NGO "ANOTHER WAY" (STICHTING BAKENS VERZET), NETHERLANDS, SUSTAINABLE INTEGRATED SELF-FINANCING DEVELOPMENT PROJECTS AND ADVANCED DEVELOPMENT TECHNOLOGIES

Modern systems for the registration of transactions are being developed. One of them is a slate for micro-finance described in an article by P. Pain in the Hindu, Los Angeles, 18 September, 2011.

There will be an elected local LETS coordinator in each tank commission area. The LETS coordinator will need to be literate and will be responsible to the general LETS systems coordinator. The local coordinators will help those members unable to write/sign their cheques (or deal with other methods of payment), arrange distribution of chequebooks (or other payment forms)to the LETS users, collect the used cheques (or equivalent) deposited in the LETS POST box near the local water tank and take them to the general LETS systems coordinator for registration. The local coordinators will also display the monthly or weekly reports on the LETS NOTICE BOARD near or above the LETS POST box, advise illiterate members of their LETS balances, call a fortnightly or monthly meeting where the users can discuss the operation of their LETS system, make special requests (such as, for example, increasing the debt limit for sick members or for those making special purchases), and discuss ways to use the goods and services of those with high debts so as to help balance their trading accounts. The local coordinators will also discuss with the members selected proposals for allowing export and import of goods and services into the local LETS system and report back to the general LETS coordinator.

The first general LETS systems coordinator will be chosen by the Project Administrator. He and the locally elected LETS coordinators will make up the LETS COMMISSION. The LETS COMMISSION will meet at least once a month to discuss particular problems and to decide on actions needed to balance the export/import accounts amongst the various local LETS currencies.

The fortnightly/monthly reports for members in each tank commission area will be published on the local LETS NOTICE board and discussed at a general meeting of the local members. The report will show, for each member, the previous balance, the current balance, the total number of plus transactions and minus transactions conducted, and list each plus and minus transaction since the previous report.

The cheque (or other transaction form used)will have two parts. Each part will have the member's name and LETS number pre-printed on it. The SELLER'S cheque is used in each transaction. The BUYERS name and system code are filled in on the cheque, with the assistance of the local coordinator where necessary, as well as a description (with LETS code) of the goods or services sold. Finally the cheque is signed by BOTH parties and deposited in the LETS post box. The amount credited to the seller must be exactly the same as that debited to the buyer.

Payments for LETS services provided by members to their communities will be debited to a special LETS code for the community. When the community debt reaches one LETS currency unit (or other agreed amount) for each member, each member will be debited with that amount. The community LETS code will then be credited by the same total amount. This system allows collective communal property to be involved in the LETS transactions. For example, the sale of wood from communal land can be registered as a credit to the LETS group involved, and then transferred from there to individual group members.

The processes broadly follow traditional balance of payments transactions but the objective is to maintain a balance in imports and exports. A large debit balance between one LETS group and another would show resources are being transferred from one group to another. The coordinators would then have to take steps to correct the imbalance. They could, for example, temporarily extend the range of goods and services the debtor group can export to the creditor group, such as by arranging a special market.

ILLUSTRATION OF A LOCAL MONEY TRANSACTION BETWEEN TWO

LOCAL MONEY SYSTEMS

Alpha lives in local money system area A. His system uses local money units called “argents”. He has a current balance expressed in argents of 600.

Beta lives in local money system area B. Her system uses local money units called “busybees”. She has a current balance expressed in busybees of 600.

The perceived value of an hour’s work in local money system A is 10 argents per hour.

The perceived value of an hour’s work in local money system B is 10 busybees per hour.

100 argents are therefore worth 100 busybees.

Local money system A has a credit with local money system B of 65000 argents.

Local money system B has a debit with local money system A of 65000 argents

Local money system B has a credit with local money system A of 10000 busybees.

Local money system A has a debit with local money system B of 10000 busybees

Alpha sells a cow to Beta.

Alpha is the seller. He works with “argents”.

Transactions are always made in the seller’s units.

The transaction is therefore expressed in “argents”.

The agreed price for the cow is 100 “argents”.

The seller always prepares the transaction document.

Alpha therefore prepares a transaction slip for the sale of a cow for 100 argents with Beta as buyer.

Beta signs the transaction slip, and receives a confirmation note.

Alpha deposits the transaction slip in a LETS transactions box. He keeps a confirmation note.

The registrations:

a) Alpha is credited with 100 argents. His balance passes from 600 argents to 700 argents.

b) The coordinator of group A advises his counterpart in group B of Beta’s debit of 100 argents.

c) The coordinator of group A credits his group A with 100 argents. Group A’s credit in argents with group B then passes from 65000 to 65100.

d) The group B coordinator would debit the group B buyer, Beta, in local currency B, busybees. Beta’s balance would therefore pass from 600 to 500.

e) The group B coordinator would debit his group B with the 100 argents. Group B’s debit in argents would then pass from 65000 to 65100.

f) Since no transaction in group B currency busybees has taken place, B still has a credit of 10000 busybees with group A, and group A has a debit

of 10.000 busybees with group B.

g) Periodically, the group A and B coordinators then simply adjust their respective trading debits and credits by pairing value units one for one. In this

example, group A has a balance of 65100 credit argents with group B , and group B has a balance of 10000 busybees with A. They can be paired off, so that

group A finishes with a credit balance of 55100 argents and B a debit of 55100 argents, and groups B and A have balances of 0 busybees.

