Introduction

Community currencies are being used successfully in many parts of the world. The concept is proven, as being a reliable basis of exchange, if implemented in a sound way. Such a community currency has the potential to facilitate the emergence of a thriving local economy, even in the face of a recession in the general economy, but this potential is not being realized. Such currencies have been beneficial to the minority who participate, but the trade in such currencies has remained marginal in relation to the local dollar economy, and the overall prosperity of the communities has not been significantly affected.

In the world of dollar economics, it is well understood that economic development requires investment. With community currencies, however, the approach has typically been to introduce the currency, talk up its use in the community, and then hope that useful exchange somehow materializes. An existing merchant may be willing to trade in the currency, but if they can’t pay their staff and buy their supplies in the currency, their participation can only be limited. Someone may have an idea for developing a profitable new business, based on local supplies and markets, which could trade in the currency – but a considerable dollar investment would be needed to establish the business. Under such circumstances it is very difficult for significant trade in the currency to develop.

Consider how a new dollar-based enterprise is typically launched. First a business plan is developed, showing how the enterprise can operate profitably, and identifying what funding will be needed to get the business off the ground. Then a funding source is sought – either an investor or a bank – who then funds the startup in return either for equity in the new enterprise, or else a commitment by the enterprise to repay the funding with interest out of operations.

The idea behind the Credit Bank model is to view a community-currency economy as a startup enterprise. Instead of a business plan, we need an economic development plan for the community. And instead of profit-maximizing investors, we need local investors who see themselves as partners with the community, and who are willing to wait until the community is thriving before they get back their investment – without interest. With a sound development plan, and appropriate investment, it becomes possible to develop and grow a community-currency economy in a systematic way. This Credit Bank model includes an effective strategy for doing so.