Banking correspondents as social innovation network - The case of Banco Palmas

This paper focuses on the banking correspondent’s network as social innovation NETWORK. We argue that banking correspondents are contributing to achieve societal goals of reducing poverty under conditions of knowledge sharing of microfinance technologies among social relevant groups. More specifically, we are looking at how to propagate bank’s microfinance services within low-income communities through knowledge sharing practices. Financial services access provides critical investment opportunities and liquidity for consumption for the poor who have been traditionally left aside of financial markets (Llanto & Fukui, 2003) and is also one of the most important conditions to improve the chances of self-employed individuals who are close to the poverty line (Abramovay, 2004). Well-applied technology allows for a broader range of distribution channels and increased productivity among microfinance providers (Sanabria, 2006). In combination with greater economies of scales, technologies have resulted in a reduction of the total cost of debt in those places were the microfinance activity has been developed (Sanabria, 2006). Innovations help reduce the MFIs’ transaction costs and risks. They also make it possible for poor households to satisfy their investment and consumption requirements (Llanto & Fukui, 2003). When many agents join in a network to create new combinations of existing technologies, they create an innovation through a social innovation network. Ideas of a group can solve problems of others, but only if connections between solutions and problems are made between groups (Hargadon & Sutton 1997). This paper describes an emerging technological and social innovation network in Brazilian microfinance sector, which are the correspondent banking networks. Correspondent banking arrangements refer to bank partnerships with non-bank entities, such as lottery kiosks, post offices, MFIs and so forth to provide distribution outlets for financial services (Kumar at al, 2006). A set of correspondents connected to a bank and managed by a network integrator form a correspondent banking‐network (Diniz, Pozzebon & Jayo, 2009), which is a social innovation network. To shed this argument, we present the case study of Palmas Institute enriched by many of its social actors’ visions. First, we present the Palmas Institute history according to information collected on sites, interviews, documents and academic articles (Diniz, Pozzebon, Jayo & Araujo, 2008). Second, we use a conceptual framework provided by Pozzebon, Diniz & Jayo (2008) to present and analyze the social innovation network. Respondents were selected according to their job, position in the organization and role in the negotiation process. Data were codified in categories, inspired by this study’s conceptual framework. For each category, we have first presented a general view of the results. Then, we compared the results by the different “relevant social groups”. Our main contribution is to present distinctive perspectives about the theme, discussing banking correspondent’s network’s ways of improving the appropriation of microfinance technologies by low-income communities.