The Economical









Chapter 7:
The Local Economy




I)        Introduction


The plan introduced in this chapter[68] is intended as a sketch of what the economic structures in the temporary settlement could look like. It is an idea, built with building blocks of various elements taken from existing and often successful examples. Although the plan is presented as a blueprint for a Local Economy Organization (LEO), this is done for the sake of clarity, to go beyond abstract concepts and sketch something concrete. The real economic and financial structures in the settlement will need to be adapted to the people and organizations involved, and to the financial means available.


This plan should therefore be read as a carefully selected set of ideas that can contribute to the success of the Nest!. Special emphasis is put on how the combination of these ideas creates new opportunities. What this study demonstrates, is that by working together things can be achieved that would not be possible otherwise.



Goals and Gains of a Local Economy


In this chapter we develop a plausible economic structure for the temporary settlement for the time of its duration. The specific aims of this economic structure are to make the best possible use of the available capital and capacities in the temporary settlement as well as in the developing neighborhood, to allow equal exchange between the efforts people put into the community (in terms of work and time) and in terms of financial capital, to create new possibilities for validating the work people do and as a result to improve the quality of life in the community.

The Local Economy Organization is intended to be tightly linked to the Euro economy - it is not the intention to create an isolated local economy which is economically separated from the rest of the world. The economic structures described here are not alternatives to mainstream economy. They provide additional financial facilities that are strongly linked with the national economy.


Strengthening social Cohesion

Nowadays, most economic and financial structures have become huge institutions. Although technically they may be efficient, socially they are not. Bigger is not always better. Sometimes smaller structures perform better - even economically - because they require less bureaucracy, have a stronger involvement of clients/participants and not only achieve their direct goals but also build a stronger community.


Doing as much as possible with own Resources

Instead of turning to subsidies immediately it is often much better to see what you can do yourself. People have much stronger commitment to things that are achieved by their own efforts. By working together financially people can make use of their collective economic power, and various new opportunities arise.


Economic Empowerment

People with limited financial means also have limited chances to get something off the ground economically. Often they don't have the knowledge and confidence to start something like a business. But even if they do, the chances are big that banks are reluctant to co-operate. Different economic structures are needed to provide the necessary coaching, support and access to financial means for economically less strong groups.



Time Gaps as Economic Opportunities


In the postwar reconstruction period it was accepted that initially bus lines in a new area would function at a loss. Nowadays public transport is not available till it is profitable – and by that time people are used to their cars. The same applies even stronger to services and shops that today are larger in scale and therefore need a larger population before they can function. The result is that the first inhabitants suffer and that the start of a community in the neighborhood is difficult.


During the time period that the neighborhood is not finished, which coincides with the existence of the temporary settlement, small-scaled community businesses and services can thrive that under normal circumstances could not (or barely) exist. They can fill the vacuum and temporarily have a monopoly, a situation that gives a good head start for consolidation into permanence. The type of business can vary, fulfilling needs for the time pressured households in the new area, who are also likely to be able to afford them. The time gap between the arrival of the first inhabitants and the full operational functioning of shops, services, transport and other businesses can provide a market niche for small scale economic initiatives.





II)      The Local Economy Organization (LEO)



The Local Economy Organization, further referred to as LEO, is the organization that runs the local economic and financial structures in the settlement.


The general goal of LEO is to improve the economic and social well-being of the local community. In the first stage, the local community will be people involved in the temporary settlement (inhabitants, businesses or people otherwise related to the settlement). In a later stage, the local community may also include the permanent residents of the new neighborhood.


The concrete tasks of LEO are:

§         to provide affordable temporary housing for people, organizations and businesses in the settlement,

§         to organize co-operative saving structures that allow people with low incomes to build up own capital reserves,

§         to provide investment capital for local business start-ups,

§         to run a local currency scheme that guarantees sufficient means of exchange for healthy local economic interaction to develop,

§         to support local exchange and interaction, both economic and social.


In order for LEO to be run effectively, these various tasks need to be separated in four different functional parts. To a large extent, the different parts can operate independent from each other, but in some respects they all rely on each other. Linking together the different functions creates opportunities that would not be there otherwise; the total is more than just summing up the parts.

This will become clear in the detailed descriptions further on.

The following functional parts or branches of LEO can be identified:

1.             Housing Co-op

2.             Local Currency Fund

3.             Savings and Loans Division

4.             Local Job Agency


In theory, each of these branches could become an entire organization. This depends entirely on the size of the settlement. LEO can develop and grow gradually along with the settlement. In the beginning the Local Economy Organization is more likely to exist of one active coordinator and a hand full of people being part-time involved in the different aspects of the work.



