In 1998, a community of 40,000 people living near an old landfill in Fortaleza obtained a R$2,000 loan from a nongovernmental organization (NGO). The community was organizing collective efforts to build houses and schools and discussing ways to improve quality of life in the region. They decided to make use of the local impetus—and the money—to found a bank, creating a new currency called the palma. The palma was pegged to the Brazilian real and was designed to be used by residents at local businesses. The objective was to encourage the development of local commerce, discouraging people from spending their scarce income at establishments in other regions. Accused of fraudulent intent, Banco Palmas was sued by Brazil’s Central Bank before its legal status was recognized at the beginning of the year 2000. Brazil now has 167 community banks inspired by the institution in Ceará, according to Ariádne Scalfoni Rigo from the Business School at the Federal University of Bahia (UFBA).
Banco Palmas is considered the first community bank in Brazil and was founded by community educator Joaquim Melo, who lives in the region, together with the Conjunto Palmeiras Residents Association. “These are nonprofit institutions that provide community financial services with the aim of stimulating local production and consumption networks, especially in low-income areas,” explains Professor Eduardo Diniz of the Microfinance and Financial Inclusion Research Center at the Getulio Vargas Foundation (Cemif-FGV), who has been studying the topic for 20 years. In July 2024, Diniz organized a seminar at FGV for Brazilian and foreign researchers working on identifying and analyzing the phenomenon in different parts of the world. These banks operate by offering social currencies, which can be used for payments, credit lines, and social benefits (see infographic). To begin operating, an institution needs to receive an investment in reals and then issue the equivalent amount in social currency, the circulation of which is restricted to the surrounding communities, accepting it as a means of payment in establishments registered by the issuing community bank.
According to Diniz, the financial institutions must follow rules established by the Brazilian Central Bank, including that social currencies have financial parity with the real and the bank hold an equivalent reserve. “In other words, all amounts issued in social currency must be matched in the bank’s own holdings,” he explains.
Other services provided by these banks include zero-interest loans in the social currency for people too poor to buy essential items, such as food and medicine. They also offer lines of microcredit to small producers and local traders at interest rates below market values. Rates vary from 1% to 3% per month and the profit made by the bank is used to fund its operations or returned to cash. “By offering microcredit at low interest rates, these banks stimulate the opening of small businesses and the generation of jobs in vulnerable regions, contributing to the decentralization of development in Brazil,” says engineer Luiz Arthur Silva Faria, a coordinator of the Community Banks and Digital Social Currencies Observatory and a professor at the Federal University of Rio de Janeiro (UFRJ). “Traders can exchange social currency for reals at the bank itself, when necessary. This is essential to ensuring participation by people who also need to purchase goods outside their community,” continues Faria, who like Diniz is a member of the Research Association on Monetary Innovation and Community and Complementary Currency Systems, an international network created in 2011.
Joaquim Melo, the current institutional manager of Banco Palmas, recalls that in the beginning, the community of Conjunto Palmeiras lived in shelters made of cardboard boxes. In response to their precarious living conditions, the locals banded together to organize collective efforts to build homes, schools, and churches. It was only after this that the municipal government decided to install sanitation and electricity services in the community, which increased the value of the properties. As a result, families began selling their homes and moving elsewhere, using the money from the sale to pay off debts or achieve some form of financial relief. “We are an organized community, and in 1997 we started thinking about ways to use this sense of togetherness to improve the local economy,” recalls Melo. They started by carrying out a survey, identifying that the local population spent approximately R$4 million per month, mostly on basic items such as food and medication. “However, more than 90% of this amount was spent at businesses outside our territory. We thus realized that the community itself was becoming even poorer,” he explains.

Social currency in Maricá contributed to the development of local commerceEvelen Gouvêa / Maricá Municipal Government
In its first years of operation, Banco Palmas received international donations from NGOs and institutions such as the University of Oxford, in the United Kingdom. It entered a new chapter in 2003, when Brazil’s federal government established the National Secretariat of Economic Solidarity (SENAES), managed by the Ministry of Labor and Employment under the leadership of economist Paul Singer (1932–2018), from the School of Economics, Business Administration, Accounting, and Actuarial Science at the University of São Paulo (FEA-USP) (see Pesquisa FAPESP issue nº 267). Singer invited Melo to help create government training programs with the aim of sharing the experience of Banco Palmas across Brazil.
