3. Toward sustainable local development

3.2. Effects of complementary currencies

3.2.3. Support for local economies and small and medium-sized companies

A diversified financial system geared to the needs of local economies is an essential requirement of a healthy economy. Commercial areas with a mix of different types of local businesses create an economy that is more resilient to external shifts, as well as being more gratifying for resident and visitors alike. Complementary currencies can counteract the domination of the giant corporations by supporting these diverse small and medium-sized businesses and educating consumers in terms of their freedom of choice. These currencies incentivize sales, improve productivity and help businesses to be more resilient to changes in the economy.

  • Improved cash flow. They can help small and medium-sized businesses to finance each other, giving and receiving credit, goods and services within the business network, thus reducing the need for cash (reserving it for operating expenses) and dependence on conventional banks.
  • Creation of sound commercial networks. Complementary currencies give businesses the opportunity to create networks between them, providing a platform from which to advertise their work to other members and generate increased sales, with buyers searching for business opportunities within the network itself. Businesses can specify their ethical criteria in the exchanges they conduct (for example, reducing the ecological footprint or maintaining local production) or simply recognize the commercial benefit of increased exchange. This interaction among businesses fosters long-term relationships between small and medium-sized companies in the same sector.
  • Use of underused capital. Most businesses do not operate at their full capacity. The commercial benefits of connecting underused assets with unmet needs are self-evident. Complementary currencies enable businesses to make underused assets available to other businesses in exchange for currency that will subsequently be used to purchase goods and services from still more businesses. A good example of this are the empty seats in cinemas, which could be offered for payment in complementary currency at the last minute; the cinema could then use the currency to buy goods or services from other members of the network.
  • Keeping money circulating locally. Injecting money into an area is of little use if the money then ‘leaks’ out. This is precisely what happens with legal-tender money. Currencies specific to a geographical area offer the possibility of keeping money circulating in the local area for longer. If a critical mass of businesses and individuals using the complementary currency is reached, a mutual reinforcement network can be created among local buyers and sellers. More individuals are persuaded to buy with the currency as increasing numbers of small and medium-sized businesses decide to accept the currency. These small and medium-sized businesses will then be able to reuse the benefits of the complementary currency, using it to conduct exchange transactions with other businesses or as staff bonuses. The use of money that can only be spent within the local economy creates a virtuous circle of spending and reinvestment.
  • Educating consumers. Complementary currency projects can stimulate reflection and discussion on how money works and the impact it has on the local economy. A greater understanding of the socioeconomic dimensions of consumer behaviour can have direct benefits on the local economy by swelling customer numbers for participating businesses.
  • Increased customer loyalty. Complementary currency projects can boost customer loyalty based on shared values, which translates into more small and medium-sized businesses signing up to the project as customers search the network for participating businesses where they can spend their local money.