My article presented at 3rd ICSEA in July 2014 at Wonju, Korea.

1. Practices of social and complementary currencies in Europe and the world
- With regard to the promotion of social enterprises -
Yasuyuki Hirota
miguel@ineval.org
Universitat de València (Spain)
Introduction
A number of social and complementary currencies (SCCs), used in parallel with legal
tenders (such as Korean Won, US Dollar and Euro) for payments, are emerging
throughout Europe and in other continents to enhance the local economy. Unlike
official currencies, these means of exchange are managed democratically by their own
users, making it easy to make our economy serve for us and not vice versa. But very
few, if any, studies have been done in terms of the relationship between social
enterprises and SCCs, posing a need for further researches in this field.
This paper’s goal is therefore to fill in this academic gap by illustrating how these
SCCs can help social enterprises in different ways on the basis of both theoretical
framework and empirical findings. It is essential to start with the fact that current
monetary system has some innate failures which are actually hurdles on stimulating
social enterprises. Although there is no SCC to target them specifically, different
experiences have already proved the potential that social enterprises can benefit from
such means of exchange too, so this paper tries to depict the perspective for the
collaboration between SCCs and social enterprises.
This paper will consist of four sections: it begins with explaining different structural
faults of our conventional money system which are against nurturing social enterprises,
such as money creation as bank debt, compound interest and pro-cyclical money
creation. Then relevant theories are presented to depict SCCs’ role in our economy.
Description on some leading experiences, such as Chiemgauer (Germany), SOL-Violette
(France) and Banco Palmas (Brazil) will be presented to highlight what sorts of
socioeconomic benefits they are bringing about. Last but not least, an analysis is given,
focusing on how such experiences can improve social enterprises’ performances in
terms of finance and customer acquisition / retention as well as their challenges.
1: Structural issues with our current money system

2. It is quite relevant to begin with defining some structural issues with our current
money system before dealing with the need of SCCs.
The first problem is that most money is created and supplied to the economy as
bank debt (Greco, 1990: Douthwaite: 1999, Greco: 2001, Lietaer and Belgin: 2012,
Jackson and Dyson: 2012 and Lietaer et al: 2012). In the UK as much as 97.4% of
money has come into being as such (Ryan-Collins et al, 2012) and last March the Bank
of England itself has officially admitted this process (Bank of England, 2014).
Undoubtedly banks are corporations, therefore money is only provided to projects as a
loan when they find it profitable to lend, or in other words money creation itself is the
bank’s business in search for profit. The fractional reserve allows banks to create and
lend tens of times more money than they actually have as cash deposit (the required
reserve rate is only up to 10% in the US1
, up to 1.3% in Japan2
, 1% in the Eurozone3
and
non-existent in the UK4
), and what is important is that the money, thus created by bank,
only exists electronically at bank accounts. Galbraith (1975) says that “the process by
which banks create money is so simple that the mind is repelled.”
What we see as a result are the “debt economy” and “economic relationship that…
includes a modernisation and a control of the subjectivity” (Lazzarato, 2011), in other
words, “a virtual economic serfdom in which debtors, struggling to avoid default, are
forced to an unhealthy competition with one another” (Greco, 1990). Lietaer et al (2012:
125 – 127) explain that, had France not approved the Article 25 of the Law on the 03rd
January 1973 which forbids the Banque de France to provide the French government
interest-free loans but forces the government to ask the banking sector for loans and
to pay corresponding interest rates, the public debt in this country in 2009 would be
merely 8.6% instead of the actual 78%. The whole real economy (both the non-
financial private and the public sector) is obliged to owe more and more to the financial
sector in order to get the money necessary for their operation while banks enjoy their
monopoly to charge interest on most economic activities, enriching themselves at the
cost of the rest of the economy.
The second issue is around the compound interest, an essential condition for the
bank to lend money to borrowers. Kennedy (1995) explains the following unsustainable
features of the compound interest:
1
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
2
http://www.boj.or.jp/statistics/boj/other/reservereq/junbi.htm/ (in Japanese)
3
https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.html
4
http://www.bankofengland.co.uk/statistics/Pages/iadb/notesiadb/wholesale_baserate.aspx