Carolina Pupo, who defended her PhD on community banks and social currencies at USP in 2021, says that between 2003 and 2015, SENAES issued calls for proposals that resulted in the creation of dozens of new banks. “At the time, these financial organizations were a popular way for the government to combat extreme poverty,” says Pupo, who is also part of the Community Banks and Digital Social Currencies Observatory. According to the researcher, local organizations expanded their territorial reach after being formally recognized by federal public policies.
At first, all social currencies circulating in Brazil were issued on paper, says UFBA’s Rigo. Just like the real, they were made of specific banknote paper with a holographic strip and serial numbers. In 2015, they began to be digitalized using E-dinheiro Brasil, a platform designed by the Brazilian Network of Community Banks, headed by Melo. Now, residents who register on the platform are given access to an app or a card with which they can make purchases at accredited commercial establishments in their region. “Transactions carried out on the E-Dinheiro platform are subject to small fees, which are used to cover operational costs and to fund the community banks,” explains Rigo. In 2016, when SENAES was shuttered, community banks were left without institutional support. As a result, they became dependent on partnerships with universities and NGOs, and many had no choice but to close.
Municipal governments have also started community banks to offer social currencies, one of which is located in Maricá, a city of 200,000 in the Metropolitan Region of Rio de Janeiro. In 2013, the local government created the social currency mumbuca and began using it for social welfare payments. According to Diniz, from FGV, the project started off small and grew gradually over time. By the end of 2023, 93,000 people with low incomes were benefiting from the initiative. The bank was funded by revenue from oil royalties and the development of the Basic Citizen Income (RBC) program in 2019. Diniz explains that Maricá was a commuter town with little commercial activity of its own, economically dependent on nearby urban centers such as Niterói and Rio de Janeiro. “The adoption of a social currency has boosted the local economy, so much so that in the last five years, the number of new businesses in the commerce sector has increased by around 50%,” he says.

Joaquim Melo, founder of Palmas BankPublicity / Palmas Bank
Economist Fábio Domingues Waltenberg, head of the Center for Studies on Inequality and Development at Fluminense Federal University (UFF), has been measuring the impacts of income distribution policies and the social currency in Maricá since 2019. Through quantitative analyses and interviews with some 5,000 people, the study found that households benefiting from the RBC program increased their consumption of goods and services by 5%, especially the purchasing of food and medicines, compared to vulnerable households that did not benefit from the program. The research is funded by the Jain Family Institute, a nonprofit applied research organization based in New York.
Waltenberg, however, believes that other policies also contributed to the changes, in addition to income distribution through social currency. “Revenue from oil exploration has offered Maricá a unique opportunity to implement innovative measures that, in the short term, are improving people’s lives and attracting migrants from other cities,” says the researcher. He notes that the municipality’s population increased by 55% between the 2010 and 2022 national censuses. “Sustaining this explosion in the medium term is a challenge, given that oil revenues are only expected to be available for another 15 years,” warns Waltenberg.
Despite recognizing that the social currency has contributed to socioeconomic development in Maricá, economist Lauro Emilio Gonzalez Farias, head of CEMIF-FGV, highlights that further empirical studies are needed to identify a causal relationship between the initiative and the improvement in the city’s economic conditions. “Another challenge is to avoid political capture of the project,” he points out.
Inspired by the experience of Maricá, 15 municipal governments across the country have invested in similar measures, most of them in the state of Rio de Janeiro. Niterói, for example, created the arariboia social currency in 2021, which now accounts for a circulation of R$19 million per month and is used by 100,000 people. Rio de Janeiro’s city council is currently debating a bill that would implement a social currency called the carioquinha in the state’s capital city. “When the banks are created by municipal governments, adoption of social currencies is easier because businesses that do not accept them are left out of an ecosystem worth millions of reals,” points out Waltenberg, comparing this situation with the work of community-run banks. Community banks have to make a great effort to convince the population to adopt a social currency. Some businesses, for example, offer discounts to people who choose to pay with a social currency instead of reals. Pupo recognizes the benefits of social currencies issued by the state, but also highlights that in a way, it distorts the original idea. She believes that one of the problems is when large commercial establishments join the ecosystem. “As a result, most of the money spent in social currency stops going to small businesses, instead benefiting a large supermarket chain, for example,” she points out.

