Community currency
A local money, issued and governed by the community, that keeps spending and credit circulating among neighbours and local businesses.
Start small
Map who already trades with whom (a 2 to 4 week survey, a few volunteers, near zero cost). Then run a 3-month pilot of a simple voucher or mutual-credit ledger with 10 to 20 businesses and one anchor organisation, using free or low-cost software. Budget a few thousand dollars for printing or app setup.
The problem
Money leaks out of poor or peripheral places faster than it arrives, so local businesses starve, credit is scarce and people cannot trade with each other even when they have the skills and goods to do so.
Where it fits
Thrives where there is a strong place identity, an anchor institution (community bank, association or co-op) that can issue and back the currency, enough local businesses to accept it, and a trusted way to convert back to national money. Works best when tied to a wider purpose such as credit for the poor, language or short supply chains.
The principle underneath
Money that can only be spent locally has to circulate locally, so each unit changes hands more times before leaving. When the community governs issuance, credit can go to people and enterprises the mainstream system ignores.
A pattern in nature
Like nutrients cycling within a healthy soil rather than washing out to sea.
Who to call
Banco Palmas and the Brazilian Network of Community Development Banks (Fortaleza); Grassroots Economics (Sarafu, Kenya); Euskal Moneta (eusko, Pays Basque); BerkShares Local (Massachusetts); Sardex (Sardinia); Community Exchange System. RAMICS, the research association on community and complementary currencies, connects researchers.
Watch out for
Too few places to spend it; conversion fees that annoy businesses; reliance on one champion or one grant; no plan for digital payments; legal grey areas with central banks and tax offices; issuing more currency than local trade can absorb.
Where it comes from
Modern community currencies draw on the Wörgl scrip of 1932, LETS systems from 1980s Canada, Brazil's solidarity economy movement (Banco Palmas, 1998) and the Schumacher new-economics school (BerkShares, 2006). Open practice, widely documented; credit local founders when adapting a specific design.
Where it's worked
Conjunto Palmeira, Fortaleza, Brazil (Banco Palmas) · 1998 to 2012
Share of household purchases made within the neighbourhood rose from 20% (1997) to 93% (2009); loan default 1 to 2.5%; the model spread to 68 community development banks nationally by 2012.
Peer reviewedSourceBanco Palmas on the Landscape
Kenya (Sarafu Network, Grassroots Economics) · 2020 to 2021
Randomised trial: recipients of about US$30 in community currency saw monthly income rise by $23 and food and water spending by $28 after two months; the network had 40,000+ users and over $3 million in trade.
Peer reviewedSourceGrassroots Economics on the Landscape
Pays Basque, France (eusko) · 2013 to present
Grew to about 4.5 million eusko in circulation by 2025, described as Europe's largest local currency, accepted by hundreds of businesses and a growing number of municipalities.
DocumentedSource
Berkshire region, Massachusetts, USA (BerkShares) · 2006 to present
Running for 20 years with just over 300 accepting businesses (down from about 400 at its peak), exchanged at bank branches 1:1 with the US dollar.
DocumentedSource
Where it failed
Many currencies fade once founding volunteers tire or grant money ends: the Bristol Pound closed in 2021 and BerkShares has fallen from about 400 to just over 300 accepting businesses. Banco Palmas faced central-bank scrutiny and still lacks a legal framework for solidarity finance. Sarafu research found weaker gains for women than men during COVID-19, and paper-only currencies struggle as payments go digital.