Professor Mario Aquino Alves and colleagues at FGV-EAESP focus on how the Instituo Palmas developed from grassroots social innovation in a local community to top-down tech venture and digital social money.
When Social Innovation Goes Tech Venture, by Tom Gamble. Related research: Digital Social Money Implementation by Grassroots Organizations: Combining Bottom-Up and Top-Down Strategies for Social Innovations; Eduardo Diniz, Mario Alves, Adrian Cernev, Eros Nascimento.
Going digital – the venture phase
The introduction of digital cash to a social innovation initiative changed the nature of Banco Palmas. It increased the distance between the organisation’s original grassroots identity and the key feature of social currency. In effect, the second pillar of the social innovation became digitalized. And the projects greater in scale.
In 2014, the Instituto Palmas was contracted to create a CDB in the city of Maricà, 63 kilometres from the capital Rio de Janeiro. While located in an oil-rich state, Maricà possesses 4 districts with high rates of poverty. Aware of the success of the Banco Palmas model in creating local wealth, the mayor of Maricà was also wary of the so-called ‘paradox of plenty’ which claims that regions blessed with abundant natural resources – especially petroleum – usually tend to maintain themselves in conditions of poverty.
The Instituto Palmas mission was therefore to set up a two-pronged strategy with this in mind: encourage a demand-side policy of income cash distribution to low-income earners via a municipal debit card, and introduce a supply-side policy aimed to encourage and develop local entrepreneurs and shop owners through microcredit.
Although cash transfer using digital cards is common in many countries (the Bolsa Familia in Brazil benefits 12 million families, for example), the Instituto Palmas initiative was the first time this type of benefit occurred in combination with a local social currency.
Once again, the new project made an impact on the identity and approach used by the Banco Palmas. The digital debit card, whereby the population receives a monthly grant worth $32 which can only be spent at registered local stores, was something inexistent in the original model of the community bank.
Moreover, the scope in the latest project is municipal, changing the concept of the community as territorial to a broader sense of ‘municipal community’. And finally, the relevant social groups involved include a debit card infrastructure manager and the decisive participation of the city government, responsible for the cash input of the whole system.
The initiative met with satisfaction from the three main project stakeholders: the city authorities and the Instituo Palmas because it ties in with their solidarity economy philosophy; the community banking staff because it is a way to attract clients and offer more profitable services; and finally the local store owners who saw the occasion to increase profit through the poor having more cash in their hands. However, the experience also generated drawbacks.
The sense of community that was a successful feature of the former grassroots projects seemed to be lacking – beneficiaries seeing the community bank more as a simple outlet from which to pick up the debit card and discuss any possible difficulties. A further reason for lack of community spirit also comes from the fact that the area covered by the latest initiative was 362 km2, a far cry from the handful of kilometres covered by the original projects in 1990s Conjunto Palmeira.
In addition, since commercial and operational issues with the digital system were activities catered for by the company hired by the City Hall, store owners had no strong relations with the community bank which was seen as merely an agent to deal with beneficiaries’ concerns.
Bottom-up or top-down?
Prof. Mario Aquino Alves concludes that it is important for such social innovation initiatives to find the right balance between top-down and bottom-up strategies and decisions. When sharing knowledge and success, it seems that top-down strategies are required.
Indeed, such strategies help enable social innovation to produce social changes on a larger scale. However, it must be taken into account that a sense of community bond and social capital is strong when initiatives come from the grassroots.
This bond and use of social capital in the community stabilizes when social innovations become institutionalised or seek to replicate. And it becomes weak when such social initiatives become, in sort, tech ventures. How to retain that precious wealth of local identity and togetherness, as well as involving the commitment and passion of the local people and stakeholders who learn from the experience, remains a challenge to be taken up for future social innovation projects.
As Prof. Alves says, in the light of the Instituo Palmas case, yet to be learnt is how to group together different concepts of community, and to foster social capital by issuing social currency instead of a social capital coming before the issuing of social currency.
Useful links:
- Link up with Mario Aquino Alves via LinkedIn
- Read a related article: Social Innovation Strategies – from bottom to top
- Visit the FGV-EAESP website, South America’s most influencial educational institution
- Learn more about Banco Palmas and the Instituto Palmas
- View inspiring examples of social innovation at We THINQ
Learn more about the Council on Business & Society
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The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
In 2020, member schools now number 7, all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
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- FGV-EAESP, Brazil
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- IE Business School, Spain
- Keio Business School, Japan
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.