3.  It drives exponential growth which is observed in the natural world as the
growth of cancer (all living things begin with growing quickly, then slow down
and eventually stop growing quantitatively on reaching a certain maturity)
 Interest cost raises the price of every goods and/or services that we consume:
between 12 and 77% of the cost paid by West Germany’s public sector in 1982
accounted for compound interest repayment, which means such a huge
surcharge would not have been necessary if interest-free finance had been
available to provide such services.
 An unfair redistribution of wealth takes place with this interest, as the wealthy
can afford to lend money and therefore enrich themselves furthermore by
charging them interest rate while the rest of the population needs to pay the
interest rate, either directly on servicing their own debt or indirectly on paying
for any goods or services as we have just seen
On top of Kennedy, Lietaer et al (2012) points out the short-termism as another by-
product of the compound interest rate (See Figure 1).
Figure 1: How investment behaviours are affected by interest rate / demurrage5
5
Source: Lietaer et al (2012)

4. This graph shows two investment opportunities: one for a pine tree (costs $10 and
will yield $100 in 10 years) and the other one for an oak tree (costs $10 and will yield
$1,000 in 100 years). From the conventional financial viewpoint, futures’ current value
is discounted6
, so a pine tree is now worth only $61.39 ($100 / 1.0510
) while an oak tree
is now worth only $7.60 ($1000 / 1.05100
), making everybody opt for the first option.
However, if the demurrage (proposal by Gesell (1916) and Fisher (1933) to charge
penalty for hoarding money: see 3.2 for details) were imposed instead of interest rate,
the picture would be completely different as the oak tree’s current value would be
much bigger.
The last point is that the current money creation system, based on the bank credit, is
pro-cyclical, in other words banks pumps out more money when the economy is
booming while it withdraws and shrinks their monetary supply once a recession starts.
Such a structure of our money system is quite adverse to social enterprises in
different ways:
- Money creation as bank debt: in the first place, they have difficulty getting
access to the credit for both initial fund and operational fund from the bank
due to their low, if any, profitability. Social enterprises are to bear different
sorts of costs (especially training) to achieve their own goals while their
productivity is not always as high as its rivals, making it little attractive for
banks to lend money to such projects. On top of that, it should be
highlighted that what Greco (1990) depicted is contrary to social enterprises’
principles, as commercial banks are actually promoting cutthroat
competitions where social enterprises are in a very disadvantaged position.
- Compound interest: social enterprises need loans for their start-up but the
compound interest becomes another burden. The short-termism imposed
by the compound interest is another threat, as they are forced to yield
results as soon as possible without taking into account the necessary time
length to train the socially marginalised.
- Pro-cyclical money creation: social enterprises are needed more when the
economy is in the bust as more people lose job and need to be socially
reintegrated, but it is precisely at this time that banks are more loath to give
credits. While social enterprises can benefit from an economic boom as it
may loosen the criteria for bank loans, appropriate measures should be
taken so enough fund should be pumped out to the social enterprises
during the recession.
6
Provided that the interest rate is 5%/year, my $1,000 deposit will be worth $1,050 in a year
while what will be worth $1,000 in one year is now worth $1,000 / 1.05 = $952.38.

5. 2: Definition of SCCs
The term SCC is comprised of two different concepts: social currency and
complementary currency.
The first term “social currency” was invented by Primavera et al (1999) who, after
observing the bustling practices of “club de trueque” (barter club) in Argentina at that
time, found out that it has “its effects of social inclusion” as thousands of unemployed
people gathered there to exchange whatever they had (vegetables, fruits, clothes, shoes,
books, CDs, cosmetics and furniture etc.) and/or whatever they could offer (haircut,
manicure, wedding ceremony, legal counselling, car insurance, taxi and travels) to make
ends meet (Gómez, 2009). Participants, called as “prosumidores”7
, had an additional
income of some 600 dollars per month, about twice the minimum wage (ibid).
The second term “complementary currency” was first used by Bernard Lietaer at his
report to the European Commission in 1998, mentioning existing practices such as LETS
and Time Dollar as they are complementary to the legal tender (Rizzo, 2003). Table 1
summarises what Lietaer (2001) explains.
Table 1: Comparison between national currencies and SCCs8
National currency SCCs
Type of capital Financial / physical Social / Natural
Effects on the
relationship
Scarce / Competition-
inducing
Sufficient / Cooperation-
promoting
Serving for Commercial and financial
transactions
Communitarian
transactions
Form of creation “Fiat”, created by a Central ‘Mutual credit’, created by
7
“Prosumidor” (pl: prosumidores) is the Spanish word for “prosumer,” a concept invented by
Toffler (1980) by putting together both “producer” and “consumer.” Toffler was referring to
consumers who meddle in the production process, for instance by suggesting the producter
which design is the best for them, or to freelancers, what emerged in Argentina was a huge
amount of consumers who turned to be producers too to make up for the economic loss
triggered by economic crisis.
8
Source: Lietaer (2001)

