Mutual credit: introduction

“It only requires that we each take control of our own credit and give it to those individuals and businesses that merit it and withhold it from those that do not.” – Thomas Greco

What is mutual credit?

Mutual (or collaborative) credit is a way to trade / exchange products and services with each other, without official currency. It’s an old idea that could really take off in the age of the internet. We think it can help strengthen communities and support small businesses, as an alternative to multinational banks and corporations.

Mutual credit isn’t barter. With barter, two people exchange goods or services with each other. You have to find someone with something you want, and who wants what you have. With mutual credit, you just get an account, and can trade with anyone just one way – it doesn’t have to be reciprocal. If you sell, you get credit in your account; if you buy, you go into debit.


A street ad for the Sardex mutual credit system in Sardinia.

There are limits to how far anyone can go into debit or credit (you wouldn’t want people just taking but not giving, or just giving, but not providing work for anyone else; however, limits may vary between businesses and individuals, depending on how much they are trusted and how much trade they put through the system). Limits (and all other rules within each system) are decided collaboratively. This is important, because the risk / benefit of someone leaving the system owing / owed is shouldered by everyone through inflation / deflation, unless they agree otherwise. That’s very different from our current finance system where banks make all the profits and taxpayers shoulder all the risk.

Now, plumbing work might ‘cost’ a lot more (in terms of credit) than, say, six eggs, so people offering products or services put a ‘price’ to those services, in credits. An hour’s plumbing work might be twenty credits, and six eggs might be one credit. It’s a ‘free market’, in that people are free to set their own prices, and customers are free to accept or reject those prices. If enough people reject a price, it will have to be reduced, and if too many people are chasing someone’s products or services, prices will go up naturally.


Household appliances tend to be replaced when broken, rather than fixed, due to the difficulty and cost involved in getting them repaired compared to buying a new one. Mutual credit can make repairing things worthwhile again, even as a sideline for handy people with sheds.

There are two main ways to do mutual credit – with a ledger (i.e. everyone has an account), or with tokens (but not tokens that are bought with official currency) that make it impossible to go too far into debit.

There are similarities between mutual credit and local currencies. The main difference is that the former involves membership schemes, but local currencies don’t. However, there’s a big difference between local currencies that are bought with official currency and vouchers issued to members for free, as IOUs. Local currencies bought with official currency (i.e. legal tender) have their benefits, but are not mutual credit.

This medieval tale shows how self-issued credit works in a local community. Each trader’s credit has the traders’ name on it, and the risk is theirs alone. In mutual credit, the risks are mutually held, which means that mutual credit schemes require governance. Unlike medieval market traders, we now have the advantage of the internet to organise it.

Existing schemes

Here are ways that mutual credit already works, in order of increasing formality.

Families and friends: people do things for each other because they want to; they might keep mental tallies, or sometimes exchange verbal or written IOUs.

LETS: LETS started in Canada in the 1980s. Most mutual credit schemes are formed where the economy is depressed – plenty of local resources, skilled people and demand for goods and services, but with one thing missing – money – which LETS doesn’t need. It was successful, and soon spread to the rest of the world.

Timebanks: timebanks are similar to LETS, but credit is based on hours worked. It’s easier to express services in hours than products, but timebanks don’t reward people more for more challenging or skilled work.


There was never a society in which the main means of exchange was barter, and money didn’t evolve from barter, but from mutual exchange within communities, where the vast majority of exchanges took place. Barter was always marginal and between strangers.

Eco- / Bangla-pesa: William Ruddick set up a system called Eco-pesa (a printed voucher redeemable for one shilling) in slum areas of Kenya, from which developed Bangla-pesa – another voucher, but this time issued by the people themselves, not bought with shillings. Businesses, including new co-operative farms and stores, flourished. Ruddick was arrested for counterfeiting, but was released when they realised he wasn’t a forger. The idea has spread via Grassroots Economics to other parts of Kenya and to South Africa.

Sardex: Sardex is a business-to-business credit network on the island of Sardinia. It’s a type of commercial barter scheme (see below), run socially (i.e. for more than just profit), and restricted to small and medium-sized businesses on the island – that trade with each other via credit rather than cash. There were trades worth the equivalent of over 40 million euros in 2017 – on an island with the population of Birmingham!

WIR Bank: the WIR Bank started in Switzerland during the hyperinflation / depression between the wars. Its members are businesses that trade using mutual credit accounts, not money. It’s still around – its 2005 trades were the equivalent of 6.5 billion swiss francs (about £4-5 billion) – but with no money involved.

