Certificate Course in Community Currencies for Grassroots Development

The following wiki will be used to hold all of the support material for the Course in Community Currencies for Grassroots Development created by Grassroots Economics (GE). Through the course you will be able to learn from the experience of Will Ruddick and the various projects his organization has set up in Kenya.

http://grassrootseconomics.org/certificate-course

Overview

This course will immerse you into the world of Community Currencies as a tool for economic and community development. We will cover why and how Community Currencies have been implemented in marginalized communities as well as their history, set backs and future projections. After completing this course you will be have a strong foundation to design, customize and implement Community Currencies.

Topical Outline:

• Community Currency Theory: development economics, history of money, financial systems and debt, currency models, goals standards and ethics.
• Preparation & Development: community participation and ownership, system design, voucher creation, communications, partnerships, and legality.
• Setup & Launch: cooperative facilitation, collateral asset development, financial sustainability, and marketing.
• Long Term Care: long-term support, audits, Community Currency renewal.
• Management: system maintenance, legal reporting, accounting, currency circulation, administration, data collection, and personnel.
• Fieldwork: on-the-ground survey work and interviews; lessons learned from previous Community Currency models; taking part in community currency events and activities; economic resource mapping.

To register for the course do it directly through the GE page -http://grassrootseconomics.org/certificate-course

Below you will find relevant materials to fully understand the taxonomy of the currencies and support materials to be able to design and implement them.

Theory

What is Money?

Definition: According to the Bank of England, in a modern economy, money is a type of IOU, but one that is special because everyone in the economy trusts that it will be accepted by other people in exchange for goods and services.

Functions:

• Medium of exchange
• Store of value
• Unit of Account

Characteristics:

• durability
• portability
• divisibility
• uniformity
• limited supply
• acceptability
• value

How are National Currencies Created?

• Sir Mervyn King, Governor of the Bank of England 2003- 2013 - “When banks extend loans to their customers, they create money by crediting their customers’ accounts.”
• “Right now bank deposits makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of real cash that you can touch.”
• Martin Wolf, who was a member of the Independent Commission on Banking, put it bluntly, saying in the Financial Times that: “the essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending”

How we got here

• In UK - Before 1844 only the government was legally allowed to create metal coins. Over time, the paper receipts had for their stored coins, became accepted as being as good as metal money. People effectively forgot that they were just a substitute for money and saw them as being equivalent to the coins.
• Coins were originally stored with Gold Smiths who became the first banks, and began to issue more notes than they had in reserve.
• Eventually the gold standard was completely lost and reserve requirements for banks were based on cash. But today those requirements have effectively vanished.
• Private Banks currently create 97% of the worlds money supply.
• By creating money in this way, banks have increased the amount of money in the economy by 11.5% a year over the last 40 years. This has pushed up the prices of houses and priced out an entire generation.

“What is the Salient Economic Unit?” - Jane Jacobs

Why do Nations have sovereign currencies at all?

-With banks in control of the credit supply, sovereign money or national currency today has lots much of it's meaning.= -Why should the Kenyan Government have to borrow at interest the money it needs?

Switzerland is a top performing economy in the world with a population of only 8 million people and has retained its own currency. – And 1 out of 4 businesses are part of Complementary Currency Programs – If 8 million people in the middle of Europe can have the top economy in the world and their own Currency – what would happen if all areas of ~8 million people could have their own currency?

Community Currency Theory

Global Economic Problems in Summary

Usury: Interest Bearing Debt: Money created as debt – On a global scale this ensures more money creation to pay interest. Since the ability to repay this debt nationally and globally is impossible (not enough money in the system), more money must be created (at interest) to pay off the current debt – and so on.

Fiat: Money created with no backing. There is little to no regulation on the private banking system’s creation of credit. This is defined as a bubble creating huge profits for banks and increasing instability (bubble) and inequality.

Inflation: a factor of 3-5x faster than production worldwide.

Local Economic Problems in Summary

Market Instability: Money comes into local communities largely from exportation of labor to external markets and leaves communities through purchases of imports. If these external markets, falter, or have any seasonality this drastically effects the amount of money available for trade in a local community.

Lack of Money: The money supply is not sufficient to trade available goods and services.

Lack of Investment: Given a chronically non-liquid market nearly all available money goes toward basic needs and consumption of imported goods. Money is not saved as much as it could be, and the mechanisms for savings are difficult. Investment comes with interest bearing debt.

Capital Ownership: Cooperative development can help low-income groups pool resources and develop local industries. (Competing for scare resources)

Lack of local industries: Over dependence on imports causes money to leave local system. Exporting the majority of labor is inefficient - labor should be utilized and products created for local consumption and export. Rather than tapping the local labor force and building new businesses, the majority of local businesses only sell retail goods to these workers.

