A Local Community Currency Battles the Central Bank of Kenya

Former Peace Corps volunteer Will Ruddick and several residents of Bangladesh, Kenya, face a potential seven years in prison after developing a cost-effective way to alleviate poverty in Africa’s poorest slums.  Their solution: a complementary currency issued and backed by the local community.  The Central Bank of Kenya has now initiated charges of forgery.

Complementary currencies can help eradicate poverty.

Proving that may be difficult in complex economies, due to the high number of factors influencing outcomes. But in an African slum with little of the national currency available, supplying residents with an alternative currency has a positive effect that is obvious, immediate and incontrovertible.

This was demonstrated when Will Ruddick, an American physicist, economist and former Peace Corps volunteer, introduced a complementary currency into a Kenyan slum called Bangladesh, near the coastal city of Mombasa. Will’s local development organization, Koru-Kenya, worked with over one hundred small business owners in Bangladesh, who agreed to give each other the equivalent of 400 shillings (about €3.5 or $4.60) in mutual credit in the form of business vouchers called Bangla-Pesa. Half of the vouchers would be available for spending on each others’ products and services, and half would be spent into the community on public projects such as waste collection and health services.  Allocation decisions were democratic and transparent, and the new currency was backed entirely by the community’s own resources and insured by a system of group guarantors, not by the Kenyan government or a development agency.

The project was launched on May 11, 2013.  The immediate effect was an increase in sales of 22%. That meant increasing incomes and purchasing power by 22%.  These exchanges were of goods and services that without the additional currency would have been thrown away or gone to waste, not because they were unmarketable but because potential customers did not have the money to buy them.  Introducing Bangla-Pesa worked to move the economy forward at full capacity, connecting the community to its own resources when the only things lacking were those slips of paper called “money.” A compelling video on the project is here.

The successful Kenyan experiment quickly earned endorsements from the United Nations, The Hague and  the International Reciprocal Trade Association. Indeed, no other poverty alleviation or local governance program can compete with the cost-effectiveness of this approach, which is easily replicable in poor communities across Africa. The plan was to expand it to other villages in a democratic grassroots fashion so that it could provide a local medium of exchange for people throughout the continent. This would be done via mobile phones with a system provided by Community Forge, an organization based in Geneva that supports the development of community currencies worldwide.

But that plan was unexpectedly interrupted on May 29th, when Will and five other project participants were arrested by Kenyan police and thrown in jail.  Besides Will, who is married to a Kenyan aid worker and is a new father, the others include local community business owners who are parents and grandparents….

Complementary currencies are endorsed by many governments worldwide. The oldest and largest is the WIR system in Switzerland, an exchange system  among 60,000 businesses – a full 20% of all Swiss businesses. This currency has been demonstrated to have a counter-cyclical effect, helping to stabilize the Swiss economy by providing additional liquidity and lending capacity when conventional credit for small businesses is scarce.

Brazil is a global leader in using the complementary currency approach for poverty alleviation. Interestingly, its experience began in much the same way as Kenya’s: Brazil’s most successful community currency, called “Palmas”, was nearly strangled at birth by the Brazilian Central Bank. How it went from criminal suspect to official state policy is told by Margrit Kennedy and co-authors in People Money:

After issuing the first Palmas currency in 2003, local organiser Joaquim Melo was arrested on suspicion of running a money laundering operation in an unregistered bank.  The Central Bank started proceedings against him, saying that the bank was issuing false money.  The defendants called on expert witnesses, including the Dutch development organisation Stro, to support their case.  Finally, the judge agreed that it was a constitutional right of people to have access to finance and that the Central Bank was doing nothing for the poor areas benefiting from the local currencies.  He ruled in favour of Banco Palmas….

http://www.globalresearch.ca/the-crime-of-alleviating-poverty-a-local-community-currency-battles-the-central-bank-of-kenya/5341276

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