Commercial barter: in the 1960s and 70s, commercial barter (sometimes called commercial trade) exchanges developed that allow businesses to trade by offering credit to each other, avoiding interest on bank credit. Commercial exchange brokers make their money from fees and commissions, and are overseen by the International Reciprocal Trade Association. Some are huge – like Bartercard – but they’re for-profit and not democratic.

A global system?

There is currently a plan (‘Credit Commons’) to expand and co-ordinate the mutual credit idea to encompass the whole world. More here.


Cape Town Talent Exchange, where the Community Exchange System was born.

What are the benefits of mutual credit?


The main economic benefits are that the means of exchange (in this case credit, rather than money) is not scarce; there’s no interest to pay; and it doesn’t allow the banking system to siphon wealth out of our communities. Here’s more on what’s wrong with the banking system.

Producers of useful goods and services should never be prevented from providing them to people who want them because of a scarcity of money. The more you think about it, the more ridiculous that situation seems, because people can provide their own means of exchange – one that carries no interest, and doesn’t allow banks to extract wealth from the system. To take part in this type of exchange, purchasers also agree to provide goods and services to other people – which means that only people who provide useful goods and services are able to obtain value from the system. Beautiful!

Recessions / depressions are caused by a lack of money. During a recession, all the same infrastructure, producers, skills and customers that were there before the recession are still there, but there’s not enough money to stimulate trade. But to paraphrase Alan Watts, saying that people can’t trade because there’s a lack of money is like saying that people can’t build houses because there’s a lack of centimetres.

Money always attracts money. It always concentrates in very few hands, causing money scarcity for everyone else. Also, that concentration of money is always used to buy power – to pay, or to give jobs to, politicians, or in wilder times, mercenaries. This can’t happen in a mutual credit system because credit doesn’t attract more credit. You can’t lend out your credits at interest. You can only spend credit on other people’s products and services.

Short video report on the Wir Bank in Switzerland. It has over 60,000 members, all over the country. Here some of them explain the benefits to their business. It’s a mutual credit system, completely separate from any official currency. Payments are made via a card, that debits the account of the person buying, and credits the account of the person selling.

Mutual credit insulates the community from inflation, monetary problems or financial collapse in the wider society. The more you trade in the system, the less you’ll be affected by a global financial crash. There’s a widespread belief that the global financial system is in a precarious state – bumping up against limits of various kinds – resource limits, ecological limits, limits to the amount of debt, and limits to the amount of wealth that the financial sector can extract from the real economy (remember that the derivatives market is ten times the size of the real economy of goods and services). 2008 was a stumble. If it falls completely, credit commons may be the only safety net.


Mutual credit is about groups of people becoming stronger by leaning on each other, and is a natural tool for local organising. Even in a global system, you would plug into it via your local community, where you are known and trusted. Technology can help spread the idea, but ultimately it’s all about real people. It can help build safer, more interesting and happier communities.

As well as all the essentials of life, you can also get things that are difficult to obtain from the money economy – like someone to house-sit for a meter-reader or a delivery while you’re at work. Maybe someone can read or work at your house, so wouldn’t charge much. Elderly or disabled people can ‘pay’ for help by doing things such as sewing, knitting, baking, child-minding, house-sitting, food processing etc.

Local networks provide a ‘club’ of people happy to prioritise the offerings of fellow members, because it’s a reciprocal arrangement, and doesn’t require you to have money to purchase things. This allows people to gain confidence and develop skills in producing goods and services that benefit the community; and it allows ordinary people to decide where to give credit, rather than banks, who make those decisions based on profitability rather than what benefits your community.


You can develop new skills to provide products or services for a willing group of local customers, and maybe turn that hobby into a career.


The biggest environmental benefit is that there’s no interest. Debt principal can be paid back in a stable economy, but to pay interest, the economy has to constantly grow (by producing more debt or by increasing the velocity of money – either will require more resources and produce more waste). It’s this constant growth that’s the root of the destruction of the biosphere; and this destruction is not trivial.

Mutual credit favours local procurement policies, which reduce food miles and everything else miles.

Members can hire out equipment, so that individual households don’t have to have everything. This could work with vehicles, lawn-mowers, gazebos, power tools, welding gear, camping or fishing gear, or even washing machines.

The norm nowadays is to throw things away and buy new, because of the cost and difficulty of finding someone to do the repair. But often, local people will enjoy repairing things, and not charge too much. This reduces resource use and waste.