===Differences in Characteristics of Money===

Characteristics of Money:

• durability
• portability
• divisibility
• uniformity
• limited supply
• acceptability

Characteristics of Community Currency:

• Backed by local value
• Non
• Interest Bearing and Non-Inflationary
• Supportive of local industries and cooperatives
• Building local identity and trust
• Providing market stability Free to use and develop Community issued and regional in usage

Theory of Change

Mutual Credit: (The term implies that creditors and debtors are the same people lending to each other)

The practice of multilateral exchange can be a mere convenience, but once a common unit of account is agreed, the extent to which members can draw credit limited, a mutual credit system quickly resembles a money system.

Keynes proposed a mutual credit system called International Clearing Union instead of a gold standard.

Theory of Change ----> Growing Local Production Through Liquidity Injection ---> Value circulates within

Community Currencies: A brief Overlook

What is it?

Community Currencies are regional means of exchange that supplements the national currency system. A network of businesses, schools, self-employed and informal sector workers form a cooperative whose profits and inventory are issued as vouchers for social and environmental services as well as an interest-free credit to community members. These vouchers circulate in the community and can be used at any shop, school, clinic or cooperative businesses and form a stable medium of exchange when the national currency is lacking. This injection of money into the community in the form of a community currency, based on local assets, increases local sales and helps directly develop the local economy. The Community Currency programs create stable markets based on local development and trust.

As a socio-economic development tool Community Currency offers an innovative way to improve living standards by:

• Providing community groups access to an interest-free credit, thereby increasing local trade, employment, small business development and overall local economic stability.
• Providing a mechanism for communities to build local trust and finance social services, such as education, environmental and health services.

Community Currencies are central to the global commons movement. With long-term social and financial impacts for low income communities. They are distinct from the wider field of complementary currencies because they have the collateral of cooperative assets of the communities that use them.

How it Works?

(1) Local goods and service providers in areas like Kangemi, Kenya, are brought together into a business network and legally registered as a Community Based Organization (Chama) or Cooperative (SACCO). (2) This cooperative develops or acquires a shared businesses, such as a factory, wholesale shop or bus. (3) Inventory and profits from these cooperative businesses form the basis for a voucher that is issued as a Community Currency. Each business member is guaranteed by other members for an initial amount of credit and the community currency is also used for social service work – like tree planting, employing local youth for waste collection and road maintenance. (4) Business owners within the network trade both in Kenya Shillings and Sarafu-Credit. The community currency circulates around the community helping to connect local supply and demand for people who lack regular access to national currency. (5) Community Currency holders may also use any excess to purchase cooperative business inventory.

For example, a mother without sufficient Kenyan Shillings can use her own labor to pay for her child's education, by getting a credit based on her goods and services in Community Currency. A school receiving the credit can use it to help pay for school fees and increase teacher’s salaries. The teachers can use the Community Currency to pay for cleaning services from the mother or any goods and services in the network and it can keep flowing in a virtuous cycle. This credit acts as a strong buffer to market instability ensuring that hundreds of businesses have a means of exchange even during the worst economic times. Members also enjoy other benefits besides increased customers and stock turnover. They are also invited to many events that the networks facilitate, such as training, community market days, and networking events, as well as participation in savings and loan programs.

Preparation and Development

A currency is something that can bring a community together and also something that can break it apart. A currency can be a beautiful circulatory system enabling trade and human connection, it can also act like a jail, promoting greed and scarcity. The standards under which a community currency is developed and maintained are the difference between these two realities. We urge groups interested in implementing a currency program to consider professional consultation at all stages of project development. The steps below are only a rough framework to give one an idea of what is involved and are based on implementations in Kenya since 2010.

Phase 1.

a)Identify Stakeholders.

i) Trainers: CC Course alumni and GE staff ii) Implementers: Lead facilitating organization iii)Partners, Cooperatives and other community groups iv)Focus group trainings

b)Assess capacity of stakeholder assets, businesses and network

i) Perform baseline analysis of community & Legal due-dilligence ii) Assess current levels of cooperation and trust in the proposed network iii)Assess backing businesses – whose goods or services form the CC collateral iv)Identify value addition to those businesses or new businesses v)Identifying partners: Government Business – large scale employers, NGOs vi)Health Education Environmental vii)Develop long term plan with stakeholders

c)Backing Business(es) Development

i) Value addition / business creation. ii) Training new and existing group businesses on accounting and CC usage

Phase 2.

1) Capacity building Backing Business and Implementers

a) Ensuring the business is profitable and able to provide collateral in goods and services for all CC issued.

2) CC Public Launch
3) As these CC are spent at the backing businesses the accumulated CC are used for: Backing Businesses

Operating costs, Community Services and as additional Member credit.

