Published in the Routledge-CoBS book Responsible Finance & Accounting, Professor Eduardo Diniz, FGV-EAESP, provides a spotlight on his research into solidarity finance in Brazil and one of the country’s flagbearers – Palmas e-Dinheiro, a Solidarity Fintech owned by Banco Palmas.
Fintech in Action by Tom Gamble and Eduardo Diniz. Related research: Innovations in Social Finance, From Community Bank to Solidarity Fintech: The Case of Palmas e-Dinheiro in Brazil, 2021, Springer
Eduardo H. Diniz is a professor at FGV-EAESP and an internationally recognised expert in solidarity and inclusive finance, having been invited to present his research at central banks and bank federations in Brazil, Mexico, India and Colombia. He has been a researcher at FGV’s Microfinance and Financial Inclusion Center since 2007, and his research output has been published in leading research journals as well as being presented in international conferences including the Academy of Management.
Recently featured in the Routledge-CoBS book Responsible Finance & Accounting, Prof. Diniz points out that Brazil has been in the vanguard of solidarity finance and community banking services since the 1990s. Indeed, this came partly as an alternative solution to counter traditional banks’ low-risk approach in targeting ‘wealthier’ client bases.
Digital society, digital solidarity
One of the innovations specific to Brazil has been the creation of digital solidarity currencies to cater for bottom-of-the-pyramid citizens. An outstanding example of this is the e-Dinheiro payment platform, adopted by the Brazilian network of community banks, including Banco Mumbuca, which added the platform to its plastic debit cards operations to deliver social benefits to the poor in the city of Maricá.
“Moreover,” adds Diniz, “the COVID pandemic created conditions for the digital currency being offered as basic income for the poor and as a minimum salary to cover micro-entrepreneurs having lost their revenue streams.” A direct result was that the currency helped to implement the lockdown measures in the city of Maricá to help curb the effects of the pandemic.
Finance can be responsible through Fintech
This combination of basic income and other city benefits in the form of digital local currency created an opportunity to consolidate a model for financial inclusion that act both as a powerful tool to fight poverty and also improve the local economy, severely damaged after the pandemic crisis. “Nearly two years on,” adds Prof. Diniz, “this initiative is now being successfully replicated in a number of Brazilian municipalities.
“Cash transfer programs and local currencies were once two separate fields of research,” states Prof. Diniz. “Now, combined, they are proving a very powerful strategy to be used by municipalities and other local governments to improve their local economies and fight poverty, producing social inclusion and promoting local businesses.”
Local currencies are good for local economies
A new generation of cash transfer programs operated at municipal-level have emerged as a response to the Covid-19 pandemic. “The need for ‘staying local’,” points out Prof. Diniz, “has fostered a particular and innovative aspect of design found in some of these municipal initiatives: the use of local currencies to disburse the benefits. All in all, using local currencies in municipal cash transfer can make cities and territories stronger, more resistant and better able to absorb the effects of crises.
“Municipal cash transfer programs using local currencies are just in their beginning and need more investigation,” asserts Eduardo Diniz, “but recent experiences in Brazil seem to be very promising”.
Discover insights from Prof. Eduardo Diniz’ research The Journey from Community Bank to Solidarity Fintech through Digital Social Currency included in the book:
Responsible Finance and Accounting: Performance and profit for better business, society and planet
Useful links:
- Link up with Eduardo Diniz via LinkedIn
- Read a related article: Is Bitcoin compatible with ESG analysis?
- Discover FGV-EAESP, Brazil
- Apply for one of the graduate programs at FGV-EAESP.
Learn more about the Council on Business & Society
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.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
- ESSEC Business School, France-Singapore-Morocco
- FGV-EAESP, Brazil
- School of Management Fudan University, China
- IE Business School, Spain
- Keio Business School, Japan
- Smith School of Business, Canada
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.