6. Authority the participants themselves
Yang Yin
Nowaday both terms are used, quite often interchangeably, to refer to any means of
exchange other than national currencies. Lietaer (2001) defines money as “an
agreement within a community to use something as a means of exchanege,” highlighting
that the civil society can have their own money (i.e. achieve their money sovereignty) as
far as there is a consensus among its members.
3: Case studies of SCCs
3.1.: LETS (World)
LETS is the most popular type of SCC based on the mutual trust among its members.
Invented in 1982 at Commox Valley, British Columbia, Canada by Michael Linton, this
model has been replicated all over the world, with successes, failures and evolutions.
Servet (1999) defines this as “a group of people who, under an associative form and on
the local basis, exchange services and goods… by an internal accounting unit of
transactions.”
The system itself is quite simple: each member has their own account and starts
trading among themselves in this currency. In case of a LETS with six members (Anne,
Brian, Charlotte, David, Emily and Florence), everyone starts with a zero balance. One
day Brian buys Anne some bread and pays two points to her, and she has the right to
buy something equivalent from any another member of this system while Brian owes
two points to all of them. But how to repay this “negative amount” differs from how to
service the debt, as Brian’s “negative amount” is cancelled when he provides equivalent
goods or services (food, a second-hand cloth or book or pick-up service, for instance).
Usually there is a limit to the negative amount to prevent members from only
purchasing other members’ goods and services without providing anything in return.
Currently the biggest experience of this sort is CES9
. Originally developed as an
online LETS in Cape Town, South Africa, it took little time for this system to be linked
with similar groups in other countries. As of May 2014 as many as 682 systems from 67
countries / regions belong to this international online clearing system.
9
http://www.ces.org.za/

7. Another remarkable experience is Hanbat LETS10
at Daejeon, Korea which has been
operational since 2001 which allows the payment in two currencies (LETS points called
duru as well as Korean won), with approximately 600 families trading partially in this
local currency. The turnover has grown from 8,813,300 duru + 8,677,500 won =
17,490,800 in 2001 to 132,187,025 duru + 115,757,020 won = 247,944,045 in 2011.
3.2.: Chiemgauer11
(Bavaria, Germany)
Chiemgauer is an euro-backed regional currency12
in the counties of Rosenheim and
Traunstein as well as Rosenheim City, Bavaria, Germany to “bind the money and let it
flow within the community” (Gelleri: 2009). This initiative began in January 2003 as an
extracurricular project of a Waldorf school13
with six female students involved with the
start-up. (Gelleri: 2009, Kennedy et al: 2012). Table 2 shows key numbers about this
experience and Graphic 1 explains Chiemgauer’s life cycle:
Table 2: Key numbers about Chiemgauer14
2003 2005 2007 2009 2011 2013
Consumers 130 700 1,337 1,899 2,470 2,769
Businesses 100 380 631 587 593 627
Social projects 5 50 158 200 233 253
Chiemgauer in circulation 10,000 50,108 165,648 327,458 498,906 520,514
Donation for social projects 1,800 10,498 26,272 39,150 52,128 59,282
Turnover in Chiemgauer 75,873 699,834 2,304,571 4,042,204 5,676,698 7,181,494
Chiemgauer’s circulation speed
(per year)
9.48 16.78 19.35 13.72 11.42 12.82
10
http://www.tjlets.or.kr/ (in Korean)
11
http://www.chiemgauer.info/ (in German)
12
Kennedy et al. (2012) defines regional currencies as a subcategory of complementary
currencies which focus on a particular region, defined as “a geographical area with which people
tend to identify themselves.” (ibid.)
13
14
Source: http://www.chiemgauer.info/fileadmin/user_upload/Dateien_Verein/Chiemgauer-
Statistik.pdf (in German)

