Mutual credit circuits can transform commercial exchanges from a mere business opportunity into an occasion to engage in the economic life of the community.
We hear about them more and more, even if under different names, and they represent one kind of experience within a trend that is seeing the proliferation of local currencies, socially controlled commercial credit circuits, reward systems and even crypto coin (this last being a phenomenon that lies outside the scope of the present article[1]). There appear to be more than 5,000 of them in the world, a figure that is not easy to verify but that points to a certain ferment, owing to the fact that, historically, deep financial crises give rise to situations in which money is not spent and debts are not settled.
This means that, of the three functions money has – unit of account; means of payment; store of value – the store of value function takes over, with the dire consequences we are witnessing, above all in terms of a shortage of liquidity.
Faced with the crisis, which is not only financial and clearly produces situations that are disadvantageous for many, forms of collaborative economy come into play that, besides promoting innovative practices of sharing, renting, exchange and sale, prompt fresh thinking about the paradigms of finance and economics through the setting up of clearing houses for mutual debts and credits, which make exchanges and payments between businesses easier by taking on the function of a complementary and social currency.
One of the alternative economic principles moving in this direction is that of clearing, understood as the periodic closing of monetary accounts, that is, as the offsetting of debts and credits within a defined context and period. Clearing as an end allows money to work as a means of exchange but not as a store of value, and its consensual application makes possible one of the fundamental conditions for the existence of complementary currencies, namely that they cannot be regarded as an instrument for accumulating positions of economic pressure and for the resulting perpetuation of imbalances among the members of the exchange community. Consensus over its application within defined territorial and temporal limits is giving rise to numerous currency forms that complement the official currencies (meaning that they do not replace them, but circulate alongside them), variously labelled as complementary, parallel, purpose-specific, local, social, mutual-aid, cooperative or community currencies.
Local complementary currencies are conceived first of all as a tool for managing the money in circulation in a context of crisis in which that money tends not to circulate, and some experiences have proved able to take root at the local level.
The best known model is that of the Wir circuit (http://www.wir.ch), born in Switzerland in 1934 with the aim of limiting the effects of the Great Depression on small and medium enterprises. It is a system of exchange between businesses – hence a B2B (business to business) model – that facilitates transfers between production and commercial units through the multilateral offsetting of debts and credits. This mechanism makes it possible to optimise the management of liquidity. Production units can obtain a positive clearing balance straight away, the moment they sell goods or services to the other members of the circuit. In this way they acquire a Wir credit that serves as a means of payment. This circuit allows businesses that have a surplus of production to come into contact with other businesses that need those goods. The central office – which performs the function of a clearing house – sets the limits of the credit that can be granted to each business. Today the Wir circuit has also become a bank subject to Swiss law, even though its issues are neither guaranteed nor convertible into legal currency, that is, into Swiss francs. The prices of all goods and services are expressed in terms of “Wir credit”. Use of the Wir circuit follows a counter-cyclical trend with respect to the performance of the Swiss economy: when the circulation of the franc slows down, because of an economic crisis for instance, circulation in Wir increases. It follows that, in this case, the local currency contributes to the stability of the economy (T. Studer, 2006 and S. Lucarelli 2015).

This is the model on which a more recent experience has been built and spread, one that began in Sardinia and is now spreading to other Italian regions (http://www.sardex.net/gruppo/) and that from 2016 will operate in Umbria too, promoted by Link3C (http://www.link3c.it), a cooperative company entered in the Register of Innovative Start-Up Enterprises of the Perugia Chamber of Commerce.
Like those of the Sardex.net circuit, the aims of the Umbrex circuit will be to strengthen communities, increase prosperity and stimulate spending in the Umbria region.
The settlement of purchases and sales takes place among the members of the circuit and through the use of Umbrex credits. The relationship with the official currency is 1 to 1. On joining, each member becomes the holder of an account and of an interest-free credit line, as well as of a card for purchases within the circuit. The online portal allows all members to create a profile through which they can communicate all the information about their business, describe their product and look for the other registered companies, so as to then carry out all the transactions agreed between the parties; the handling of offline relationships is not ruled out, however. Every business has a broker at its disposal who advises on and manages transactions and tries to make exchanges between businesses easier, starting from an analysis of debit and credit positions within the circuit: the growth in the number of transactions has to go hand in hand with the maintenance of a steady level of credit in circulation. The idea, in fact, is to keep a stable per capita money supply able to sustain the volume and number of transactions. The credit lines are granted using as collateral a set of goods made available by the company that joins the circuit. As a first approximation we can picture the collateral as if it were the company's warehouse. If, however, the debit position is not covered within twelve months through the sale of new goods and thus the earning of sufficient credits, it must be covered in euros, save for specific agreements between the managers of the circuit and the company in difficulty. Should this not happen, the ordinary debt recovery procedure is set in motion. These are clearly extreme cases, which in fact have always been avoided in the circuits already in operation through the work of the commercial advisors, whose job is to bring into the circuit potential buyers of the products supplied by a business that may be finding it hard to settle the debts it has contracted towards the circuit[2].
We are therefore looking at a business-oriented local credit circuit, aware of the significant role played by effective demand as it can be expressed locally; to strengthen that demand, business to employee (B2E) arrangements are also activated, which offer employees of the companies registered with the circuit the chance to join Umbrex on a voluntary basis, creating their own personal account on which to receive part of their salary, bonuses, salary advances or reimbursements. If, for example, an employee needed an advance to cope with an unexpected expense, they could turn to the Umbrex circuit and avoid drawing on their own savings or turning to finance companies that would charge high interest; the employer who advances the salary in the form of Umbrex credits will gain from it in terms of monetary saving in the following months; the system as a whole will benefit too, because the Umbrex credits obtained by the worker will be spent within the local circuit. In this way workers and businesses work side by side with the aim of restoring purchasing power, strengthening local demand and thus contributing to the recovery and consolidation of the regional economic fabric.