Pioneers as Developers – The Housing Co-op


The Nest! Housing Co-op is an essential factor in the whole settlement project. It is responsible for acquiring, setting-up, renting-out and maintenance of the temporary houses and it is responsible for developing the privately commissioned housing described in the next chapter. These are the major economic factors in the settlement. The capital and financial flows involved will form the basis of the Local Currency and the local saving schemes.


The Housing Co-op is the developer for the temporary settlement. It takes care of the whole process of buying the temporary houses, laying foundations, setting up the houses, preparing a minimum of required infrastructure and facilities (roads, water, electricity, etc.) and managing the renting out and maintenance of the temporary houses. A high degree of involvement of the pioneers in all this is possible and desired.


Financially, the Co-op will buy the temporary houses. A bank loan will be necessary to do this, but also pioneers who have some money or outside investors can buy shares in the Co-op. The Co-op has expenses for all work involved: build up, maintenance, and administration. On the income side, the pioneers pay rent for their temporary houses to the Co-op. The price of the rent includes the capital costs of the bank loan (interest), rent costs for the land, set-up and maintenance of the temporary houses, insurance, legal costs and costs for running the organization of the Housing Co-op.


Strengthening Local Exchange through Local Currency – The Local Currency Fund


The Local Currency Fund is responsible for printing and safeguarding the proper functioning of the Local Currency. It issues the Local Currency and keeps track of the way the local economy evolves and the currency is used.


To start up a Local Currency system various aspects are important: the issuing (who creates the currency and how?), the backing (what guarantees the value of the currency?) and the circulation (why would people use it?).


The Local Currency is issued by the Local Currency Fund. The value of the Local Currency is backed by the Housing Co-op in form of temporary houses, by the Local Currency Fund based on the future value of the Co-op and through sales at cultural events and in the various initiatives in the settlement.

When calculating the amount of Local Currency to be issued the different levels in which it is backed, need to be taken into account.


Backing by Temporary Housing

The Housing Co-op uses Local Currency for all its payments within the settlement. It can do so because the people who receive this Local Currency also need to pay rent to the Co-op, which they would have to do with Euro otherwise. In fact, the Local Currency is nothing but a piece of paper saying "this is worth 1 Euro when you pay it back to me". The Local Currency directly represents Euro.

The big advantage is that the Co-op does not need to borrow these Euros from the bank first. The Local Currency therefore reduces the bank loan required by the Co-op, and consequently reduces the level of the interest payments. It is of direct economic interest of the Co-op to involve people from the settlement.


This part of the Local Currency is backed by the main 'product' the Co-op offers: housing. The Co-op accepts this currency for rent payments. This is a very suitable form of backing for a currency because rent involves a considerable amount of money, and it is something everybody needs. People in the settlement will therefore have no problems accepting the Local Currency, because for them its buying power is as good as Euro as it can buy a “product” they use on a daily level.


Backing by Future Value

The second level of issuing Local Currency is based on the value of the Housing Co-op after the estimated period of 5 to 10 years that the settlement will exist. The Co-op has bought the temporary houses and the necessary infrastructure for the settlement, which no doubt represents a considerable capital, even after several years of use. By the time the bank loan for the initial investment has been repaid, all this property belongs to the Co-op. The amount of this capital, that can be guaranteed, can be used as backing for issuing more Local Currency up-front.


This way of issuing has several advantages. In the first place part of the capital, that is invested in the temporary houses, can be made liquid again, so that more can be done with limited resources.


Secondly, because more Local Currency can be created from the very start of the project, enough can be issued for a healthy local economic exchange. The first type of issuing is limited by the amount of work the Co-op can commission locally, and this may not be sufficient to facilitate other local trading in the settlement.


And thirdly, the Local Currency Fund is free to decide how to spend this currency. It can therefore be used to pay for various tasks done in and around the settlement, including various social tasks. The Local Currency Fund thus can provide subsidies to local initiatives and establishes a local subsidy commission to decide what initiatives should be granted subsidies in Local Currency.


This part of the Local Currency is backed by the future value of the Co-op. The backing therefore represents a value in Euro - which is a condition we tried to meet throughout the entire plan, but a value that can only be accessed at the end of the settlement, when the Co-op is dissolved and the houses are sold. The Local Currency issued in this way can not be changed back to Euro directly. It can be paid back when the Co-op is dissolved at the end of the settlement. This means the Local Currency can become an attractive way for saving for the future. This is by no means a limitation on the practical use of the currency. The limited options for directly changing it to Euro may even stimulate people to spend it faster: if they have the choice to pay Euro or Local Currency, most people will probably use the Local Currency first.


