In Part 1 of his article, Prof. Mario Aquino Alves of FGV-EAESP Brazil focuses on the Instituo Palmas and its digital social money initiative to argue that social innovation can blend both top-down and bottom-up strategies to reach success – but perhaps at a price.
Not one, but several strategies to reach success
Traditional approaches to social innovation have argued that in order to achieve impact, scaling up and replication, social innovations are necessarily a process of top-down governance, especially to overcome problems in communities with low social capital or where even in the presence of some sort of social capital, rent-seeking behaviour occurs. On the other hand, the argument for bottom-up strategies also finds its place in the social innovation debate with the notion that grassroots organisations, citizens, NGOs or cooperatives must seize the initiative over government or firms and take the lead in development strategy.
Mario Aquino Alves advocates that a mix of strategies can occur – and indeed be used – to develop social innovations. His argument is that if social innovation aims to improve both the individual, the community and/or the organization/firm, then it can occur from any of these, in different forms, and from different players interacting at all levels in a relational process. Social innovation is therefore both bottom-up and top-down in nature.
Prof. Alves, together with research colleagues Eduardo Diniz, Adrian Kemmer Cernev and Eros Nascimento, proves this through research into the grassroots organization Instituto Palmas in Brazil, which first grew from organizing its community and later became recognized nationwide as a model of social innovation, community empowerment and collaborative collective learning. The NGO’s rise in influence effectively provides Prof. Alves with a distinct, three-phase model of development which adds a new dimension to existing research in that it is possible, through the example of Instituo Palmas, to study social innovation over a long period of time.
Bottom-up social innovation strategy
His research begins with a focus on the institution’s beginnings as a grassroots organisation which in 1998 developed an innovative initiative for social inclusion known as the Community Development Bank (CDB). Created in the early 1970s from the displacement of low-income families, the town of Conjunto Palmeira in north-east Brazil finally, under much lobbying, gained access to basic public facilities in the 90s. However, this brought a problem: it generated additional living costs that many families were unable to afford, forcing many of them to sell up and move out. The local neighbourhood association realised that it was urgently time to seek an answer to help reduce the high social risks faced by the community. As a result, Banco Palmas was born, with a starting capital equivalent to 25 Brazilian minimum wages, to offer microcredit – with a difference. That difference lay in its methodology that focused not on the individual, but on generating income, wealth and social development on a territorial basis. The central idea was to create a solidarity network from the local community and its social capital that integrated a virtuous circle between local producers and consumers through a social paper currency only exchangeable in the local community. As such, the greatest possible proportion of local wealth circulated locally, remaining in the community instead of disappearing elsewhere. This bottom-up strategy, born from the grassroots, led to an increased volume of purchases by residents in the local stores, benefiting not only the local merchants but also local producers. The CDB model developed by Banco Palmas proved effective – via its microcredit operations and local social currency – in three ways: it helped construct a communal identity, developed the community from within, and educated people by making residents rethink the concept of money and currency.
From local community social banking to nationwide network
From this success, the Banco Palmas experience became to be considered as one of the most iconic in the field of solidarity economics in Brazil. As a result, the decision was made to extend the initiative to other states and a spin off, Instituto Palmas, was created with a mission to do this. Effectively, the impact of this was to modify the approach, indeed the identity of the initiative. From a former position as grassroots activist implementing a bottom-up strategy promoting the local development of the community, Banco Palmas necessarily took on the role of disseminating its model to other towns and communities, thereby assuming a top-down strategic approach in its bid to replicate the model.
Two partnerships endorsed this dimension: with the National Secretary for Solidarity Economy in 2005, and with the Banco do Brasil – the largest commercial bank in the country – in 2006. As such, the scale of the project and its nationwide implementation saw a need for the information and communications technology to gain in effectiveness. And with this new technology at hand, the nature of the original offer – microcredit and social currency in paper format – changed too. Its new, institutionalised partners meant that the offer at hand was similar to that offered by a normal, high-street banking service: opening and management of accounts, collecting bill payments, and digital cash instead of paper currency. Subsequently, the Instituo Palmas was to provide technical support in replicating the initiative.
While the project saw the successful replication of the Community Development Bank initiative in other parts of Brazil, the top-down position brought with it several issues, most notably that of conflicting agendas between the ‘institutionalised’ role of Instituto Palmas, working under the ‘push-down’ process of the federal government, and the community associations it was working with to roll out the initiative. Moreover, the technical and project management activities of workers and managers in the CDB seemed to be far removed from those of the original community bank hallmark.
Part 2 of the article focuses on the third stage in Instituto Palmas’ development: the tech venture. It will be published on Thursday 7th December.
- Link up with Mario Aquino Alves via LinkedIn
- 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
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