Mutual credit clubs: an introduction, with Dil Green

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Posted Dec 6 2020 by Dil Green of
Mutual Credit Services helps establish mutual credit clubs

This is the first in a series of interviews that will accompany a book I’m writing, that will be published by Chelsea Green – an employee-owned company, and part of the new economy that the book is describing, built around a mutual credit core. Here’s more on the book deal and here’s some introductory information about mutual credit.

Dil Green had the original idea for ‘mutual credit clubs’ that can federate to create a new global trading system. He’s brought together a group of people to form Mutual Credit Services (MCS) to start to build this federation (new website coming soon).

Hi Dil – Dil is a member of the Lowimpact co-op, and was introduced to me by Matthew Slater, author of the Credit Commons white paper. You had an idea earlier this year, that’s culminated in my getting the book deal. There’s a lot of specialist knowledge I need to extract, to translate for a bigger audience, and to slot into the book. It’s apt I think to start those interviews with you, because it’s your idea about mutual credit clubs that’s got me to this position.

We’ve been talking about mutual credit on Lowimpact for a while now – the position is that humanity is on a very destructive path, which will be impossible to get off as long as we have this money system.

I’m going to ask you a some questions that I’m typically asked. Not all of them – just the sensible ones. I’d like to make sure the answers make sense to complete beginners. I’ve got quite a few questions, so very briefly if you can.

First – why are you doing this?

It’s the thing that I feel I can do and make some difference in, which seems to have the potential to contribute most deeply to sorting out the trouble we’re in. There are lots of people doing lots of different things, and we need all of them, and I’m not knocking anyone else’s choices – just wish them good luck. But it seems strongly to me that, for reasons of historical accident, the sort of money we use drives extractive behaviour and excessive competitive behaviour and discourages and disincentivises collaborative behaviour, and changing that might do a lot to make a lot of good ideas and things that other people are doing work better.

We worked on the Open Credit Network (OCN) together – a national network for the UK. Why did you switch to the MCS idea?

Essentially, mutual credit works by operationalised trust – it takes trust that exists or can be developed between trading partners and turns it into something real – i.e. more access to credit. The problem with the OCN (and it’s a great thing, and a huge step forward) is because it’s a national network of individual businesses, the ability to generate trust is relatively low. Businesses don’t know each other and aren’t in trading relationships with each other. So with MCS we’re looking to have smaller groups of trading partners, where trust can be strong.

So – mutual credit clubs – groups of businesses that trade together in mutual credit, that can be federated into wider networks that can encompass the globe. Very exciting. And very useful in post-Covid times when there’s not going to be much money about. So people read the book, they think great – How can I join in? When?

The key thing that is hard to understand is that, in the West particularly, individuals are not allowed to create economic value. But we’re only really permitted to create economic value within some business entity. This is a great takeover of human endeavour in capitalism – individuals don’t have the means of production. Things are different in the developing world – they often don’t need any institutional structure. But even people who think they’re individual creatives in wealthy countries, like writers or artists etc. actually have to engage with businesses in order to be able to create economic value out of the human value that they create with their work. To join in, you have to be part of something. So we’re starting with business to business networks, but that’s including social enterprises, charities and sole traders; plus productive community groups – so an allotment association could form a club and trade.

Where are we with the tech? What will the package that local network conveners get look like? when? what’s required to make it happen?

There’s a fair bit of work to be done to have something that works ‘out of the box’, but what we have got is the most complex, innovative aspect of it done – which is the definition and operations of any club – the ledger, i.e. the big book in which all the trades are written down – the digital version of that. Every club is a stand-alone, mutual organisation, owned by its members, runs its own internal accounts system. Each ledger can then federate to another ledger, and the ledgers aren’t strictly linked, they’re just connected by messages about trades. ‘I want to send 100 credits to this business in your group’ – is a typical message. So we’ve got that software up and running, it’s open source (and in a reference implementation), which is great. What then matters for each club is how they send those messages. That’s going to be different in different contexts. We have a very basic banking app front end that we’re using internally, and that can be developed. But we’re essentially in development of various funded contexts where we’ll produce useable interfaces to that ledger software that makes sense for different businesses in different context. The easiest way might be to integrate it into their existing accounting packages. It’s just like another bank account or a Paypal account on their system.

Roughly, any idea when this will be ready for clubs to have, and to get going?

You could start now – we could do it for you if you’re a good enough prospect, and you wouldn’t need any new software at all. That’s what we’ll be doing with the first few projects. It will never be ‘done’ – it will be an evolving process, but I’d say that in 8 months or so, we should be in a much better position.

So when the book comes out, hopefully next autumn, there are going to be some projects to point at?

We’re working hard to make that be the case.

And what if someone watching / reading this wants a club, whether they’re a business network, an accountant, a local authority – anyone who’s interested in having a club – what do they do? Should they just contact MCS through the website?

Yes. At the moment, our capacities aren’t enormous, and we need to focus on key projects we can see have a strong chance of building a working model, because that’s what we need to be able to point at to get funding, whether that’s investment or grants – we need to be able to start showing people how this really works, and we’re making great strides.

