Social money for sound community development
- Case studies of Chiemgauer, Germany and Banco Palmas, Brazil –
“Miguel” Yasuyuki Hirota
mig@olccjp.net, http://www.olccjp.net
1) Introduction: What is social money?
Social money (alias complementary currency, local currency etc.) is a means of
exchange to be used in parallel with the official tender of each country and its
“mechanisms of issue, distribution and control are of transparent character and
distributive equality” (Primavera, 2001) although this topic is foreign to a great
majority of those who have been working arduously to build up the solidarity
economy, especially in Asia. This short report is my humble essay to illustrate how
this tool is effective in helping communities achieve its endogenous development,
studying two practices.
It would be significant to begin this article with questioning something that we
tend to take for granted: “what is money?” Lietaer(2001), who came up with the
concept of “complementary currency,” defines that it is “an agreement within a
community to use something as means of exchange,” suggesting us the use of
something else as such if we are unhappy with the existing rule of the conventional
money. He coined the word “complementary currency” as he found out that the
conventional monetary system tends to promote domination, hierarchy, technology,
peak experience and other sorts of male (yang) values from the Taoist perspective,
suggesting the use of complementary means of exchange to nurture the female (yin)
principles such as collaboration, equality, sympathy and sustainability in order to
balance yin and yang in our society.
Thousands of social money initiatives have emerged all over the world since
1980s to deal with unsatisfied social and/or economic needs, such as LETS, Time
Dollar (both in United Kingdom, United States, New Zealand, Japan and other
countries), Ithaca Hours (Ithaca, New York) and Projet SOL (France) to fulfill some
unattended demands.
On this survey I will focus on Chiemgauer at Prien am
Chiemsee, Germany and Banco Palmas at Fortaleza, Brazil, showing how they have
achieved their own economic goals without abandoning their solidarity.
2) Chiemgauer (Prien am Chiemsee, Germany)
Chiemgauer, practiced in a part of Bavaria between Munich and Salzburg
(Austria), is one of 30 regional currency systems in Germany, Austria and the
Switzerland, defined as a way of complementary currency with the aim to satisfy
unmet needs with unused resources at the regional level (Kennedy and Lietaer,
2004).
These initiatives deal with a geographic area of approximately between
10,000 and 1 million inhabitants, with the hope to replace 30% of all economic
activities there.
Chiemgauer was founded by Waldorf female students in January 2003 under
the supervision of Christian Gelleri, professor of economics who taught them about
the theory as well as practices of complementary currencies. Notes of 1, 2, 5, 10,
20 and 30 Chiemgauers (equivalents to euro) are issued and each note has a design
by students.
Users exchange euro into Chiemgauer at local non-profits' offices that they
want to support financially and pay in these vouchers at local shops which accept
this means of exchange, though the Regiocard allows its users to get this regional
currency without having to visit the non-profit whenever they want to have this cash.
Local businesses can spend Chiemgauer at other local businesses or reimburse in
euro although 5% of commission fee is charged, of which 2 % is spent as
Chimegauer office’s administrative expenditures and the rest of 3 % stays at the
non-profit which sells these notes. Let us see which advantages each actor has
with this system:
 Non-profits: they get 100 Chiemgauer at the price of € 97 and resell them to
their members et al at € 100, earning € 3 per 100 Chiemgauers that they sell.
 Consumers: they exchange euro into Chiemgauer at the non-profit that they
want to support and buy goods at local shops with these vouchers, supporting
the non-profit financially without virtually spending anything.
 Local businesses: they accept Chiemgauer as equivalent of euro and spend
them to buy grocery from other local businesses or reimburse it into euro at the
cost of 5% of commission fee. This charge is justified because of the very fact of
improving these businesses’ image by supporting community activities by way of
Chiemgauer, winning people’s trust and leading eventually to the increase of
their turnover.
Another feature of Chiemgauer is that it has introduced the demurrage,
proposed by Gesell (1920), in order to prevent this complementary currency from
degenerating into a means of hoarding and to confer it on high liquidity. It is
required to put a stamp of 2% of the face value (€ 0.10 for 5 Chiemgauer, for
instance) every three months to keep it valid, obliging its bearers to give up hoarding
this complementary currency and to spend it as soon as possible and stimulating
consequently the regional economy.
2,975 members (1,992 individuals, 779 businesses and 204 non-profits /
projects / municipalities) join this system with more than 300,000 Chiemgauers
into circulation in February 2009.
The annual turnover of local businesses in
Chiemgauer is € 3,941,843 in 2008, 61% more than the previous year, and as a
result donations to non-profits also grew to € 35,477, 38 % more than the previous
year. Chiemgauer office itself is also a non-profit and is therefore managed by its
members in a democratic way.
Chiemgauer is helpful for the sustainability of socio-economic activities within
the region by providing an additional income to non-profits and creating another
economic circle within the region which is different from the one created by the
transnational currency euro, since member businesses become more competitive
thanks to the incentive given by this system which encourages member businesses
rather to spend this currency at other member businesses than to reimburse it into
euro. Chiemgauer is regarded as a reservoir which stocks money = purchasing
power within the region so that it should flow out neither to huge financial centres
nor to multinationals, strengthening the region and making its development more
sustainable and endogenous.
3) Banco Palmas (Fortaleza, Brazil)
Another remarkable initiative of social money has been operational since 1998
at Fortaleza, Ceará, Brazil. A neighbourhood called Palmeira, where some 32,000
people live, was a shanty town founded in 1973 and ASMOCONP (Associação dos
Moradores do Conjunto Palmeira, Association of Residents of the Palmeira
Neighbourhood) was founded in 1981 to struggle against their miserable life
standard, winning the fresh water and electricity services in 1988, sewage in 1990,
and thus nurturing their social capital. Despite such developments the poverty
was everywhere at the community, and ASMOCONP founded the Banco Palmas in
January 1998 to improve people’s economic life, mainly with its volunteers
administering this financial institution. Nowadays more than 38 similar systems
are active throughout Brazil.
Currently Banco Palmas gives different financial services not in real (Brazil’s
official currency, R$) but in their local social money called palma (P$). Each P$ is
backed with a R$, each note is equipped with bar code, serial number and other
devices to prevent counterfeits and manufacturers/merchants are allowed to
reimburse R$ with P$ for their external trades.
It offers the following financial
services at lower interest rates than conventional commercial banks on top of giving
different training courses, supporting entrepreneurs:

Microcredit for production, trade and service: up to R$1,000 (about US$450),
interest rate of 0.5 to 3% / month

Credit Card “Palmacard”: up to R$100 (about US$45), only accepted within
the community and no commission fee is charged for this service

Microcredit for women: the bank has financed women in precarious situation

Palmacasa: another financial service to help people improve their home
Some of member businesses offer discounts for purchases in P$, encouraging
people to spend and accept this local currency.
An interesting experiment took place there in 2002 as a trial to see the
feasibility of the Fomento Project by Strohalm, a Dutch NGO which is specialised in
setting up social money systems in Europe and Latin America. R$50,000 donation
came from the Dutch government to build a school at Palmeira and only R$10,000
was paid directly in the national currency to construction workers while they
received the remaining amount in P$. The R$ which stayed at the Banco Palmas
was used for microcredits repayable either in R$ or P$, encouraging such
entrepreneurs to accept P$.
The actual amount of “cloned” real for microcredit services was R$48,587,
slightly even more than the projected one because the R$ devaluation at the very
period increased furthermore the value of the donation from Europe, although the
total amount of microcredit was R$52,664, slightly even more than the deposit,
because some businesses repaid at least partially in R$, allowing the Banco Palmas
to lend it once more (Ramada et al, 2003).
This mechanism allows the donation to trigger further economic developments,
creating the two different currents of money, towards construction workers on one
hand and towards local businesses on the other hand, while in ordinary projects
only the first current would be possible. Although it is hard to evaluate how much
transactions saw the light thanks to this project, it is estimated that at least 80% of
P$ bills were spent more than once before returning to the Banco Palmas (ibid).
4) Conclusion and more
Two different sorts of social money initiatives have been briefly studied in this
article to prove their effect onto the local / regional economy. Chiemgauer is an
euro-backed voucher to be circulated among local businesses and consumers,
encouraging the endogenous economic activities in a rural part of Bavaria while
Banco Palmas, operational in a neighbourhood at a huge city, is helping local
businesses and entrepreneurs by offering microcredit in their own means of
exchange.
It is worth reminding that these two examples are just a tip of the
iceberg of thousands of different social money practices.
I would like to add that the appropriate design of social money is essential in
achieving your own goals: it is highly advisable to use manuals such as Lietaer
and Hallsmith (2006) and/or to partner with experienced social money experts to
introduce a successful social money system into your community.
Image 1: Chiemgauer bills with a Regiocard
Image 2: 5 Palmas Note
Image 3: Palmacard
References

Gesell, S., “Die Natürliche Wirtschaftsordnung“ (4th edition), 1920 (English
translation is available at
http://www.appropriate-economics.org/ebooks/neo/neo.htm)

Kennedy, M. and Lietaer, B., “Regionalwährungen : Neue Wete zu nachhaltigem
Wohlstand,“ Riemann, Munich, 2004

Lietaer, B., “The Future of Money,” Century, London, 2001

Lietaer, B. and Hallsmith, G., “Community Currency Guide,”
http://www.global-community.org/gc/newsfiles/25/Community%20Currency
%20Guide.pdf

Primavera, H., “LA MONEDA SOCIAL COMO PALANCA DEL NUEVO
PARADIGMA ECONÓMICO,” 2001,
http://www.redlases.org.ar/HTML/DOWNLOAD.htm

Ramada, C. et al, “Manual Bônus de Fomento”, Porto Alegre, 2003,
http://www.instrodi.org/downloads/arquivos_textos/manual_bonus_de_fome
nto.pdf