8. Euro’s circulation speed in
Germany (per year)
6.78 6.21 6.16 4.82 4.42 3.88
How faster Chiemgauer
circulates than euro in Germany
1.40 2.70 3.14 2.85 2.58 3.31
Chiemgauer’s multiplier effect 1.11 2.00 2.63 3.10 3.27 3.43
Graphic 1: Chiemgauer’s life cycle15
Photo 1: a two-Chiemgauer bill (2012 – 2013 series)
15
Source: Gelleri (2009)

9. Table 2 proves Chiemgauer’s steady growth as well as improving performance onto
the regional economy. The numbers of consumers and social projects have been
growing steadily while that of local businesses has already peaked in 2007. More and
more Chiemgauer is used and this regional currency circulates much faster than euro,
improving its multiplier effect too.
Chiemgauer’s stakeholders are consumers, local businesses and non-profits and this
regional currency is designed to offer benefits to all of them as seen on the Graphic 1.
Consumers choose a social project to donate and exchange euro into Chiemgauer and
pay in Chiemgauer at more than 600 member local businesses. Local businesses either
spend it at other businesses or redeem it into euro paying 5% of commission. The
Chiemgauer office takes 2% for its administrative cost and donates the rest of 3% to
the social project. On top of that, Chiemgauer is a currency with “demurrage”, a
monetary proposal by Gesell (1916) and Fisher (1933) to charge hoarding fee to the
bearers of money (2% every 3 months in this case: Photo 1 shows spaces where bearers
of this bill should paste a 4 euro-cent stamp every 3 months), encouraging them to
spend money as soon as possible. On top of that, Chiemgauer and two other regional
currencies have set up a financial cooperative Regios16
to provide microcredit both in
euro and in regional currency, with the option that the interest paid should be returned
if borrowers achieve to repay all their debt without delay (except VAT)17
. Below are
benefits of this SCC for each stakeholder:
- Consumers: They can donate 3% of their expenditure to a social project
(such as ecology and culture) without having to spend more. A consumer
who spends 500€ per month at local businesses can donate as much as
180€ (500€ x 3% x 12 months) without changing their behaviour.
16
http://www.regios.eu/ (in German)
17
See http://www.regios.eu/wp-content/uploads/AGB_Regios.pdf no. 10 “Zinsbonus”.

10. - Non-profits: This regional currency provides another income source. In
2003 as many as 217 social projects have received this donation, which
amounts to 58,739.61 €, and nine social projects have earned more than
1,000 €.18
- Local businesses: Their acceptance of Chiemgauer attracts those consumers
who wish to support a social project financially, leading to increase their
turnover which compensates the 5% of redeeming fee to be paid when they
change redundant Chiemgauer into euro. The (almost) interest-free
microcredit, to be offerred by the financial cooperative Regios, is another
important advantage, as both the lower interest rate as well as the better
access to credit will increase the chance for local businesses to be financed.
3.3: SOL-Violette19
(Toulouse, France)
SOL-Violette is the most successful experience of the SOL project20
, proposed by
Viveret (2003) as an interest- and speculation-free money which is committed to a
certain sort of activities. The project in Toulouse, started in May 2011, differs from
other experiences as it has decided to issue its own bills while other experiences are
completely electronic, requiring business owners to have their own card reader.
SOL-Violette is another euro-backed currency that only “solistes” (consumers) can
get at two affiliated financial institutions (Crédit Municipal21
and Crédit Coopératif22
)
with an advantageous exchange rate of 20 € > 21 sol to encourage solistes to spend
this SCC as much as possible. Then they spend sol at 125 businesses which are allowed
by CLAS (a French association in charge of managing SOL-Violette) to accept this
currency, and they either spend it at other businesses or redeem it at above-mentioned
financial institutions (21 sol > 20 €) just like Chiemgauer. The deposited euro at these
institutions are to be provided as microcredit for individuals and/or small businesses.
Businesses are required to comply with at least 9 of 25 ethical and environmental
18
Source:
http://www.chiemgauer.info/index.php?id=249&rws_donation_from=01.01.2013&rws_donation_
to=01.01.2014
19
http://www.sol-violette.fr/ (in French)
20
http://www.regios.eu/wp-content/uploads/AGB_Regios.pdf (in French)
21
http://www.credit-municipal-toulouse.fr/ (in French)
22
http://www.credit-cooperatif.coop/ (in French)

