At the Sifa Primary School outside Nairobi, Kenya, students pay their tuition with a new, local currency called the pesa. The school is one of several institutions that accepts the community currency.
Teacher Josephine Ouma says the currency has made life easier. The currency is widely used by people in the Gatina Village where she lives.
The pesas are equal in value to the Kenyan shilling and can be spent in the community just like cash.
The new currency gives poor people more buying power than they would otherwise have. If members of the community have a shortage of the national currency, they can use the community currency to "get access to the goods and services they may need," said Ruth Mwangi, with Grassroots Economics.
It is like having a credit card without the interest.
The non-profit group Grassroots Economics introduced the currency here last year. Community currency programs are being set up by non-profit organizations across the world. Although they are called currencies, they are really a regional form of exchange, or barter.
They help poor communities increase trade and create jobs, according to Grassroots Economics, based in Mombasa, Kenya. It “does not replace but rather supplements the national currency system,” reported the non-profit group.
How does community currency work?
Here’s how community currency works: A non-profit group like Grassroots Economics organizes local businesses into a commercial barter club.
Each business is given an initial amount of credit by the other businesses. These credits are backed by the goods and services of each participating business. The credits can be exchanged for various goods and services at any business in the network.
A portion of the credits is collected as a tax by the non-profit organization. This is used to fund public service projects in the community, like road maintenance or trash collection.
These alternative currencies are growing in popularity and are used in a variety of local communities around the world, including Europe, Africa and the U.S.
For example, Bay Bucks is a community currency used in San Francisco. “You earn Bay Bucks every time a business purchases your goods or services on the Exchange, and you can spend the Bay Bucks you earn when you want to purchase anything in the Bay Bucks marketplace,” according to their website.
Let’s say Albert is a baker who needs help filing his taxes. He contacts Betty, a bookkeeper in the network, and pays her 500 Bay Bucks for her tax preparation services. Betty pays Albert 50 Bay Bucks for some bagels to serve at her next meeting. She also pays Charlie, a web designer in the network, 300 Bay Bucks to design a new logo. And on it goes, stimulating business in the local economy.
Participating businesses “can use future sales” to pay for what they need now, according to Chong Kee Tan, the co-founder of Bay Bucks. Merchants in the network do not pay any interest on their purchases. Credit in community currencies is interest free.
Grassroots Economics has given pesas to about 500 locals in Gatina Village. Each member receives a maximum of 400 pesas. Of these, 200 are saved and pooled for community improvement projects. The rest can be spent like cash.
Those 500 people are a just a small percentage of the roughly 10,000 people living in Gatina Village. Grassroots Economics said it started with a small number of members so they can monitor the currency.
Francis Njuguna, a shopowner in the village, said: “There are some challenges with the currency, since there are a lot of people who have not accepted its use, but I believe that once we educate them on it, they will accept it, since many more are joining as we continue to enlighten them.”
What are the benefits of community currency?
Traditional national currencies are issued by the government and backed by banks in those countries. For example, the British pound is backed by the Bank of England.
But community currencies are based on a system of trust among local residents, explained Simon Woolf. He is managing director of the Brixton Pound, a community currency used in the south London district of Great Britain. The Brixton pound was launched in 2009.
Woolf said in a TEDx talk that community currencies “stimulate local trade and the local economy.”
Supporters of community currency say it is a cost-effective way to promote small local businesses and achieve social and environmental goals. Participants in Kenya also say the currency provides a cushion against hard times.
Grassroots Economics plans to expand the community currency program to communities in Rwanda, Uganda and Tanzania in 2016.
But experts say community currencies have limitations.
Radha Upadhyaya is with the Institute for Development Studies at the University of Nairobi. “It prevents you from getting goods and services from outside the economy, the local economy, and that means that the exchange networks are quite small,” she said.
Woolf noted that it is hard to measure the economic impact of the Brixton pound. “There are 50,000 Brixton pounds in circulation,” he said. But no one knows how many are actually being used and what the effect is on the local economy.
I’m Mary Gotschall.
Mary Gotschall wrote this story for Learning English, with additional reporting from Lenny Ruvaga at VOANews.com. Kathleen Struck was the editor.
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Words in This Story
tuition – n. money that is paid to a school for the right to study there
currency – n. the money that a country uses : a specific kind of money
barter – n. a system in which goods or services are exchanged for other goods or services instead of for money
enlighten – v. to give knowledge or understanding to (someone) : to explain something to (someone)
cushion – n. something (such as an extra amount of money) that you can use to reduce the bad effect of something (such as an unexpected problem or expense)
shortage – n. a state in which there is not enough of something that is needed