YPA: What is social currency?
AA: It depends on the angle you look at. There are a lot of different models in countries such as Kenya, France and Japan, also known as local or complementary currencies. The important thing about each currency is that one local community defines what are the principles, what is the use, how to use it and which should be the investment mechanism. Issues that are important to the sovereignty of each population. The local currency of Banco Palmas was created within the Palmeiras group, which is where Banco Palmas operates. It’s a currency that was created to contribute to the organization of local economies, and by organization I mean the dynamization of networks of local producers and consumers. When this network of local production and consumption is developed, people create a differentiated, solidarity and sustainable economy. Currency is one of the important tools, not only in practical and operational terms, because it allows the local consumption, but also in pedagogical terms of sovereignty and symbolic, because it is a tool of local power.
YPA: During your speech at the closing table of the International Forum for Well-being you said that until a few years ago the circulation of a currency parallel to the official currency was illegal. How and when has this changed and what is the role of Banco Palmas in this change?
AA: Banco Palmas was born in 1998. During the first 4 or 5 years we were ignored by the economic system. When this group learnt about Banco Palmas, it certainly did not like the proposal, because this system wants to maintain this monopoly of creating money and economic vision in the country. The first years were years of resistance and Banco Palmas faced two lawsuits. The last one in 2003, when facing the Central Bank’s indictment against the Brazilian state, we get a favorable sentence in which the judge, in other words, stated that Banco Palmas existed because the Central Bank was not complying with its mandate, which is to work for the financial inclusion of the Brazilian people. Twenty years ago, close to 70% of Brazilians did not have access to the financial system. It was in the first place a fight of resistance, because Conjunto Palmeiras exists for 45 years. Then, Banco Palmas is another symbol of resistance of this movement. Later, during the Lula administration, the National Secretariat for Solidarity Economy was created, which allowed and facilitated the implementation of community banks in other regions of Brazil. Through this program it was possible to reach the current number of 113 community banks in the country.
First, a moment of resistance facing the financial system and then, support for the creation of community banks. This is our vision for the strengthening of civil society, with greater independence and sovereignty in economic issues.
YPA: What is the measurable impact on local communities that have social currencies? How does this relate to the concept of well-being?
AA: It has issues that are measurable and others that are not. I’ll explain that with a case: in 2010, Banco Palmas started an exclusive microcredit line for women beneficiaries of Brazil’s conditional cash transfer program. There are other models like this in the world, but the Brazilian is the largest of them, where something around 13 million Brazilian women receive help to support their families. Nearly 30% of Brazilian families are beneficiaries of the program. Our line of productive microcredit was created to think about how these women could start different activities for income generation, with small enterprises or with small activities that they could carry out in the home to generate complementary income. That’s because it’s important to generate local wealth, which is one of the main functions of community banks such as Banco Palmas. After three months of running the program, we surveyed 100 women benefiting from the credit and one of the strongest things we’ve noticed was that in a neighborhood like the Palmeiras complex on the outskirts of Fortaleza, a beach town, half of these women had never gone to the beach. Think of the level of isolation of these women who were born or who have lived for over 20, 30, 40 years at that location, 50-year-old women who had never been to the beach.
We realized that more important than a line of microcredit, we had to take these women to the beach. That is well-being in the vein. Explain this to the World Bank or the Inter-American Development Bank. I tried, several times. But they look and wonder, not being able to get if they understood it correctly. They call you communist, anarchist, anti-system, because you say that taking those women to the beach is more important than microcredit. Obviously, microcredit is important, but in this context of isolation, in the handcuffs on the heads of those women who are the main local development institution of any community, who are the head of these families, caring for the next generation, thinking about the economy of the house, situations in which the husband is often not present or is not a positive reference, we realized that we needed a much more holistic look.
We created the ELAS project from this data that we’ve collected, a project of socio-productive inclusion of women from Bolsa-FamĂlia which, in addition to microcredit, it built all the skills, provided time for leisure, for women to get to know the city, to connect in a space only for them. Working the psychological issue, as many speakers spoke during the Forum for Well-Being, to look inside before looking outside, to have this internal peace to face this great challenge of removing families from the situation of inequality or economic poverty, which is very strong.
So, this is our contribution to well-being. A conventional bank would never do that. But a community bank that thinks of microcredit and uses it for investments in production and generation of local wealth, uses the social currency, sees that it can intervene in this condition by the proximity to the territory, realizing that the challenge and dimensions of poverty are very broad. A community bank has this capability, a conventional bank will never do this. Firstly, because they will believe that they’re very risky operations, therefore, they are not worth it, and they think that some paternalistic or assistance policy is the unique way. A community bank, where the community itself works on it, completely changes a project that had started with microcredit and turned out to be something much bigger.
