Written by Hugo Turpin

For those unfamiliar with the concept, a complementary currency is a currency or medium of exchange that is not necessarily a national currency, but rather supplements or complements national currencies. While not considered legal tender, the use of these currencies is based on mutual agreement between the exchanging  parties. Their primary goal is to regulate a local or regional economy or achieve a particular social, environmental, or political outcome.

 

Tony Greenham, a financial economist, explains that “wherever there are unmet needs and spare resources, we can find new ways of creating money.” Complementary currencies can solve these gaps. These currencies can be either paper-based, or electronic, and are usually interest-free. Amid a global warming crisis, complementary currencies may combat the catalysts of climate change on a local level. As more countries warm to this concept, a snowball effect could allow complementary currencies to expand globally, to help fight against global warming. As of 2019, there were over 5,000 different complementary currencies being used around the world, and this number is only rising.

 

Unlike alternative currencies like cryptocurrencies, complementary currencies aim to fulfil social goals, often at a local level. As such, cryptocurrencies could be classified as complementary currencies if they are implemented to pursue a social goal.

 

To give you an example of the impacts of complementary currencies , take Bangladesh not the country, but the sprawling slum district on the outskirts of Mombasa, Kenya, where money is tight and business is highly volatile, leaving many families frequently short of cash for life’s essentials. In 2013, Bangla Pesa was launched as a complementary currency for small businesses in the community. Over 200 traders, the majority of them women—ranging from bakers and fruit sellers to carpenters and tailors—are now members of the network. Every new member must be endorsed by four others before being issued with Bangla vouchers, and commit to backing them with their own goods and services. Thus, ensuring that the scheme is underwritten by its own members.

 

Within two years of the scheme’s launch, traders’ revenues had increased substantially, largely due to the economic stability and liquidity provided by the scheme. Using Bangla vouchers to buy and sell within the network allows members to save their Kenyan shillings for essentials like electricity that require hard cash. The complementary currency also provides a buffer against the frequent slumps in cash spending. For instance, when a three-day power cut hit the district in 2014, small businesses like John Wacharia’s barbershop lost customers and cash revenue. But as a member of the network, he had an alternative means of exchange at hand. “Bangla Pesa allowed me to provide for my family, eat, and survive when I could no longer work,” he said.

 

Complementary currencies aren’t just for poorer communities. Take St. Gallen, a wealthy Swiss city that introduced time banking in 2012 to provide more care for elderly people. Its scheme, Zeitvorsorge—meaning “time provision”—invites every citizen over the age of 60 to earn care-time credits by helping a local elderly resident with everyday tasks like shopping or cooking, while also keeping them company. This mean that senior citizens to build up a “time pension” to cover their own future needs of care and companionship. Furthermore, the system distributes an initial stock of care-time credits—which are essentially its currency—among the city‘s neediest, making the scheme socially redistributive. Carers can earn up to 750 hours of time credits, guaranteed by the council, who promise to redeem those credits for cash should the initiative fail.

 

Current complementary currencies are often created to address specific issues, such as increasing financial stability. Most complementary currencies have multiple purposes and intend to address multiple issues. They can really help communities that do not have access to financial capital or can help adjust people’s spending behaviour. The 2006 Annual Report of the Worldwide Database of Complementary Currency Systems presented a survey of 150 complementary currency systems, in which 94 respondents selected”all reasons”, among them cooperation, micro/small/medium enterprise development, activating the local market, reducing the need for national currency, and community development. These aims may include:

– Resocialisation and emancipation

– Lifeboat currencies

– Increasing financial stability

– Reducing carbon emissions by encouraging localisation of trade and relationships

– Encouraging the use of underused resources

– Recognising the informal economy

– Promoting local businesses

– Maintaining purchasing power and value preservation

One of the key ideas of complementary currencies is encouraging localisation of trade and relationships that will aid in battling the climate crisis. This will help decrease the average food miles that countries see daily—one of the biggest contributors to global warming. Furthermore, they will help small businesses thrive, reducing the carbon footprint associated with large-scale, centralised production and distribution systems. Some complementary currencies are even structured to reward sustainable behaviours. For instance, people might earn complementary currency by recycling, using public transportation, or buying organic products, directly promoting lower-carbon lifestyles. Overall, complementary currencies can support the circular economy by encouraging the reuse, repair, and recycling of goods, reducing the need for producing new items, which typically involves carbon-intensive processes.

  As their popularity continues to rise, complementary currencies may prove a vital to fight global challenges as they address environmental and social issues on a local level.