Mobile boom
Just as community currencies boomed during the Great Depression, their
digital versions are expanding amid the COVID-19 recession. As the virus
hit, the city of Maricá, Brazil, was able to double its income supplement
program to residents, paid in mumbucas (after a local river), two months
before any federal support arrived. While cards exist, most transactions go
through mobile phones.
More complex experiments are combining mobile payments with blockchain, the
technology behind most cryptocurrencies, in which all computers in a given
network record all transactions simultaneously, creating an immutable
decentralized ledger.
In Turkey, Good4Trust, a virtual bazaar for socially and environmentally
conscious producers and consumers, is preparing to launch a community
currency using blockchain powered by Celo, a Silicon Valley company.
Brixton, a London neighborhood, launched its pounds in 2008, featuring
famous natives and residents, including pop icon David Bowie. In January
2021, it announced the release of a digital version using blockchain from
Algorand, a Singapore company.
In Kenya, the sarafu (Kiswahili for “currency”) also leverages blockchain.
It was used by 41,000 people across 60 villages, which in 2020 spent the
equivalent of $2.5 million in over 335,000 transactions, all through mobile
phones. “This platform allows a group of farmers to come together and
create their own currency and a resilient economic system from the bottom
up,” its creator, Will Ruddick, told F&D. “Currency is vital
infrastructure,” added the American physicist turned economist and social
entrepreneur, who first launched a paper-based community currency in Kenya in 2010.
Recording all transactions in the blockchain allows for real-time data
collection and evaluation of social initiatives. The Danish Red Cross, one
of the project’s funders, uses it to study the effect of its programs. “For
the first time, we can observe a program’s impact in real time,” says Adam
Bornstein, head of the innovative finance and systems change team. “We can
correct course within days rather than wait for surveys 12 months after the
fact.”
The data can also be used to create early warning systems for disasters,
giving the institution more flexibility in deploying its resources. “The
world is complex and dynamic, whereas humanitarian finance and procurement
policies are inherently inflexible,” adds Bornstein.
Strengthening communities and supporting local business have always been at
the core of local currencies. But the experimentation they allow can have
broader, perhaps national, implications. “There’s a lot of focus on central
bank digital currency,” Ezechiel Copic, Celo’s head of official sector
engagement, told F&D. “Local currencies can provide a testing ground
for these initiatives.” With new technologies and the hard work and vision
of social entrepreneurs and economists, alternative currencies might find
their way into the mainstream.
