Over the past year, I’ve been exploring the many examples out there of communities forming peer-to-peer networks in order to rebuild local economies, resilience and trust. These range from gift economies to barter groups, from loyalty programs to mutual credit systems. The latter, mutual credit systems, is the focus of this post.
The oldest mutual credit system still in operation today (of which I am aware) is the WIR, based in Switzerland, which was created in 1934 due to currency shortages after the stock market crash of 1929. The WIR is managed by the WIR-bank, a cooperative owned by the businesses using it. They currently have about 75,000 Swiss businesses as members, representing about 25% of all businesses in the country.
It’s essentially just a bookkeeping system that enables transactions to happen, and is generated directly among the businesses. So, business A sells a good or service and receives a WIR Credit, while Business B, the buyer, gets a corresponding debit. Business A can go use their Credit elsewhere, while Businesss B has to eventually sell a good or service to offset the debit and remain in good standing with the community of business members. No interest is charged, and the ledger always balanced to zero. It’s been observed over the years that during times of recession, participation in the WIR system increases, meaning the financial needs of businesses continue to be met uninterrupted despite what’s going on in the global economy.
I thought this was a pretty cool thing, both in terms of creating a mechanism for businesses to engage in trade without the use of traditional money, and as a complementary currency that acts as a “spontaneous counter-cyclical shock-absorber for the Swiss economy,” in the words of Bernard Lietaer.
I wondered if there was anything similar going on in the US, and was excited to discover the Vermont Businesses for Social Responsibility Marketplace, an “innovative peer-to-peer mutual credit system embedded within the largest green business association in the US.” Businesses pool the credit they issue to each other into a common marketplace where local goods and services are bought and sold, credit lines are issued to willing entrepreneurs, and the cost of doing business is lowered by consolidating expenses and buying power. They currently have 160 businesses actively trading, with a goal of getting 1000 Vermont businesses as members by 2015.
I reached out to its founder, Amy Kirschner, to find out more about how it works. Continue reading