4) CC Maintenance

a) Branding and marketing b) Capacity building around leadership and skills c) Training of various community groups and individual members

5) Member Credit

a) Members registered and trained from the business community. Receive a credit in CC that can be used among each other and also at the Backing businesses. *This is similar to a zero interest loan. b) Member credit can be increased over time based on participation in activities and CC usage and should be linked to owning shares in cooperative businesses.

6) Community Markets

a) Bringing together people to trade using CC at existing and new weekly and monthly markets

7) Community Service Work

a) Together with local partners using CC to help mobilize and fund educational, environmental and health care providing services.

8) Operating Expenses of Backing Businesses

a) Backing businesses should have a clear policy on usage of CC to reduce their operating expenses through paying salaries, bonuses, rent, maintenance, stocking and so on.

9) Partnerships

a) We recommend government and existing health, environmental and social services and NGOs to convert their funds into CC, and support all activities.

Standards

The following categories form the basis for standards under which a community currency is developed and maintained. For each category below a clear implementation and maintenance plan should be established. The topics and questions below are based on community currency implementations by GE since 2010 in Kenya and not meant to be a full or general treatment on the topic.

Risk Management - Identifying and mitigating potential risks

• Disaster mitigation, What are different types of disasters and worst case scenarios related to the currency system. Loss of trust, corrupt leadership, buy-outs by collectors, hoarding, outside interferance, etc.
• Currency Security Features - What happens if our currency is counterfeited, or digitally hacked?
• Transaction and Information Security - How secure is private information about community members?

Community Involvement - Without adequate community involvement, few programs are sustainable.

• Implementation - At what stage is the greater community involved
• Diversity - Are all parts of the community represented?
• Co-creation and cooperation - Are community members an integral part of the creation and maintenance of the program?
• Net Positive Community Impacts - Can the impacts of the program be felt by the greater community?
• Behavior Change Communication - How are the community members mobilized and educated?

Legal Framework

• Taxation - If registered and taxable business transactions are part of the program, how are they being accounted for using the Community Currency?
• Country specific laws - Are vouchers or promissory notes transferable in your country? What regulations must you follow to uphold existing laws?

Governance

• Administration - Is there adequate local administrative skills, and do these administrators have the backing of the community?
• Collaborative decision making - How involved is the community in the decision making process?

Sustainability

• Locally Appropriate Solutions - Is an alternative means of exchange going to solve local problems? Is the program being implemented to solve problems or
• Are Flexibility, Adaptability, Practicality and Innovation thriving in your system?
• Maximum or minimum - Debt levels - How do you determine how much of the currency should be created and issued?
• Backed by national currency or resources - Is it a voucher with a value backed by the national currency? How does it derive it's value? Does it's value change over time? Does it expire? How is it renewed?
• Exchange Rates - Is the community currency exchangeable with other currencies? On what basis?
• Fungibility - Does the currency allow any grouping of goods and services to be traded easily?

Economic Viability

• Independence - How much local vs non-local goods and services are part of the network? How dependent is the community on inports and exports. How dependent is the community currency on official money?
• Market Diversity - Is there a critical mass in number and type of goods and services being offered for fluid transactions to take place?
• Resilience - How resilient is the currency to changes in the market and other risks?
• Cost Recovery - What are all the setup and maintenance costs and how will they be paid for? How much of these costs can be paid int he community currency vs the National Currency?
• Net Positive Economic Impacts - Can you quantify and verify both the positive and negative impacts of the program?
• Marketing - How well to people identify and trust the community currency? What modes of marketing are you using?
• Interoperability between systems - If a neighboring community starts a program in your region will the two currencies be exchangeable? Will they have the same value?

Professionalism - As much as these are community initiatives, they are can become key parts of the communities ability to function and need serious professional standards to keep them going.

• Accounting and Financial standards - Are accounting and financial standards being kept? Will an auditor be able to verify these records?
• Transparency / Information sharing - How much information does the community and local government have about how the program works and its daily usage?
• Effectiveness - How effective do people find trading in a community currency?
• Efficiency - Does this program offer an advantage over existing means of exchange, credit/debt?
• Exchangability - Is the currency being traded for all sorts of goods and services, rent, schools fees, taxation?
• External auditing - Who is auditing your books and verifying that all of the currency issued is properly backed? What third party can assess your currency usage and activities and report to local government, registrars and the greater community?
• Training - Are your administrative team and members adequately trained?
• Baseline projections - How aware are you of the situation before you start a currency program?
• Values and Goals - Are the values and goals clear for the community?
• Management Capacity - Do you have the local capacity to manage such a system?

Technology and Monitoring

• Software, mobile phone systems - What are the short and long term costs for technological solutions and how are they going to be paid for?
• Record keeping and statistics - Will you be able to say after several years of the currency being traded, if it has really benefited the community?
• Impact assessments - Are you getting enough information to assess impacts on a regular basis?