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Date: 2024-05-23 Page is: DBtxt003.php txt00004071

Complementary Currencies
An Alternative Economy

Bill Ruddick ... Now people can create their own aid: Promoting aid effectiveness beyond vouchers, with complementary currencies


Peter Burgess

Now people can create their own aid: Promoting aid effectiveness beyond vouchers, with complementary currencies

This think piece on promoting aid effectiveness through alternative means is provided by William O. Ruddick, Associate Scholar, Institute for Leadership and Sustainability. Aid agencies are constantly on the lookout for new ways to improve aid effectiveness and many have begun moving toward the use of vouchers.

Aid agencies are constantly on the lookout for new ways to improve aid effectiveness and many have begun moving toward the use of vouchers. Voucher systems reduce corruption by limiting the use of national currencies that quite easily fall into the wrong hands, causing donor funds to not reach their target beneficiaries. Vouchers can also have a positive impact on the local economy by directing funds to local businesses.

Aid organizations like Red Cross and Catholic Relief Services have been using vouchers for years to fight famine. These famine fighting vouchers allow for direct targeting of both aid beneficiaries and also merchants for centralized and sanitary food collection and distribution. Merchants can also be chosen that are run by reputable and underprivileged owners, such as women run businesses. Similarly school and education vouchers have been used in many areas to allow children access to school without having to use national currency.

But can these voucher systems be more effective allowing them to circulate as a currency amongst a network of beneficiary businesses? This was the thesis of a successful Complementary Currency pilot program run in Kenya called Eco-Pesa which used a complementary currency to redirect aid funding in order to have a larger and lasting impact, while also planting thousands of trees, providing health services, and collecting tons of harmful waste [1]. Currently work is being done to expand and adapt this system to mobile phone technology [2].

While there are many types of complementary currencies, one of the simplest and most powerful models is called mutual-credit. A community of individuals and/or businesses determines a level of credit for its members, and credits (not tied to national currency) are simply exchanged within the community. The credits are backed by a commitment from the community to buy and sell a certain amount of their goods and services in exchange for them. This isn’t isolationism. These communities still use national currencies for exchanges outside the community, and for savings, but they’ve found a way localize and support one another outside of the global monetary system.

Mutual Credit is best known in the business world of credit-clearing. Where a group of businesses create a credit that is usable amongst the group and serves as an effective accounting system for inter-company barter exchanges. In Switzerland business groups use a complementary currency to support each other and defend themselves against monetary fluctuations. The WIR bank in Switzerland started in 1934, and in 2010 it had over 60,000 registered businesses trading outside of the national currency to support one another. It has been identified as one of the key methods keeping Switzerland’s business community stable. These systems need to be adopted by aid organizations to help impoverished communities to create their own self support networks; in effect, to create their own mutual aid.

For over 50 years pioneers in complementary currencies have been creating tools and methodologies to enable any community in the world to tap into their own abundance and develop their own monetary network. They are in use in small villages and large cities around the world, and this practice is growing rapidly. Time Banks [3] are becoming popular in the US and Local Exchange Trading Systems (LETS) [4] are growing rapidly in Europe. Today, nearly 1,000 communities across the globe are setting up accounting systems for complementary currencies on free websites [5].

Activists and development organizations are continually struggling for limited resources. But the current financial system not only doesn’t have the capacity to help, it is a fundamental part of the problem by creating dependency and increasing social stratification. We can change the development funding dynamic, by empowering communities to direct their own productive power to the will and needs of local people through complementary currencies. And, pertinent to the instable monetary system we live in now, complementary currencies allow communities to provide services to each other that will not be affected by volatility in national currencies.

Imperative to the growth of Complementary Currencies for aid initiatives is the research and development of best practices and standards that protect communities from the risks and abuse of such systems if poorly implemented. This is the work of organizations like (IFLAS) Institute for Leadership and Sustainability [6] at the University of Cumbria. In the UK in March 2013, with the United Nations Non-Governmental Liaison Service and the New Economics Foundation, IFLAS is running a one-day workshop for professionals to learn how to start and scale complementary currencies.

Complementary currencies give us a tool that strikes to the heart of our global imbalances. To fully promote sustainability and aid effectiveness, aid organizations need to move beyond pure vouchers systems and support local development initiatives using complementary currencies that allow communities to fundamentally rethink what ’money’ is and how it works. Given that the outlook for traditional sources of financial aid is not good, this kind of innovation in aid work is urgently needed.

William O. Ruddick Associate Scholar, Institute for Leadership and Sustainability (IFLAS) Co-Founder, Koru Kenya
  1. [1] Eco-Pesa: An Evaluation of a Complementary Currency Programme in Kenya’s Informal Settlements
  2. [2] Bangla Kenya
  3. [3] Time Banks USA
  4. [4] LETS
  5. [5] Community Forge, Swiss non-profit Association.
  6. [6] (IFLAS) Institute for Leadership and Sustainability
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