11. criteria set forth at the Dossier d’Agrément23
and the one year membership is given for
those businesses which do clear the condition (two years if they comply with at least 14
criteria)24
.
An important feature of this French experience is the City Council’s involvement: it
donated 120,000 € in 2011 and 2012 respectively and almost 100,000 € in 2013 to
sustain this project. Part of this budget is spent as subsidy for the unemployed by way
of three Maisons de Chômeurs (Umemployed People’s Houses) and 90 unemployed
people are selected to receive 30 sol during three months, giving them access to
organic food, other sorts of goods and/or services that they would never get. The sol
in circulation increased from 28,000 in 2011 to 47,918 in 2013 and the turnvover in this
SCC in 2013 is estimated to be 287,68825
.
3.4.: Banco Palmas26
(Fortaleza, Brazil)
Banco Palmas at Conjunto Palmeiras, Fortaleza, Brazil is another remarkable
experience, especially in the context of poverty reduction. Conjunto Palmeiras is a
former shanty town which was founded in 1970s by former fishermen who had been
expelled from their coastline village and in 1980s ASMOCOMP (Associação dos
Moradores do Conjunto Palmeiras, Conjunto Palmeira’s Inhabitants Association) was
founded to initiate its social struggle in search for better infrastructure (road pavement,
water and sewage service, electricity and school). Ironically the improvement of life
standard meant also the increase of the cost of living and a number of people were
forced to leave this neighbourhood simply because they couldn’t afford to pay the cost.
Therefore ASMOCOMP founded the community bank Banco Palmas initially to provide
microcredit service so people could get out of the poverty by starting up their own
businesses, but later it introduced its local currency Palma too to stimulate local
consumption.
What is relevant of Banco Palmas is that this SCC is a part of an integrated local
development project: For entrepreneurs Banco Palmas gives microcredit in real (Brazil’s
official currency, R$) while consumer loans are done in the local currency called palma
to stimulate local consumption and to retain the purchasing power within the
community. ASMOCOMP realises the mapping of the local economy on a regular basis
23
http://www.arecom-geneos.com/~fbosque/sol/sol-
violette/questionnaire_agrement_papier_v2.pdf (in French)
24
http://www.sol-violette.fr/prestataires/rejoindre-le-reseau (in French)
25
Source: http://www.sol-violette.fr/uploads/assets/telechargement/Bilan-2013_V9_1213-
12h33.pdf (in French)
26
http://www.bancopalmas.org.br/ (in Portuguese)