A consequence of issuing Local Currency in this way is that under certain conditions a limitation may have to be built in for how much Local Currency the Co-op can accept for rent payments, e.g. a maximum of 50% in Local Currency and the rest in Euro.

However, if the currency gets used for various other kinds of trading in the settlement, such a limitation may not be necessary after a while.


Backing by Euro

If many people visit the settlement for events which are organized there, the Local Currency can be used for buying consummations. The currency can be bought for Euro by anyone, both pioneers and visitors. It can be used like the special coins you buy during events to get a drink. As such, this already has advantages: you have an internal medium for trade and at the same time you generate Euro to buy goods outside the settlement.


Extra advantage is that visitors may not always use all their Local Currency, or they deliberately keep some as a souvenir or even a collector’s item, which creates extra income for the settlement. Of course this works best if the coins or notes are made attractive in some way. At the Heineken Music Hall, for instance, they make new coins for every concert with a print of the musicians playing that night. They probably make a good extra profit on people keeping the coins as souvenirs.


If the settlement attracts sufficient visitors, it can be interesting to attach an extra social fund to the Local Currency. For visitors nothing really changes, they still pay 1 € for 1 unit of the Local Currency. But from every Euro they spend, 10% goes into a social fund for local activities. Such a fund can for instance support a local environmental project, a playground or any other social activity in the area. When any of the businesses or initiatives that earns Local Currency wants to convert it back to Euro, they get 90% back in Euro. The Local Currency can now be promoted with a slogan like: "Support the environment! Use Local Currency!".


For the currency issued this way the backing is very simple: outsiders buy the Local Currency with Euro, so these Euro directly form the backing. If the event organizers need Euro to buy goods from outside, they can change the Local Currency they receive as payment from visitors back to Euro at the Local Currency Fund.


Other ways Euro enters the system are when services are paid in Euro at the Job Agency or when down-payments are made in Euro in the privately commissioned housing development project described in the next chapter.



With these three levels of issuing in place there will be a considerable amount of Local Currency circulating within the settlement. The Co-op will be a main factor in this. For all work to be done, the Co-op will hire pioneers as much as possible and pay them in Local Currency. Pioneers will have no problem with accepting relatively big amounts of Local Currency because they can use it to pay their rent.


The Local Currency has even more positive effects if it supports the local exchange of goods and services. A few conditions to stimulate this are already built in: within the settlement it is relatively easy to earn Local Currency (for most people probably easier than earning Euro), while for spending it there are less options to choose from. The value of the Local Currency is the same as the Euro, but you can not get everything with it. People will therefore be inclined to use the Local Currency when they have the choice. If these factors are properly balanced, the Local Currency may get a very high circulation speed.


The challenge will be to extend the use of the Local Currency to various other services and trades. The local job agency will therefore facilitate the exchange of services and tasks, which can all be paid at least partially in Local Currency.

If there are sufficient options for trading and other services offered against Local Currency, then workers will be able to accept even more of their payment in Local Currency than their monthly rent because they will still be able to spend it.

Changing back to Euro

With rent payments being accepted in Local Currency, not many people need to change it to Euro. Only some businesses and initiatives are allowed to change the Local Currency back to Euro. This is controlled by the Local Currency Fund and can only be done under certain conditions. The main condition is that the backing of the Local Currency remains in place. Businesses will obviously have to change Local Currency to Euro when they need to buy supplies or hire labor only available outside the settlement. This will be made possible. Under normal circumstances, however, exchanging Local Currency back to Euro is not possible. Only when the project ends and all capital of the Co-op is sold can everything be changed back to Euro. However, this would mean the end of all Local Currency and may not be desirable at all if the currency is successful.


The whole idea of the backing for the currency is that you do not need it when people already accept the Local Currency and rely on it. But in order to achieve that situation, especially in a temporary setting like this, we need to provide transparent and easy to understand security.


Not all Local Currency can immediately be changed back to Euro because of the combination of the different forms of backing: a reserve in Euro, rent payments and the value of the Co-op. The first part can be changed back instantly, the second part month by month, and the last part only when the project ends. For this reason also visitors can not change back Local Currency to Euro, unless specially marked currency is sold for this purpose.



Ways for Pioneers to save in the Temporary Settlement – The Savings and Loans Division


The Savings and Loans Division manages the various saving schemes applied in the settlement and handles the loans and subsidies given out to local projects and businesses.


