Mutual credit is a form of money in which users pay each other using a system of debits and credits. Within such a payment system, there is no need for cash or banks. Mutual credit can help revive organic trade between neighborhood businesses or among community members. It is stimulative in a way that reflects community values. That’s because transactions (technically lending and borrowing) are guided not only by profit but by participants’ long-term priorities as community members and the trust they have in each other.
Why use it?
Recent years have seen great interest in the phenomenon of local currencies and their ability to influence an economy. Mutual credit in particular is a system that can sustainably provide liquidity where needed, thus helping stimulate economic activity.
A true circular economy must address externalities not always valued by traditional currencies. In a mutual credit system, participants can use alternative denominations of value, such as “hours of work,” “favors,” “kilowatt-hours,” or their own new denomination. This can create a more holistic or sustainable economy, rendering different forms of work or value more visible, to be acknowledged or compensated appropriately. Using a complementary medium of exchange in this way can help bring to light all aspects of an economy.
In order to set up a mutual credit system, you will need to get to know the players in your economy, the resources, time, and skills available, and the needs of individuals and the community. This information allows you to map existing or potential value flows between different members of your community. We call it resource-mapping, and it is usually the hardest part about setting up a system of mutual credit.
Who is it for?
Business owners and entrepreneurs are often the most important agents behind kickstarting a larger ecosystem of mutual credit. They may also have the most to gain, since the added purchasing power in the local economy and stability to weather external financial shocks are great advantages for small and medium-sized enterprises.
However, anyone can benefit from using mutual credit in their community, whether it is a small group of friends, a municipality, or something else. Depending on the situation and resources available, there may be many different ways to implement a mutual credit system to suit the situation.
Mutual credit is also a good resource for development professionals working with underserved groups. For example, the mutual credit platform Trustlines is essentially a mobile-first payment solution that works equally well for people who do not yet have any savings in their national currency.
How long does it take?
There are a few mutual credit platforms out there if you want to set something up. For example, getting started with Trustlines
is quick and simple--you can start creating connections with your community as soon as you download the app. Other platforms may offer more options for centralized control, or more features, but may take longer to set up and more effort to maintain. Others may be pre-existing platforms that you can apply to join.
When starting your own system of mutual credit, resource-mapping, community-building, and organizing a full-fledged pilot can be longer projects taking anywhere from weeks to months depending on the size of your community and scope of the project.
How many people is it for?
If you’re starting off with a simple platform for peer-to-peer credit, like Trustlines, you’ll need a minimum of two people. After that, it can grow to have as many users as you wish. Centralized models may have different dynamics.
Regardless of the platform, we suggest a group of 10-100 people to start off with, to discuss their offers and needs, and to try out the system and make some exchanges or transfers. This will help reveal if there are any unexpected issues or additional facilitation resources needed by the community.
What materials do you need?
For an initial meeting, we suggest paper and pen to assist in brainstorming for market facilitation. For example, this may include listing each person’s offers and needs. Some helpful worksheets and handouts are available below to print and distribute.
Participants may also want to bring items to trade, although this is not required for an initial meeting.
After mapping the different players and the potential value flows between them, the next step will be to set up a marketplace. A marketplace is anything that helps community members advertise their offers and needs to each other. It can be a physical place with booths, or a message board online, or a mobile app with a built-in map--or anything in between.
What does the facilitator need to know or be able to do?
The facilitator should be familiar with mutual credit and be able to suggest or discuss the social guidelines, a marketplace, or an accounting platform for implementing it.
When deciding on a marketplace and accounting platform, it is good to take into consideration the needs of the community. For example, do you have reliable internet in your area? Do members use smartphones? How do community members communicate with each other--Facebook, SMS or messaging apps, or good old fashioned meetups? These may affect your decision about what type of accounting system to use and how to create an accessible marketplace.
Some of the resources available on the Trustlines communities page
may be helpful.