12. to detect which sort of businesses are lacking, helping entrepreneurs know the local
needs and set up new businesses which are more likely to succeed.
Another interesting feature of this bank is its own evaluation method: as most
people in the neighbourhood are from low-income families, it is not feasible to ask for
collaterals on offering microcredit. The banking team has therefore developed an
alternative: ask neighbours if they would lend money if they were asked by the loan
applicant to do so. Local inhabitants’ high-level mutual trust, which had been brewed
for decades through their social struggle, has enabled this community bank to get rid
of that bothering evaluation procedure. In 2012 it lent R$ 3,660,991.97 (approximately
US$ 1,876,000) to 4,479 production projects on top of giving 230 consumer loans, and
40,000 palmas (about US$ 19,500) were in circulation in the community.
Banco Palmas has been widely known as a model case of community bank, especially
as the solidarity economy network was strengthened27
. As of march 2013 there are as
many as 103 community banks all over Brazil28
and the public sector is providing
supports to replicate such an experience.
4: The complementarity of SCCs
We have already seen some fundamental problems in our current money system.
Now it is worth reviewing how SCCs cope with them.
Money creation as bank debt: LETS is a perfect system to allow people to create
money other than as a bank debt, but it is also fundamental for those with negative
balance to repay. Another way to create money is to issue it only on accepting tangible
deposits (such as food and biodiesel) and in fact Lietaer and Belgin (2012) suggests this
method for a new global currency called Terra.
Compound interest: All SCCs are aware of what is stake at the compound interest
and some work completely interest-free while some are unable to abolish it for
different reasons, although at least they try to reduce it to the minimum.
27
In 2003 both the SENAES (“Secretaria Nacional de Economia Solidária”, Brazilian government’s
organisation in charge of promoting solidarity economy,
http://portal.mte.gov.br/tca_contas_anuais/secretaria-nacional-de-economia-solidaria-
senaes.htm) as well as FBES (Fórum Brasileiro de Economia Solidária, Brazilian Solidarity
Economy Forum, http://www.fbes.org.br/) were founded, playing a fundamental role in
promoting this economy throughout this South American country.
28
http://www.inovacaoparainclusao.com/rede-brasileira-de-bcd.html (in Portuguese)

13. Pro-cyclical money creation: Stodder (2000) shows an important fact that
commercial barters29
play a counter-cyclical role to the economy: they get bigger when
the general economy enters a slump as it becomes more difficult for small businesses
to get a loan and/or sell in the official currency while they shrink when the official
currency economy enjoys the boom, therefore balancing the whole economic activities.
5: How SCCs can improve social enterprises’ performance
Although currently not linked with social enterprises, the Chiemgauer model shows
some ways to help social enterprises. Here I will refer to some potential ways SCCs can
contribute for social enterprises, basically on the basis of this German experience but
referring to other SCC experiences too.
The first advantage that this German experience could offer is, obviously, the 3%
donation to the “social project.” If social enterprises are admitted as “social project” as
well as “business”, consumers can easily donate to them by spending in Chiemgauer,
not only on spending there but also on shopping any other member businesses.
Although this donation alone cannot warrant their economic survival, it is worth noting
that this mechanism can help them by providing an additional revenue.
The second advantage is its character as loyalty programme: Holders of Chiemgauer
(both consumers who exchanged to it from euro and businesses who have accepted
this regional currency) are forced to spend it at another member business if they do not
want to lose 5% as reconversion fee, making social enterprises a bit more competitive.
The third advantage is the easier access to microcredit. All these organisations are
non-profits or cooperatives which were established by its own users, making it easier
for lenders to trust small entrepreneurs and consumers and to finance their small
projects, and even at lower interest rate. Banco Palmas shows that the high level of
trust among local inhabitants enables it to simplify its evaluation process. And the
allowed maximum negative balance at LETS allows social enterprises to be “in debt” up
to some amount which is negotiable with other members of the system.
29
SCCs used for B2B transactions. The biggest one is WIRBank (http://www.wir.ch/) in the
Switzerland, operational since 1934, which gives 647,244,773 WIR (one WIR is equivalent to one
Swiss Franc, as of 2013) to Swiss small businesses to promote trades among themselves, but a
number of similar cases are found in different countries. IRTA (International Reciprocal Trade
Association, http://www.irta.com/) is this industry’s international organisation.

