Solidarity Finance and Public Policy: The Brazilian experience of community development banks

NGLS Working Paper 2013 (Draft)

Compendio :

Prepared for the special session on Alternative Finance and Complementary Currencies as part of the International Conference on Potential and Limits of Social and Solidarity Economy organized by UNRISD and ILO in cooperation with NGLS and other partners.

This article attempts to approach the development process of solidarity finance public policy in Brazil, starting from the end of the 90’s. We will start with a brief historical account of the birth of grassroots movements during the military dictatorship, in 70’s and 80’s, and its importance in the return of democracy in Brazil. Together with the historical account, we will also

enumerate the economic changes and the entering of Brazil within the process of economic globalization, as well as the resurgence of cooperative ideas and initiatives of the solidarity

economy. Within in the field of solidarity finance it is necessary to establish a link with the increase of incentive policies to support microcredit. In contrast to other Asian and Latin

American countries where such experiences took place during the 70’s, in Brazil it only saw visible growth in the 90’s both with the creation of microcredit organizations as well as the

dissemination of government programs. Thus, this text presents the context by which solidarity economy initiatives grew stronger and its interface with the institutional environment created by the microcredit and financial inclusion agenda. It is important to highlight, that this paper does not aim to analyze municipal or state level public policy, in spite of their relevance in strengthening the solidarity economy and microcredit initiatives. Federal Government actions will be the focus of our analysis with the showcasing of changes encouraged within legislation as well as within the political and institutional environment at the Central Bank of Brazil and at Public Federal Banks. Furthermore, this paper will attempt a more in depth presentation of the community development bank (CDB) experience and the use of social currency. Also, we present the difference between CBD and the traditional microfinance and moreover how this experience has linked itself to different government policies and its challenges in consolidating itself as a solidarity finance public policy.