The Housing Co-op as a Saving Scheme

The Co-op as described above already is a type of saving scheme. All participants pay rent, but by doing this they slowly increase the value of the Co-op, of which they themselves are the owners. With every bit of the bank loan that is repaid, the Co-op increases its value. In the end, the pioneers have a valuable share in the Co-op. What happens after that depends on how things will continue. Maybe the used temporary houses and whatever other goods of value that belong to the Co-op will be sold and everyone gets their share. And now they get that share in Euro!


Because of the co-operative structure with the pioneers as members (as opposed to a privately owned housing company), the pioneers gradually become the real owners of the Co-op with every bit of the bank loan that is repaid. Indirectly, they become owners of their own houses and thus of the capital that represents.


This also allows the equal exchange of human and financial capital: people who have enough money can pay their rent in Euro, those who are active in the community can earn a lot of Local Currency and use this to pay (part of) their rent. At the Co-op this is of equal value with Euro. Because the Co-op requires both Euro and Local Currency, it is good to have both types of people in the settlement.

As long as enough people pay their rent in Euro, others can be allowed to pay the full 100% in Local Currency.


Saving for permanent Housing: the Building Society

The value of the temporary houses is much lower than that of permanent houses (an average of €6.000 to €25.000, against at least €150.000 for permanent houses). Additional saving opportunities are required for people who want to save for a permanent house, possibly in the newly developed settlement. The method of the Building Society is very useful for this purpose.


The aim of the Building Society is to provide financial means for affordable housing. All participants in a Building Society profit from saving collectively instead of individually. Suppose a house costs €120.000. Without a mortgage, one person would need to save 500 every month for 20 years to be able to afford that house. If 10 people all save for a house it would take each of them 20 years to buy the house. But if they put their money together, then already after 2 years they would have enough to buy a house for the first person, in another 2 years the next, etc. Only for the last person it would still take 20 years, but the average time to get a house has already gone down to 11 years.


If new people join at a later stage, their savings contribute to help the last people from the first group to get their houses faster. People who access their house the first can be required to pay more than the monthly 500 for the rest of the period the Building Society exists, for two reasons: because they have the advantage of having their house before others, and because they have their house now, they no longer have to pay rent.


Building societies have a history that goes back to the mid 18th century in England. Most of the early building societies were so-called terminating societies, meaning that they were dissolved when all members had been housed. They were typically started as community initiatives. Nowadays building societies can be found all over the world, but especially in English speaking countries. Due to their success and the high level of regulations to comply with, building societies have grown into large institutions that have in many cases lost their community character. Nevertheless, many societies are officially still owned by their membership. Nowadays, besides mortgages, many building societies also provide various other financial services. Although this may have contributed to the alienation of the membership (because it usually involves further growth of the organization), it is a logical development that has most likely been supported by the members themselves.


The Building Society is an effective way to collect financial means for buying houses out of people’s own resources. It is a co-operative organization form and a form of community banking, which fits perfectly to the ideas and principles of the Nest!. Because the Local Currency is entirely backed by Euro, savings in either currency are treated equally. No limitation is required for how much Local Currency can be accepted by the Building Society.



Learning from the South: Saving and Credit Groups

In Asia and Africa neighborhood saving groups have a long tradition as a means of economic empowerment. Through international grassroots women’s networks and the Grassroots Women’s International Academy (GWIA) conducted during Expo 2000 (see chapter 4) the approach has also been transferred to neighborhood groups in Northern Countries,[69]  and is included as one of the economic empowerment strategies of the Nest! Project.

A local Saving and Credit group consists of 10-15 people that commit to saving an agreed on sum of money (for instance €50) each month. This sum is collected every month at a group meeting. At the same meeting, group members present requests for a loan and following discussion in the group, decisions are made as to who will receive a loan that month. Repayment procedures, time spans and interest rates are also discussed and determined collectively. Occasions for which loans can be given include for instance education and further training, paying off of debts, business investments, furniture and equipment, travels, or medical bills.

Over time the group funds increase steadily, in terms of savings accumulated by each member, in terms of the amount of funds available for giving out loans to group members, as well as in terms of funds acquired through interest. These funds can be used to give out business loans to other members of the temporary settlement or to support projects. The more loans are given out, the more financial capital is acquired by the group. This stimulates the development of ideas, plans and projects.

If some people save in Local Currency and others in Euro, loans are possible in either currency, or in a combination of both. This can further strengthen the Local Currency.