Today the “Sardex Group” represents a phenomenon of great interest in the Italian and European business world, not only in economic terms (in 2014, in Sardinia alone, goods and services were exchanged for a value of more than 30 million euros) but also in terms of local innovation, considering that commercial mutual credit circuits are, in essence, forms of endogenous money creation whose function is exclusively that of unit of account and means of payment, answering the needs that emerge in the areas that host them.

This strong regard for local economies reopens the relationship between money and community: money is not the instrument for building community, but it is certainly one way, and not the least important, of strengthening the bond of society and solidarity among the members of a community on the level of exchange, and of making it emblematically and symbolically visible.
When in Umbria we speak of Umbrex, we are not talking about a return to the lira, about alternatives to the euro, about a return to barter, or about a currency with a separatist and xenophobic meaning; we are talking about a model that we count among those that are candidates to shape the appearance of the future of our economic and commercial system, a future that, as a growing number of scholars and practitioners maintain, will be marked by a peaceful coexistence, by cooperation between official currencies and complementary currencies” (B. Lietaer, M. Kennedy, 2012). In this sense we speak of the Ecology of Money (Lietaer, Ulanowicz et al. 2009 and 2010): in contrast to the “monoculture” of national currencies (which is clearly not workable in itself), a sustainable ecosystem of currencies can show greater resilience in facing economic downturns; a lively diversity of currencies is more likely to protect us from recession than reliance on a single monetary monoculture that may fail (North, 2012).
It is thus possible to imagine a scenario in which a user takes up a commercial activity with conventional money, and commits their professional work through a complementary currency, while exchanging points earned through voluntary work carried out in their free time, using them to obtain public services, and can finally add proprietary systems, such as points-reward schemes (when flying or doing the supermarket shopping) that could be managed within the same multi-currency digital wallet.
The four currencies – conventional national (that is, supranational, e.g. the euro) currency, complementary commercial-credit currency, social-credit acknowledgements, points rewards – could thus coexist.

The value underlying this way of proceeding is that of allowing the users of these complementary currencies to engage fully in the social and economic life they have chosen, replacing the logic of economies of scale with that of an economy of relationships.
And when several thousand people decide to concern themselves with the questions of controlling credit and managing its distribution, money becomes not only a means of exchange but also the most versatile instrument for taking part in social and political life.
Through this engagement a value is created, one given by social capital, which also fosters economic development in an ethical way.

Notes

[1] The best known example is that of Bitcoin, which functions as a parallel currency, convertible and subject to speculative dynamics. Unlike most traditional currencies, Bitcoin makes no use of a central authority: it uses a distributed database across the nodes of the Network, which keeps track of transactions, and it relies on cryptography to handle functional aspects such as the generation of new money and the assignment of ownership of the bitcoins. For further reading: http://dcentproject.eu

[2] It should be stressed in any case that the credit lines are modest: they range from a minimum of 1,000 credits to 20,000 credits. Cf. Federica Mellone, Le “monete complementari”, uno studio introduttivo, University of Bergamo, degree thesis, academic year 2012-13.

References consulted

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Amato M., Fantacci L. (2010). Fine della Finanza, Donzelli Editore, Roma

Amato M., Fantacci L. (2012). Come salvare il mercato dal capitalismo, Donzelli Editore, Roma

Amato M., Fantacci L. (2014). Moneta complementare, sai cos’è? Bruno Mondadori, Milano

Blanc, J. (2001). Les monnaies parallèles, L’Harmattan, Paris

De Toffol F., Valastro A. (2012) Dizionario di Democrazia Partecipativa – Centro Studi Giuridici del Consiglio Regionale dell’Umbria http://centrostudi.crumbria.it/dizionario/home

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Lucarelli S., (2015) Abstract della partecipazione al convegno “Nuovi strumenti per una nuova economia: Circuiti di credito reciproco e Patti di collaborazione”, Perugia 20 Febbraio 2015

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Fabiola De Toffol is a Project Management Professional (PMP^â) and a process facilitator, a consultant in community matters and Project Cycle Management. She is a senior partner at studiop3 Poliedra Progetti in Partenariato. In 2014 she was a founding member of Link3c, the cooperative company that runs the Umbrex Commercial Mutual Credit Circuit.