14. 6: Challenges
It should be acknowledged, however, that the current practices of SCCs are far from
being perfect on stimulating social enterprises and some major challenges are pointed
out below to show what is at stake.
The first challenge for SCCs is their tiny size in comparison with that of the official
currency economy. Although Chiemgauer is successful in achieving to attract
thousands of local consumers, its number is still less than 1% of the local population
and its turnover in comparison with regional GDP is even smaller (the annual
expenditure per member (consumer + local business + social projects) in 2013 is 1,968
€ while Germany’s GDP per capita is estimated to be around 30,000 €). WIRBank30
in
the Switzerland is the only exception in terms of its dimension which could provide
low-interest-rate loans to social enterprises (but not additional income that
Chiemgauer gives to “social projects”), but it would be necessary that a Chiemgauer-
model SCC should increase its size so more money should be donated to social
projects (1 million € should be exchanged into this SCC to achieve 30,000 € donation).
The second challenge is the need to nurture a solid social cohesion within the
community so as to allow “an agreement within a community to use something as a
means of exchange” to come into being. Chiemgauer has been able to grow thanks to
the existing social capital around the Waldorf school and Banco Palmas was born on
the basis of the local inhabitants’ union which had been shaped as a result of years of
their social struggle to improve their own life standard while SOL-Violette has been
possible thanks to the local social and solidarity economy network as well as the
subsidy from the City Council. While SCCs are an economic tool, it is also essential for
their promoters to make enough efforts to build up an adequate community.
The third challenge is the need of marketing. Quite often SCCs are conceived,
promoted and implemented by advocates of monetary reform and, while they are
experts in ideological discussions, they lack arguments to show businesses and ordinary
consumers which sorts of specific socioeconomic benefits are available for SCCs users.
Kelman (1961) shows that there are three stages on adopting social causes: compliance
(I don’t smoke here because it’s forbidden by law), identification (I don’t smoke because
my favourite TV starts have declared to quit it) and internalisation (I don’t smoke
because it’s unhealthy for me) and, while it is practically impossible to resort to
compliance (it is quite unlikely that any government should approve a law to force
businesses and consumers to accept SCCs), it would be quite useful for SCC promoters
to try to come up with strategies to attract new users by identification (Use of a local
30
http://www.wir.ch/ (in German, French and Italian)

15. currency as a symbol of attachment to the community) as well as showing clear
economic benefits for different stakeholders (consumers, local businesses and non-
profits) on using a SCC (ex.: Chiemgauer).
7: Conclusions
Our current money system has some structural failures which are adverse to social
enterprises. The very process of money creation as bank debt means that the necessary
start-up fund and operational fund is provided from commercial banks only when they
find it profitable to lend this money, raising the hurdle as social enterprises tend to
yield little profit, if any. The compound interest, an essential requirement on borrowing
money, is another obstacle as well as contradiction since social enterprises, with the
aim of helping the socially marginalised = the poor, need to pay interest, shrinking
furthermore their profitability, on top of promoting cutthroat competition and short-
termism. The pro-cyclical nature of money creation is another headache for social
enterprises when the economy is in the bust, because there is even more need for
social enterprises while the banking sector is unwilling to lend money for their projects.
It is in this context that SCCs have emerged as other means of exchange, to be more
precise another agreement within the community to use something as means of
exchange, for social inclusion and to stimulate what is lacking with our national
currency economies, such as cooperation and communitarian transactions.
Different sorts of SCCs exist in the world: LETS is a system based on the mutual trust
where members exchange goods and services in their own exchange unit in parallel
with official currency. Chiemgauer in Bavaria, Germany is an euro-backed regional
currency with the aim of linking money with the community by donating 3% and
charging 5% of reconversion fee as well as providing low-interest microcredit in this
SCC. SOL-Violette in Toulouse, France is another remarkable experience which
promotes only those businesses which comply with some environmental and social
values, on top of giving subsidies to some unemployed people. Banco Palmas in
Fortaleza, Brazil is a pioneer of the community bank in this South American country in
which local inhabitants set up their own bank to satisfy their financial needs, giving
consumer loans in SCC to stimulate the local consumption. LETS shows the possibility
to create money other than as a bank credit, all SCCs try to minimise, if unable to
eliminate, the problems triggered by the compound interest and they are counter-
cyclical.
SCCs can be advantageous on promoting social enterprises, although some
challenges do exist. On one hand, the Chiemgauer model in Germany proves that
consumers can donate 3% of their consumption without virtually losing anything,

16. paving the way for social enterprises to receive such donations. Its effect as loyalty
programme makes enrolled social enterprises more competitive, because holders of a
SCC need to spend it at other member businesses if they are to avoid the reconversion
fee. The better access to credit is another positive effect as it enables more social
enterprises to be set up. On the other hand, SCC's tiny scale is still not enough to give
a significant impact on the local economy, a high level of social cohesion should be
brewed up to introduce a SCC and an appropriate marketing strategy should be
elaborated to present specific benefits to each stakeholder to be involved in such a
system.

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