Complementary local currencies have developed in many countries: it is estimated that there are now over 5,000 worldwide. In France, they began to develop after the 2010 crisis, and today there are around 80 of them, spread across the country. How does a local currency work? What are the benefits?
What is a complementary local currency?
A complementary local currency (CLC) is backed by the national currency, which it does not replace. Its use is limited to a restricted territory, such as a town or region. The local currency is set up by an association which, with the help of a financial institution, is responsible for its management.
Another special feature is that local currencies are reserved for a limited number of goods and services. Its purpose is not to be speculated on or saved, but to energize a region by encouraging short circuits and local purchases. It therefore often has a validity date, beyond which it begins to lose value. This is known as melting currency.
Local currencies were recognized in France as a legal means of payment by the law of July 31, 2014 on the social and solidarity economy. They must be issued by companies in the social and solidarity economy.
Who can use a local currency?
Local currencies can be used by individuals and businesses alike, provided they join the association responsible for managing the currency, pay a membership fee and accept its ethical charter (respect for the environment, working conditions, etc.).
They can also be used between companies within business-to-business exchange platforms. These are digital platforms on which companies trade using an internal currency specific to that platform. In this case, the company joins an exchange network, enabling it to buy and sell goods and services from other companies. When it settles the transaction, it buys on credit. In this case, the local currency can be used to bridge the cash flow gap without the need for a bank loan.
What are complementary local currencies for?
First and foremost, local currencies have economic objectives, as they aim to boost local exchanges and support local activity. Large chain stores are excluded from the scheme, which is reserved for local shops and craftsmen.
In Brazil, the development of hundreds of local currencies has helped revive the economy in certain favela districts. One example is the "Palmas" currency, issued by Banco Palmas, a community bank set up by residents of a favela in Fortaleza in north-east Brazil, which grants micro-credits in local currency to finance local solidarity projects.
Local currencies therefore also have social benefits, by giving purchasing power back to their users, and can also be used to support environmental projects: they can be used to encourage the purchase of organic produce, the reduction of waste or the development of renewable energies.
Some examples of local currencies in France
In France, the biggest success story is the local currency of the Basque Country, theEusko. One euro equals one eusko, and the euros exchanged are placed in a solidarity fund to support local associations and businesses that adhere to the project. Since 2017, it has also been possible to pay locally with a dedicated Eusko payment card.
There's also Galais, the local currency of Ploërmel in Brittany, Bou'sol in Boulogne and Sol-Violette in Toulouse.
Another example is the Gonette, the local currency of the Lyon region. Gonettes are mostly spent in the food sector, but they also encompass culture, since it's possible to pay for a seat in a Villeurbanne cinema with the local currency.
The main virtue of complementary local currencies is to boost the local economy.