A set of rules and agreements needs to be developed by the group to give the process structure and continuity and as precaution to potential conflicts. These rules need to address the following issues:


How many members should be in the group?

How long are the monthly meetings and where are they to be held?

Which sum is saved every month by members?

How much should the interest rate be?

How long are members required to stay in the group?

When are the savings reimbursed, after a member leaves the group?

Do the group members earn interest or is interest reserved solely to the benefit of the group fund?

What is the procedure, if a group member cannot make it to the monthly meeting?

What majority is needed for loan decisions?

In what time span do loans need to be paid back and in which rates?

How are track records to be kept and who does the book-keeping?

Should it be possible to save additional sums of money or not?

What is the procedure if payments are late?

How and when are decisions made on how to use the interest?

What agreements need to be made regarding confidentiality?

Where are group funds placed and who has access to the account?

What rules and agreements are needed to assure participative and open communication structures?



Benefit of Saving and Credit Groups for the Temporary Settlement[70]


Saving and Credit Groups can support the Local Economy in the temporary settlement in many ways:


1.        Local Saving Groups support the building up of regular savings for inhabitants of the temporary settlement. Being able to use the Local Currency as savings is a further incentive     and facilitation to engage in saving. The experiences in Southern countries and also in Germany show that saving collectively in a group is a very effective way of creating the motivation and discipline needed to save regularly, also in groups with no or low saving habits or track records. This opens up financial opportunities and long term financial planning.


“I have become much more disciplined with my finances. I never thought it was possible to save so much. The discussions in the group make me realize where I have unnecessary expenses and how I can keep better track of my money.

As a result I have been able to realize some dreams and ideas I never would have otherwise.”


“Simply talking every month about my finances is a great support. It keeps me on top of things and has made me aware of many more ways I have to both earn and save money. Many taboos and issues I had around money have cleared up. It really helps to share experiences and views on these things with others.”


“Our group is much more than a savings and credit system. It is a training scheme for handling money and an empowerment scheme in dealing with money.”



2.        Local Saving Groups are a low threshold means of accessing loans for groups with little or no collateral or for everyday life issues that you usually do not go to a bank for to get a loan. The way the local saving groups work is that group cohesion and group control provide the loan security usually maintained by financial assets. World-wide experience in local saving and credit groups show that the repayment rate – even among economical risk groups - is far superior to regular bank loans.


“Sometimes an everyday crisis situation like the break down of your car or an expensive visit to the dentist can create financial tight-spots. You don’t want to go to the bank or to friends with such issues. Our saving group is just perfect for such occasions. It is a great back up system for my family finances.”


“A bank is something anonymous. But in my saving group I have to look the others in the eye every month, so I have a completely different motivation to hand over my monthly payments. I know the other group members, who depend on it. It is my own group I am paying to.”


3.        Local Saving Groups have an amazing effect on social cohesion and social bonding. They generate openness, trust and transparency as well as confidence and mutual support. These qualities are generated in the groups not as a response to good will and good intentions, but as a result of the intense and sincere communication required in the process of deciding who will get loans out of the collective savings or how to ensure that every member in the group contributes their monthly saving and/or repayment rate.


“Since we are putting our money together, we need to create reliable relationships among each other. This causes a very different communication than in other groups. Money issues require honesty. In the beginning this was not so easy, but together you grow into it. You really get to know people when you learn about how they handle their finances. Over time we have developed a lot of trust and respect for each other.”


4.         The funds accumulated in the local saving groups are a valuable asset for investments and loans in local businesses or projects of the temporary settlement. This is a further way of assuring that local resources can stay in the community and be used to benefit the economic development of the community.



Micro Credit Schemes for local Projects and Business Start-ups

The Housing Co-op as well as the various saving schemes may be acquiring considerable amounts of capital. This capital can be applied for loans to local projects and business start-ups. Naturally, proper economic judgment is required to deal with this.



A micro-credit initiative can be started including various kinds of coaching and support for starting entrepreneurs, thereby limiting the risks of defaulting loans. Organizing this requires knowledge and experience. Whether it will be useful to set this up in the settlement depends on the amount of business start-ups and the demand for such loans.


The different schemes described in this chapter provide more than individual and collective savings. They provide awareness building, group building as well as training for economic literacy and the handling of money. The Savings and Credit Groups are more suitable for small groups whereas the Building Society works for bigger groups and the Micro Credit scheme can work even for individuals. All schemes support economic empowerment.