Goods and services supplied by group B to group A would be registered the other way round, following the procedures described in steps a) to e).

In case of a (large) remaining credit balance of one of the two groups at the cost of the other, the coordinators will take whatever steps necessary to bring the balance of the accounts back towards zero as quickly as possible. There are many ways of doing this. Allowing extra goods and services to be exported from the debtor system to the creditor system is one way. Organising markets or fairs with debtor area products in the credit area is another. Organising tourist outings of creditor area residents in the debtor area is another.

In the case above, group A has a credit balance left over of 55100 argents. The coordinators of groups A and B may therefore choose to organise the participation of some group B producers at markets in the group A area to sell group B products to group A users to “clean up” the credit of 55100 argents by selling mosquito nets in area A for a value of 60000 busybees. To do this they would usually choose products which are not in competition with group A products.

At the next reconciliation, group A, which has not in the meantime had any more transactions in argents with group B, still has a credit of 55100 argents with group B and group B a debit of 55100 argents with group A. In the meantime, group B has sold mosquito nets for a value of 60000 busybees to group A. They can be paired off, so that group B finishes with a credit balance of 4900 busybees and group A a debit of 4900 busybees. Groups B and A then have balances of 0 argents.

It will be seen that:

Between periodic reconciliations, each group will have a credit balance in its own local currency with the other group and a negative balance in the other group’s currency.

On periodic reconciliation, there will normally be credit and matching debit balances in either one of the two local money currencies. The second currency balance must be zero. In the above example, group B finishes with a credit balance of 4900 busybees and group A with a debit balance of 4900 busybees. Their argents balances are 0.

It is theoretically possible, but obviously extremely unlikely, that, on periodic reconciliation, the balances for groups A and B of both local money currencies be 0. Given the complexity of trading between local money systems, it is reasonable and normal there be a credit balance and a corresponding debit in either one of the two local money currencies involved. Where exchanges are seasonal in character, the balances may become quite large, as they can be allowed to follow natural production flows. This means that while the balances of the local currency groups are expected to tend towards a zero balance on periodic reconciliation, the system is in fact extremely flexible. Local money system managers make decisions on inter-group import and export on the basis of opinions and wishes expressed by users at well-commission and tank- commission levels.

In principle, competition within a local money system is viewed positively. However, users will be encouraged to diversify their production and to relate it to the needs of local consumption. Each local economy system is intended to be as autonomous as possible. Production units should be kept small, as near to the end consumers as possible with as few working passages as possible. Financial and parasitic services such as packing, transport, advertising, large-scale distribution costs should be limited. Solidarity services, including insurance and social security, are local and cooperative.

In principle, competition amongst local money systems is discouraged. Inter-group trading is related to specialisation and diversification of products and services.

The structures provided are open balanced systems within which private initiative and genuine competition can flourish and financial leakage is inhibited.

1. Opinion.

Explain on one page why costs involved in the running of the local money system enrich rather than impoverish the local population.

Click here to see the typical costs for the creation of a local money structure of the type provided for in integrated development projects.

The local money structures is different from the local economic development proposed in the publication by Ward B. And Lewis J., Plugging the Leaks, New Economics Foundation, London, 2002 already cited in 3. Introduction to the Local Money systems.

2. Opinion.

Explain on one page the difference between local development as seen in Plugging the Leaks and the local money system described in this section.

3. Opinion.

Explain on one page the ways in which local development as seen in the book Plugging the Leaks and the local money system described in this section as complementary to each other.

4. Opinion.

Make a single page criticism of the local money system foreseen. Which parts of it do you think would need to be changed for application in your project area ? Why ?

5. Opinion.

Structures for the management of local money systems can be incorporated in the social structures studied in la section 2 the social structures of ths block 4 the structures to be created. Alternatively, they can operate independently at three levels in parallel with the social structures. Give your preference on one page, and explain why you choose the one option rather than the other.

6. Research.

On one page explain why the local money systems provided for are always in balance.

◄ ►

◄ Fourth block : Section 3: Financial structures.

◄ Fourth block : The structures to be created.

◄ Main index for the Diploma in Integrated Development (Dip. Int. Dev.)

◄ List of key words.

◄ List of references.

◄ Course chart.

◄ Technical aspects.

◄ Courses available.

◄ Homepage Bakens Verzet

"Money is not the key that opens the gates of the market but the bolt that bars them."

Gesell, Silvio, The Natural Economic Order, revised English edition, Peter Owen, London 1958, page 228.

“Poverty is created scarcity”

Wahu Kaara, point 8 of the Global Call to Action Against Poverty, 58^th annual NGO Conference, United Nations, New York 7^th September 2005.

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