (job creation, increased income, and so on) and qualitative (for example, generating social cohesion, reducing domestic violence, access to education). Thus, CDBs understand "development" as strengthening endogenous forces in the community: they promote the regional capacities by creating and stimulating local networks of producers and consumers.
To do so, CDBs offer the community a range of financial and non-financial services, such as vocational training programmes and support for business start-ups. As CDBs are located in areas with high levels of financial exclusion, they are faced with a high demand for credit and money access. For this reason, CDBs offer loans in two currencies: productive loans which are given in the national currency, and consumption loans which are offered in a locally circulating social currency. With this mechanism, CDBs stimulate local production through a funding stream (microcredit) and encourage local consumption with the social currency. In doing so, CDBs are able to re-organize poor economies through the combined stimulation of supply and demand.
CDBs grew out of organized social movements, such as associations and trade unions. These associations govern by creating a local public space, or forum, in which citizens and managers decide together on the CDBs’ role in local development, for example by selecting the financial and non-financial products the bank can create to improve the inhabitants’ living conditions. Through these associations and forums, CDBs are established and administrated by their own users in a democratic and participatory way. CDBs forums can be considered open spaces where local users govern the activity of the bank themselves, and do so as common goods institutions (http://www.unrisd.org/unrisd/website/newsview.nsf/(httpNews)/492A681B2A2F6D9CC1257BE900409F00?OpenDocument)
See:
More Information
França Filho, G., A. Scalfoni, J. Silva Junior and C. Meyer. 2012. L'enjeu de l'usage des monnaies sociales dans les banques communautaires de développement au Brésil: étude de cas de la Banque Palmas. Revue internationale de l’économie sociale – Recma. No. 324, pp.70-86.
Melo, J. and J.B. Braz. (eds.), 2013. Banco Palmas – Resistindo e inovando. A9 Editora, São Paulo.
Meyer, C. 2013. Les finances solidaires comme biens communs durables: étude de cas de la Banque communautaire de développement Palmas (Brésil). Éditions Luc Pire, Liège.