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The Power of Local Money for a Thriving Local Economy
Ann Lapenna always felt buoyed by a sense of belonging when she walked into the West End Food Co-op in Toronto’s Parkdale neighborhood. She would head to the kitchen, don an apron, then begin slicing carrots, chopping potatoes, and juicing lemons for the store’s freshly made soups and stews.
Lapenna was part of the Co-op Cred program, which matched individuals with work placements at the co-op and nearby community gardens. Instead of dollars, wages were paid in “cred” that could be redeemed for groceries at the store. Like Lapenna, most participants had low incomes and faced barriers to employment, so the program served a dual purpose: it offered meaningful work and facilitated access to healthy food.
While a nonprofit food co-op might alleviate environmental and health problems associated with the food system, its organic products were too expensive for many community members. Wanting the store to be more inclusive, the co-op’s founders and organizational partners hit on the idea of Co-op Cred, a complementary currency rooted in cooperative principles of volunteer labor.
Complementary currencies are currencies that circulate alongside official legal tender. While national currencies are bound up in the inequities of the global financial system, complementary currencies have social goals, such as supporting local businesses or increasing economic inclusion for those without access to traditional capital. Complementary currencies also link “underutilized resources with unmet needs,” as Gwendolyn Hallsmith and Bernard Lietaer explain in their 2011 book Creating Wealth: Growing Local Economies With Local Currencies, by creating the infrastructure for people to engage in trade even when money is scarce.
Established in 2013, Co-op Cred was structured as a complementary currency in part to help those receiving social assistance avoid higher deductions taken on their income. By providing compensation in cred, the program permitted participants to maintain their benefits payments.
Unfortunately, Co-op Cred petered out shortly after the West End Food Co-op closed in 2018. The store’s landlord, a community health center, needed the space for its own expansion, and the co-op was unable to secure another affordable location.
“I wish it was still there,” Lapenna says. “I miss working there.”
Some participants continue to work in the community gardens run by Greenest City, a Co-op Cred partner organization. Instead of cred, they now compensated with gift cards to other grocery stores.
While in the end, the co-op was a casualty of Toronto’s booming real estate market, Co-op Cred also lives on in the lessons it holds for other complementary currency projects.
A promotional video for the program is packed with testimonials: Co-op Cred is “life-altering,” one participant says. “I can go shopping for what I want, when I want.” “My confidence is really building,” adds another. For Lapenna, earning her food handler certification was an important accomplishment, as was sharing her experience and what she learned in presentations delivered to university students.
Susanna Redekop, the co-op’s communications coordinator, recalls a participant’s pride at having grown hundreds of pounds of vegetables at his community garden placement—produce that was then donated to the food bank he himself used to frequent. “Having that kind of empowerment was incredible,” Redekop says.
“The currency was a tool that allowed for other things to happen,” says Ayal Dinner, who helped to establish the West End Food Co-op.
The BerkShares Example
Complementary currencies can be difficult to grasp—how can people create money out of thin air?—but they are not entirely different from the system of national currencies to which we are accustomed. Money is based on trust. It maintains its worth because we all, collectively, trust that others will continue to behave as though it has value.
Complementary currencies also offer something national currencies do not, proponents argue, by keeping money in the community. BerkShares, the most widely known example of a local currency, are accepted by more than 400 retailers, service providers, and manufacturers in the Berkshire region of western Massachusetts. Individuals receive a 5% discount at those retailers when converting dollars to BerkShares—a small incentive to promote the use of the currency. While businesses can redeem BerkShares for dollars, they can also spend them at other vendors in the network to bolster the local economy even further.
The currency’s success is partly because of strong partnerships with local banks and business groups, according to Rachel Moriarty, director of operations at the Schumacher Center for a New Economics, which helped launch BerkShares in its current form in 2006 and continues to provide research and development support to the program.
“When we launched the program, there were about 100 businesses that we pulled in from a partnership with the local Chamber of Commerce, which is a great place to start for anybody looking to initiate a program in their own community,” Moriarty says.
For some, however, a key question remains: What is the benefit of complementary currencies over other efforts to strengthen local economies?
Moriarty, for one, believes BerkShares fosters important conversations around the value of place-based economies. “At the end of the day,” she adds, “BerkShares are a tool—an educational tool—to encourage people to shop locally.”
But in areas with less access to cash and financial institutions, complementary currencies can play a more fundamental role. Money should be considered public infrastructure, says Will Ruddick, founder of Grassroots Economics, a nonprofit organization responsible for the thriving Sarafu currency network in Kenya.