Participating in the Labor Market-The Local Job Agency


The local job agency is responsible for linking the demand and supply of services, for mobilizing the capacities in the settlement, and for finding and possibly also training people for much required skills. This will be organized in cooperation with the Neighborhood Academy (Chapter 4) on site. As such, the local job agency is a combination of a volunteer job exchange like in a LETS-system, a vocational training office and a job referral agency. By not separating these functions, opportunities are opened for people to slowly grow into real jobs.


The Local Job Agency links the wants and offers for jobs and services. If people from inside or outside the settlement, especially the inhabitants of the newly developed settlement, need services like babysitting, gardening, or various kinds of handyman tasks, the agency will try to find people for this. The services will be paid for either with Local Currency or with Euro. People doing the jobs receive Local Currency.


To match demand and supply various means are used: a notice board in a central place with little notes is the simplest form for communicating wants and offers. A web-site makes it also possible for people a bit further away to check the ads and write their own offers or requests.

A coordinator works proactively to find the best possible ways to apply the skills and capacities available in the temporary settlement in ways that are needed. The skills audit applied in the Neighborhood Academy will support this process by providing documentation of the expertise present in the settlement as well as boosting confidence and motivation on the side of the pioneers to apply their skills and talents. The coordinator links up people who can be of use for each other. When useful, the coordinator can also look for training opportunities and coach people in their job experience and job performance. This process can have a very empowering effect on people who have been out of the job market for a longer time. By trying certain tasks on a basis that is not too formal and demanding, people can re-discover what they want to do and what they can do, without having a formal full-time job immediately.


If the settlement is not all that big, the role of the coordinator may function largely informally. People will know each other and probably ask each other for help when needed.

If it gets bigger, more organization and communication will be required. For people from outside the settlement to make use of the capacities in the settlement, an active job agency will be required from the beginning.




III)     Organizational Structure



The Local Economy Organization


The Local Economy Organization (LEO) is the umbrella organization and consists of 4 branches. Each of them has its own legal structure and organizational requirements. These will be lined-out briefly in the tables below. The LEO itself can best be organized in a foundation. That ensures that the over-all goals of the settlement are kept throughout the project and it may be instrumental for receiving subsidies on behalf of different branches of the organization, e.g. for job re-integration or business start-up programs (which would be a combined effort of the Local Job Agency and the Savings and Loans Division).


Legal structure:



Foundation (with the aim to improve the general social and economic development of the temporary settlement and the new neighborhood as a whole)





Information, press services





Strategy planning


Monitoring project progress










Organization costs


The organizational structures and requirements for the four branches of the Local Economy Organization are outlined below:



1. The Housing Co-op

Legal structure:



Co-operative (owned by members who rent a house or building from the Co-op, some may work for the Co-op) Buying shares through investments is also possible.





Reparation and maintenance service of temporary housing

Management of privately commissioned permanent housing development

Marketing: press contacts, finding new inhabitants, communication with members

Service desk: complaints, questions, suggestions of members





Administration (membership, finances, running the office)

Management and maintenance of the temporary houses and infrastructure

Management of building process

Development of new ideas concerning housing





Rent (partly in Local Currency)





Repayment bank loan for investment in temporary houses and infrastructure

Rent of the land

Maintenance temporary houses (partly in Local Currency)

Organization costs (staff, overhead, partly in Local Currency)



2. The Local Currency Fund

Legal structure:



Foundation (with strictly set goals: controlling the proper functioning of the Local Currency)










Management of the Euro Fund

Financial administration: keeping control of the amounts of Local Currency in circulation

Printing and issuing of the Local Currency

Co-ordinating Local Currency subsidy commission





Earnings on capital investment





Production of Local Currency

Organization costs



3. The Savings and Loans Division


Legal structure:



Association: will function like a credit union or membership bank





Service desk: request for loans, sales of Local Currency, savings deposits

Marketing: press information, membership recruitment, communication

Advice about savings, loans, conditions





Membership administration

Financial administration, balances, payments, debts

Pre-credit management: checks and controls for loans

Post-credit management: dealing with defaulting loans

Office management





Service costs

Earnings on capital investment

Subsidy for micro-credit scheme





Organization costs



4. The Local Job Agency


Legal structure:



Association (membership consists of pioneers and people from outside who make use of the facilities)





Coordinates information on supply and demand: notice board, newsletter, web-site

Job co-ordinator: actively links needs and requests to existing capacities

Coaching: workshops, courses, training, business-incubator for starting businesses





Administration and publication of wants and offers

Interactive on-line demand and supply web-site





Payments for jobs and services (partly in Local Currency)

Service costs/surcharge (partly in Local Currency)

Subsidies for re-integration





Payment to people performing jobs and services (in Local Currency)

Organization costs




IV)      Practical Examples in the Settlement


Some short descriptions of how various activities in and around the settlement can make use of the economic structure are presented here to demonstrate the concept.