The municipal government of Viladecans, Spain, created a currency to incentivize new energy modelsVilawatt
Diniz highlights another obstacle: a lack of regulation for social currencies, which makes it harder for municipalities across Brazil to adopt the approach. That could change if bill 4.476/2023 is passed. Currently being debated in the Chamber of Deputies, the bill defines what a social currency is and regulates how they are issued. According to the researcher, the bill has already been approved by the Committee for Finance and Taxes and is now being processed by the Committee for the Constitution and Justice.
Other countries have also developed social currency models. The Austrian wrögl and the Swiss wir (which is still in circulation) were the world’s first, created as a result of the financial crisis of 1929. According to Diniz, there are currently an estimated 10,000 social currencies worldwide, the majority of which are digital. In the recently published book Remaking Money for a Sustainable Future (Bristol University Press, 2024), Spanish researcher Ester Barinaga of Lund University, Sweden, and the Copenhagen Business School, Denmark, analyzes social currencies created in different parts of Europe. “In Europe, the creation of these currencies is generally linked to economic crises. On these occasions, people look for alternative means to ensure their survival,” said the researcher, who has a degree in business administration, in an interview with Pesquisa FAPESP.
One of the currencies analyzed in Barinaga’s book is the vilawatt, pegged to the euro and created by the government of Viladecans, Spain, with the aim of improving the quality of life of local residents and encouraging the development of new energy models. Owners of old houses and buildings with heating problems and low energy efficiency are paid subsidies in the social currency for improvements to their properties, including new windows and sustainable heating systems, such as solar panels. “These materials are purchased from local businesses who accept the vilawatt currency, strengthening the region’s economy,” says Barinaga. Municipal taxes can also be paid with the social currency, encouraging it to be more used in the local area than the euro, which tends to be saved for spending in large nearby cities, such as Barcelona.
In Brazil, community banks and social currencies are gaining new impetus thanks to the federal government’s re-creation of SENAES in 2023. Fernando Zamban, from the Ministry of Labor and Employment’s National Secretariat of Economic and Popular Solidarity, says that the objective is now to implement a national system for community finance, in which community banks will be one of the core strategies. “We are also studying ways to allow people to receive social welfare payments in community currencies,” says Zamban.
The story above was published with the title “Local wealth” in issue 347 of january/2025.
Scientific articles
DINIZ, E. H. et al. Assessing implications of cash transfer programmes with local currency to intra urban development: The case of Maricá. SSRN. 2024.
DINIZ, E. H. et al. Design principles for sustainable community currency projects. Sustainability Science – Springer Nature. 2024.
FARIA, L. A. S. et al. Centralizing or sharing the digital community currencies governances? Proposing ways of thinking DCC from the Mumbuca case. Ramics Congress. 2022.
GONZALEZ, L. et al. Moedas complementares digitais e políticas públicas durante a crise da Covid-19. Revista de Administração Pública. 54(4), 1146-60. 2020.
PEREIRA, L. et al. Efeitos de programas municipais com moeda social sobre o mercado formal de trabalho antes e após a pandemia de Covid-19: Um estudo de caso da moeda Mumbuca no município de Maricá-RJ. Revista Econômica. May 2024.
PUPO, C. G. de P. Entre os nexos dos circuitos da economia urbana e novas possibilidades financeiras: O uso da moeda digital Mumbuca E-dinheiro em Maricá (RJ). Boletim Campineiro de Geografia. Vol. 12, ed. 1. 2022.
RIGO, A. et al. Pesquisa nacional dos bancos comunitários de desenvolvimento: Relevância, resultados e principais desafios. Instituto de Pesquisa Econômica Aplicada (Ipea). 2024.
Book
BARINAGA, E. Remaking money for a sustainable future. United Kingdom: Bristol University Press, 2024.
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