Many people are putting their hopes for a more just and sustainable money system in Bitcoin and/or other cryptocurrencies but this is a questionable approach. While not all cryptos require as much electricity as a small country to secure them, almost all cryptos are treated as assets, which must be acquired before they are spent, not as credit.

What can I do? and have partnered to develop a UK-wide mutual credit network.

You can just dip your toe in the water at first, to see if it works for you. But at the moment, we’re only looking for expressions of interest, which you can submit via the form here. When we launch, we’ll invite interested parties to join.


There’s a lively mutual credit scene in Australia, where they have developed their own Australian Community Exchange System network.

How it works

Businesses trade with each other and account for trade in trade-credit units – fully accounted for, just like cash. Three key differences from cash make it work in places where cash is scarce (we hear you – everywhere!):

  1. You don’t need to get hold of trade credit before you spend – you have a credit limit.
  2. There are no debts – your credit is a promise of willingness to trade with other members, nothing more. No interest is charged on negative balances (or earned on positive ones).
  3. Everyone you trade with is also a member – you can see what they offer, see what they need, what their balance is, and know that they abide by the same rules that you do. And you can read reviews, too.

There is one obvious immediate problem which people come up with, that is worth mentioning, and it goes like this: “Of course our customers would like to get what we do on credit – but we don’t want anything that they make or do – so how could this work?”

The answer to this question is straightforward, but it is also hugely important. And it’s this: that such a system must include enough variety and scale so that it joins together traders in loops. Eventually, the trade credit that one trader spends must pass around a loop and result in someone else buying from the original trader to redeem the credit. The loop might be short and simple, or long and messy – and interestingly, the longer and messier, the better – because money (which is what the trade credit is) only does anything useful when it changes hands – so the more times the money changes hands before it gets redeemed, the better for the economy.

So that’s the work we’re doing – building a register of interested businesses – what they offer, what they need, so that we can be sure, before we invite new members, that they can slot into a loop that can work for them – that will offer customers and suppliers in more or less the right balance – and that can grow in future.

Grassroots economics have introduced voucher schemes into poor areas of Kenya. The vouchers don’t have to be bought with official currency – they are just to facilitate trade locally in a membership scheme, and in fact represent a mutual credit system.

We’ve been accepted onto the Finance Innovation Lab’s Fellowship Programme and have assembled an advisory group including:

  • Thomas Greco of Beyond Money and author of several books on mutual credit
  • Vivian Woodell, ex CEO of The Phone Co-op and now Director of the Phone Co-op Foundation for Co-op Innovation
  • Matthew Slater of the Credit Commons Collective, who has developed several versions of mutual credit software
  • Pat Conaty, senior research fellow at NEF and Co-operatives UK
  • David Clarke, Positive Money
  • Duncan McCann, NEF
  • Chris Cook, Senior research fellow, UCL
  • Gary Alexander, ex Open University
  • Les Moore, Open Money UK

If you or your organisation are interested in partnering with us on this project please get in touch.

We want to build mutual credit as a credible – ie sustainably viable – alternative to monopoly issue debt-based money, so:

  1. UK businesses submit expressions of interest.
  2. Once we have enough business registered to make the network viable we will launch our site where you can log in to access your account.
  3. Businesses can make themselves known – promote your business in the directory to reach new customers.
  4. Start selling – increase your market share, customer base and revenue.
  5. Members who qualify will be provided with an interest-free line of credit in proportion to the amount of goods and services they commit to provide.
  6. Spend – use credits to purchase what you and your company need.

UK businesses can register their interest via the form here.

If you’re in a job that’s about capturing market share for a corporation rather than providing useful things for your community, but you’re doing that work to pay rent or mortgage rather than because of any great love for it, you may want to consider re-training. Difficult but not impossible – see here for a couple of hundred ideas. Also, this may be easier in a small town than a large city – community may be stronger, house prices and other costs lower, with farmland nearby to provide food and other raw materials.

See this article for more information; and we’re building an FAQ page here. Please ask questions below, and we can add to the page.

Thanks to Matthew Slater of the Credit Commons Collective for Information.

The specialist(s) below will respond to queries on this topic. Please comment in the box at the bottom of the page.

Matthew Slater develops software for complementary currencies. He co-founded Community Forge, which free hosts software for collaborative credit schemes; he co-authored the Money & Society MOOC, a free masters level multidisciplinary online course. He co-drafted the Credit Commons white paper, a proposal for a global solidarity economy money system, based on mutual credit principles.

We'd love to hear your comments, tips and advice on this topic, and if you post a query, we'll try to get a specialist in our network to answer it for you.