Setting up the Temporary Houses

The start of the settlement will be marked by the arrival of the first temporary houses. The Co-op will borrow money (from banks and share holders) to buy the houses and necessary materials. For the work involved in setting up the houses the Co-op will try to hire as much as possible people from the settlement and pay them with Local Currency. Euros are used whenever materials are needed or specialized work needs to be bought from companies outside. As a result, all work commissioned within the settlement results in lower capital costs (because less Euro have to borrowed).



Training a local Electrician

The houses require connection to electricity, water supply, possibly gas. Many practical technical skills are required for setting up and maintaining the temporary houses. If there is nobody in the settlement with the skills for e.g. electrical installation, somebody may be trained for that job. A skilled technician can be hired as supervisor for one or more trainees.


The supervisor probably has to be paid with Euro, but in the future more of this work can be done by the local trainees. Government support may be possible for the trajectory to train people with limited job-opportunities. The co-ordination of this training trajectory can be done by the Local Job Agency in cooperation with the Neighborhood Academy.



Mother Center

The Mother Center (see chapter 9) is a combination of many activities. It offers childcare, a social meeting place, workshops, and even some of the functions of the Local Job Agency and a business incubator may be integrated into the Mother Center. All services at the Mother Center are paid with Local Currency, and the expenses the Mother Center makes will be spent locally using Local Currency wherever possible.


The Mother Center rents a building from the Co-op for which it can pay in Euro or in Local Currency, but it first has to earn the latter. Local Currency can be earned from pioneers using facilities at the Mother Center, and it can be entitled to receive subsidies from the Local Currency Fund for its activities.



Local Pub

The pub would work like any other pub or café, except that here you can buy your consummations with Local Currency. The pub is allowed to address the Local Currency Fund to change the Local Currency it earns back to Euro in order to buy food and drinks. The rate for changing back to Euro is 90% (1 local unit = € 0,9). The other 10% creates a social fund (in Euro). The 90% rate is also a motivation to spend as much as possible locally. If, for example, the pub needs to hire a bookkeeper, it would be cheaper if somebody can do that locally.


Where the pub would normally be run by volunteers, they now get paid Local Currency. If the pub becomes a full-time business, payment will need to be a mix of Local Currency and Euro because the Local Currency will not be able to buy everything required.




Babysitting can be provided as a service to pioneers as well as to the inhabitants of the newly developing neighborhood. People who need these services can get in contact with the Local Job Agency (possibly combined with the Mother Center) to get in contact with a suitable babysitter. For payments, people from outside the temporary settlement change Euro for Local Currency, or pay Euro directly at the Job Agency. The Job Agency subtracts a small fee and pays the rest in Local Currency to the babysitter, like any other job-agency.


Of course the same goes for any other service offered by people in the settlement. If costs (in Euro) are made for doing these jobs, these costs are paid for by the Job Agency and will be charged to the clients.



Small Businesses

The principle of the baby sitting will work the same with any other small business like a local delivery service, a carpenter, or a tailor. The main difference being that for them this income is not additional, but may soon be their main income. For that reason payments cannot remain only in Local Currency. Such businesses may also require investments (in Euro). Businesses of a bit larger scale will therefore need special considerations.


If the business earns partly Local Currency and partly Euro, they may not have any problem with that at all.

They can spend the Local Currency on renting a building (a local business center could even be founded) and partly to pay the worker(s) who also spend it for the main part on rent.


If certain businesses earn more Local Currency than they can spend, then special exchange agreements can be made with the Local Currency Fund. Since all Local Currency in this plan is backed by 'hard economic value' it is very well possible to allow various exchange possibilities.


Businesses may also be interested in loans, maybe in Local Currency, but most likely in Euro. If the Local Currency and the different branches of LEO work properly - especially the savings schemes - they will be creating capital reserves that can be used to provide business loans for the settlement.




V)       Conclusion


The plan presented in this chapter has many different aspects. The entire construction is rather complex, but not everything has to be implemented, and not necessarily all at once.


Central element in the plan is the choice for a Local Currency that is entirely backed by 'hard economic value'. This gives the currency a guaranteed value for the participants which will enhance its acceptance, but it also adds a considerable amount of complexity.


However, since the main aim of the local economy is to provide ways in which the human capital of the people in the settlement becomes exchangeable with the financial capital of others, the choice for a backed currency seems totally valid.