Here, Ruddick is referring to the function of money as a catalyst of economic activity. When national currency is unavailable, complementary currencies can unlock latent capacity.
“A medium of exchange is important, period, full stop,” Ruddick says. Sarafu, with more than 55,000 users in cash-poor communities, stimulates local trade while allowing people to save their Kenyan shillings for imports and investments.
The impetus behind these alternative systems isn’t new. “Low-income people help each other out all the time,” says Adriana Beemans of the Metcalf Foundation, which provided support to the Co-op Cred program. Initiatives like time banks, premised on tokenizing the exchange of labor and skills, risk commodifying forms of mutual aid already occurring on a grassroots level, she says.
There are valid concerns around some of these systems. The suggestion that complementary currencies can address complex issues like poverty and unemployment by connecting “underutilized resources” to “unmet needs” can come across as utopian.
But the counterargument is that local economies should not be subject to periodic devastation by the fluctuations of the global financial system. And indeed, complementary currencies have often emerged in response to economic downturns.
In 1932, Michael Unterguggenberger, mayor of the Austrian town of Wörgl, introduced an alternative currency to address unemployment precipitated by the Great Depression. The town printed paper notes, using them to pay residents to repair roads, install outdoor lighting, and even construct a ski jumping platform as part of a public works program.
After the 2008 financial crisis, Sardex was founded to support businesses across the Italian island of Sardinia. By 2018, the Sardex system had more than 3,000 members and a transaction volume equivalent to 43 million Euros. Like Kenya’s Sarafu, Sardex enables members to purchase goods and services on credit from other participating businesses. That credit can then circulate as a complementary currency, which businesses promise to accept as payment for their own products.
The fallout from COVID-19 has renewed conversations about the potential of universal basic income and complementary currencies to ensure people can afford to meet their needs. The municipality of Maricá in Brazil is already making strides here, having provided some of its residents with a basic income for several years, denominated in a digital currency called Mumbuca. When the pandemic exacerbated economic insecurity, Maricá already had the infrastructure in place to scale up the program.
Sardex and Sarafu are aimed at facilitating “loops” of economic activity, to increase the currency’s circulation within the community so participants can cover as many of their expenses as possible without spending national currency. Success is dependent on achieving a network effect—the more individuals and businesses willing to accept it, the more useful it becomes.
This was a challenge for Co-op Cred. Organizers ultimately hoped to expand the currency to more businesses, but until then, the West End Food Co-op could not afford to exchange groceries for cred because it had to pay suppliers in Canadian dollars. Instead, it had to raise money for a reserve pool to reimburse the co-op for products purchased by Co-op Cred participants.
The history of complementary currencies is filled with ups and downs. Many projects have dissolved, citing lack of use or heavy administrative burdens on volunteer coordinators. According to a study of 82 complementary currencies developed in the United States since 1991, only 17 were still active by 2004.
The Totnes Pound, based in Devon, England, and modeled on BerkShares, was discontinued in 2019. Its decline was partly because of the transition to “an increasingly cashless economy,” said John Elford of the currency’s steering group in a BBC article. Digital options are growing, but many currencies still rely on paper notes. BerkShares is looking to introduce a digital platform, though Moriarty thinks the program will likely keep the physical notes in circulation as well. “They’re beautiful,” she says. “The colors on them, the pictures—they really have come to symbolize a sense of place for the region.” Some currencies, like Sarafu, are adopting blockchain technology to enable mobile payments and real-time transaction records.
Meanwhile, Co-op Cred’s closure amid climbing Toronto rents touches on a challenge facing complementary currencies in many urban centers, which struggle to address economic insecurity as costs of living rise. Until such currencies can be used to pay rent and taxes, their capacity to provide substantive assistance is somewhat limited.
Even as Co-op Cred folded, the concept sowed seeds elsewhere. “We were being asked all the time to tell people about the model, people were really excited about it,” says Sally Miller, former coordinator of the West End Food Co-op.
She warns that the co-op’s dissolution should not be construed as a failure.
“They made an incredible impact on people’s lives,” Miller says. “And that in itself is an achievement.”
CORRECTION: This article was updated at 11:44 a.m. July 12 to correct the number of Sarafu users and provide an up-to-date link. Read our corrections policy here.
Jackie Brown is a researcher, writer, and urban planner focused on economic justice and community-led initiatives.