The Contribution of Social Currencies to Microfinance: The Case of the Brazilian Community Development Banks

Since its widespread diffusion in the mid-1990s, microfinance became an important part of poverty reduction strategies. However, the impacts of its main financial technique, microcredit, have been more and more questioned during the last decade. Several limits of this tool have appeared, which even happened to be harmful to those supposed to benefit from it. After an overview of the state of microfinance in Brazil and a review of the limits of the microcredit tool, we focus on a particular adaptation of the microfinance model: the one implemented by the Brazilian community development banks, which are today more than a hundred on the whole Brazilian territory. One of the main innovations of these civil society organizations is to link microcredit to the issuance of a social currency, the use of which - in addition to the Brazilian Real - is confined to the local territory. We highlight the benefits of these currencies and see to which extent they respond to some of the limits of microcredit, through the example of the Palmas Bank, which founded this model of solidarity finance. Not only economic tools but also social constructions, these currencies participate in endogenous development and can be the vehicle for the co-construction of poverty reduction policies.