Further details can be provided when the concepts are adapted to the concrete conditions in practice. Whether it can work economically depends on various factors like the prices of the land, the temporary houses, and the required infrastructure. At that stage it will be possible to give an exact estimate of the economic feasibility of this scheme and the scale of the different aspects of its economic structure.




The benefits of the Local Economic Organization come on many levels.


Creating Value

By introducing the Local Currency, economic opportunities are created for the temporary settlement to create value by exchanging skills and talents inside the settlement. The more the Local Currency is exchanged back and forth, the more value is created.


The Local Currency can be expected to circulate more and faster within the local economy for two reasons:

1.        It can only be used locally, so it won't leave the community.

You can not buy everything with Local Currency, so whenever people have a choice, they will spend their Local Currency and hold on to their Euro'. This effect is known as Gresham's Law, "good money drives out bad money" which is more accurately expressed as "cheap money drives out dear, if they exchange for the same price."


For example: If the circulation speed of the Local Currency is quick enough to go back and forth 12 times during a year, then 300 Local Currency units are enough to pay rent for one housing unit for a whole year.


Validating Work

With Local Currency all forms of work can be measured and rewarded, even those which are normally not paid for in Euro and even when there are no Euro available to pay for it. The Local Currency provides the local community with extra spending power, so it has more room for valuing what it finds important. And somewhere down the line the value created by this kind of work could also be measured and paid for with Euro, since the Euro-value of the community increases over time.


The Local Currency system provides an opportunity to valorize forms of work that are usually not considered work, that stay invisible or are kept outside the formal economy. Especially for women, who contribute enormous amounts of unpaid work, this opens up interesting perspectives. The Local Currency can become a valuable tool of awareness building and contribute to more gender equality by bridging the chasm between productive and reproductive work. on which gender hierarchy is greatly based. But also for many other groups, whose skills and talents stay outside of the formal economy, like youth, or the elderly, or for whom it is difficult to access paid work, a Local Currency, that links to the Euro system provides new opportunities.


Including the Excluded

A group for whom the Local Economy System in the temporary settlement can open up doors and perspectives that otherwise seem totally blocked or unattainable, are asylum seekers, who are not allowed to work in the formal economy, until their status has been cleared.

These groups could contribute their skills and talents in the temporary settlement and get paid in Local Currency, which, however, they can only exchange back to Euro if and when they have obtained legal status as refugees. If not, their contributions go into the community fund.


The Local Currency can also create space for negotiation and innovation in regard to the regulations around supplementing welfare subsidies with community work.[71]


Economic Empowerment

The local economy system is designed in a way that makes use of and validates the contributions of all groups in the temporary settlement. Every hour that is contributed, every person that participates, strengthens the local economy. By creating a link to the Euro System, every Euro that is introduced into the system raises the backing of the Local Currency. By allowing unlimited Euro to come in, but limiting the amount of Euro that can leave the Local Economy, skills and resources are kept inside the community, contributing to local development and economic independence. Economic growth of the system both benefits all individual participants in the Local Economy as well as creating opportunities for collective investments in collective projects. Investments or subsidies from outside partners are met by a community that has mobilized its own assets and resources, as well as identified service and business gaps in the local market.


Examples of Services


§            Babysitting

§            Cleaning

§            Laundry and Ironing services

§            Dog Walking

§            Home Sitting

§            Janitor and Repair services

§            Moving services

§            Gardening

§            Car Washing

§            Pick up and transport services

§            Grocery Delivery Services

§            Tailoring and mending services

§            Shoe repair

§            Small shops

§            Health, Beauty and Wellness services

§            Eldercare


Economic Development of Individuals

The Local Economy supports self development and economic empowerment for groups who have difficulty accessing affordable housing or accessing jobs that link to their skills and interests. It does so by offering a wide range of opportunities including cheap rents, as well as opportunities to acquire skills, start businesses, save money, contribute to building your own house, or find work. For some, the temporary settlement can provide the room and inspiration to realize a dream, for others it can provide the necessary support to try out skills and gain enough confidence to get off welfare and realize economic self sufficiency.


Enhancing social Cohesion with economic Tools

With the Local Economy Organization described in this chapter financial sustainability is balanced with social sustainability. The interests of individuals are served while at the same time strengthening the economic power of the community as a whole. Money is used in a way that links people and creates social bonding rather than separating and dividing people. This is especially prevalent in the collective savings systems, where getting together with other people becomes the prerequisite and the means for individual economic empowerment, and where individual economic empowerment comes in the package with collective economic development.

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