We have an example with the digital currency in the city of MaricĂˇ, in the state of Rio de Janeiro: we have issued a notice of the city hall to distribute a benefit that the city of MaricĂˇ offers with the royalties of petroleum, which is the bolsa-mambuca. Basically a local conditional cash transfer, but distributed through our digital community bank platform, e-dinheiro (e-money). It turns into local currency managed by the local community bank that owns the platform and then this money is consumed only in that territory. We already have 5 months of experience there, with over 5 thousand users registered in the platform, accessing their benefit, despite locals consuming in the area. As a result, we have generated more than R $ 1,500,000.00 of local purchases using our digital community bank platform, and the difference of making this purchase with our platform or with a Visa or MasterCard is that these companies will charge, on average, 6% merchant fee to receive purchases with these cards.
With Banco Palmas’s digital community bank model, merchants pay 2% instead of 6% and those 2% are reinvested in that territory. These R$ 1,500,000.00 generated 30 thousand reais to invest in the region. What did the community bank in MaricĂˇ do? Talked to the community to decide what to do with the 30 thousand reais generated by local consumption. Money belongs to the community, they themselves produced and generated that income via local consumption and are a popular local sovereignty. They decided to invest in productive microcredit without interest. A big difference from the traditional market that can charge up to 50%, 60% of annual interest of entrepreneurs for productive microcredit.
These are some of the examples that have the greatest impact. Not to mention that if these same purchases had been made in the traditional system with rates at 6%, this would represent 90 thousand reais, leaving the territory never to return. The profit that Visa or Mastercard obtains from these operations goes to large financial centers of the institution’s headquarters in SĂŁo Paulo or the United States and never returns to the territory that produced that wealth. That’s the differential of the social currency and the community bank, that the wealth that you generate within the territory, most of it circulates and is distributed in the region. Issues such as well-being help to better work this multi-dimension of a situation of inequality or poverty.
YPA: What are the current challenges facing social currencies inside and outside communities?
AA: The parliamentary coup against the democratically elected president Dilma Rousseff, in 2016, put Brazil in an extremely complex situation, politically and economically. Those in power today generate a lot of uncertainty about what will happen after the elections, there is a huge polarization and we do not know what the future of the country looks like. This greatly undermines the types of public policies that can be created for community banks. We are looking at the alternatives and the example of MaricĂˇ, of using a digital community bank, and palmas e-dinheiro to distribute social benefit instead of opting for a traditional bank like Santander or ItaĂş is a big gain, because it shows what community banks can be in terms of impact and financial sustainability. A more transparent system, much cheaper, with no owner and, once again, with the notion that the wealth created locally should be distributed locally, gaining an independence of public policies and giving sovereignty to the civil society that works with economic rights. I believe that this is our main opportunity, along with the challenges of convincing different communities, municipalities and other private entities that this is very interesting for Brazil. Brazilian financial system is one of the most profitable in the world. We have a very serious problem and we need to talk about this because these private commercial banks are not investing in the population that has the capacity to produce at different levels. That’s what generates employment, income. When we put people as protagonists we have a much better chance of thinking about a more sustainable country.For example, when you put the riverside communities, the outskirts of the big cities, the backwoods in local decision-making, I think the chance to work out is much greater. What kind of reform can we do in the country when banks are stealing the economic capacity of the population?
YPA: Local currencies, by definition, are limited to a particular area where they circulate. Is this going against globalization?
AA: During the Forum I heard a speech that we should be careful not to deliver this wonderful gift that is the globalization of peoples to the capitalist markets and to the companies. We are in different struggles, but in reality it’s the same fight. We cannot deliver into the hand of capitalism the gift of indigenous peoples, descendants of slaves in Latin America and Brazil, the people of the peripheries, immigrants and refugees in Europe, the French middle class, this worldview through economic democracy, well-being, circular economy, the challenge of the environment, all into the hands of the market, which has a single-minded vision. We have to bring all the different looks and work together. The social currency is countercultural if we compare it to the only currency in the world that is bank money, supposedly produced by the Central Bank.
We believe (that the production of money) should not be just a centralized activity, but we have to be careful because in Brazil that’s illegal. So our currency is counterculture in the sense that it is a community that is producing and thinking a currency as a tool to support local consumption, not a confrontation. Banco Palmas has already been accused of crimes against the Brazilian state. So for each unit of social currency that we create, we have to have R$1 of ballast. We create the currency to stimulate consumption and local production so that we can reorganize the local economy and power. Palmas currency facilitates this. What we would like to see eventually is how we can create alternative currencies that are not backed up in the official currency, to have greater autonomy and local financing capacity. Often communities cannot develop because they do not have the opportunity to invest, since we don’t have mechanisms to share risks and wealth. The wealthiest places in the world, like California for example, have investment models where investors and entrepreneurs share the gain and the risk as well. In the microcredit model, for example, the responsibility is far above the entrepreneur. If we can create alternative currencies, it will be easier to think of self-financing models. We’re not asking for a miracle. What we ask is that people have the capacity to produce, to do what they already know how to do.
That is a fundamental aspect and it’s where the digital coins that we are developing come in. The models we have created are allowing local consumption to self-finance those regions. That’s solidarity finance in the vein.
This year, Banco Palmas is holding the Global Meeting of Solidarity Development Banks in 2018, bringing together the entire network of Brazilian community banks and with the unprecedented participation of actors and international initiatives related to the theme of solidarity economy. The event will take place between September 4 and 6, in the city of Fortaleza.