It’s relatively easy to explain how people trade in a mutual credit world (I’ve explained it successfully to my friend’s 7-year old son), but how do they save? Probably the most common question I’m asked – in a mutual credit world, how do I buy a house?

We’re never going to have a mutual credit world, in the way we have a hard currency world at the moment. Money is used for every economic purpose. We measure economic tools in hard currency – or at least we think we do. Pensions don’t work like hard currency. Corn futures don’t work like hard currency. But we measure them all in hard currency. We realised that if you use one type of money for measuring everything, and one of the functions of that money is savings – technically called store of value – then there’s a problem with money supply, because people will keep hoarding it, because they need security in old age, or they want to make a large investment, or they want insurance against risk. And those are all very important things that we need in society. But if we use the same money that we use to trade, there will be problems. Money should flow – pass between people as fast as possible to enable value creation and trade. Mutual credit is designed not to be a store of value. So if you want to save, we won’t have a mutual credit world, we’ll have a mutual credit and use credit world – and use credits are different from mutual credit. Use credits are like vouchers for particular services. The key ones are energy, rent, food etc. Those things will be how you save. Because if you’ve got rent credits stored up, you don’t have to worry about having somewhere to live.

This is Chris Cook’s thing, isn’t it? I’m going to interview Chris later on, so I’ll get him to go into more detail on that.

Yes. And it’s worth reading an article called ‘2 Planks and a Bridge’, which explains simply how these 2 mechanisms can work together to cover this.

I’ll blog that article on Lowimpact soon. The second most common question. What if someone defaults / does a runner?

So, we’ll have relatively small groups. The rules will say that you can’t leave a group with a negative account. If you try to do that, you’ll be pursued through the law. But people will default – they’ll go bust, through no fault of their own, and they’ll die. There are 2 things to note. If I’m a business in the current economy and I invoice Dave and give you 30 days to pay – that’s credit. Mutual credit isn’t much different to that, except that the credit is pooled in the group. If I issue credit in the standard way, and he gets run over by a bus, and I’ve already delivered the goods / services, then I’m out of pocket. If Dave and I were part of a mutual credit club, he would have paid me immediately – as soon as the invoice is accepted.

So your account would just get those credits immediately.

Yes, so I would have the credit units. Dave gets run over by a bus…

I’m not liking this story much.

Don’t go out. At least you’re not a crook – you’re just dead. So Dave ceases trading. But it’s not a dead loss. I’ve still got your credit units, and there are still all the other members of the club who accept those credits. So the default doesn’t fall on any individual. We’ve lost as a group. We’ve lost Dave as a trading partner. But we haven’t lost as individuals. Plus, if someone defaults, and if the mutual credit economy is growing, they’ll probably want to join another club. Clubs will ask questions and hear news. It’s likely that they’ll find out why they left the club they used to be in, and refuse them membership. There could be a blacklist they could check.

And the third most common question: I’m not a sole trader and I’m not part of a small business – I work for a large company. Can I still join in? If the company I work for joins, Can they pay their staff in mutual credit?

Sardex in Sardinia is the most exciting and dynamic example of a recently-founded mutual credit network. They’ve introduced in the last 3 years a business-to-employee trading mechanism. Instead of some of their wages, employees get credits to use in the mutual credit network. So the employee gets the employer’s credit rating, which is presumably better than theirs, and the amount they trade is somehow subtracted from their wages. The practical way of doing it, taking into consideration PAYE etc, is that everyone gets paid their wages normally, then they buy credits to trade in mutual credit. That’s the most likely scenario. It’s absolutely doable. If we do it the way I’ve just described, there’s no legislation to worry about, because wages still happen in hard currency. Plus we think that employers will probably offer a discount as well – maybe sell £1.05 of credit for £1, because it will be good value for them.

Can you see a route to getting ‘new economy’ players – eg community energy groups, CSA groups, housing co-ops, worker co-ops, credit unions trading in mutual credit? How do we get there?

The same benefits of risk reduction and access to better credit applies to any trading entity, whether they call themselves a social enterprise or a co-op or a rapacious capitalist organisation – it makes just as much sense for anyone to join. What matters is reciprocal trading relationships. Western economies are very vertical – businesses buy from bigger businesses and sell to smaller businesses, and you end up with, for example, a corner shop selling to an individual. That’s been massively aggregated. Covid means that big businesses have become entire supply chains, selling direct to consumers – so the scope for intertrading is being reduced in the economy as a whole. This is why it’s so risky, and we keep having economic crashes – the economy is unstable, because it doesn’t have enough variety in it. So it’s difficult to find businesses that have a relatively high proportion of their trade as intertrade with other businesses. But we’ve got some (hot off the press) rigorous analytics to show that the benefits are real, and we’re going to be investigating what proportion of trade counts as intertrade, and looking into that more.

How does the clubs idea, as it grows, dovetail with what Matthew’s doing with the credit commons? I’ll interview Matthew next, to get his perspective.

What we’re doing is providing the layer on top of the technical specification of the credit commons that makes it easy for ordinary businesses to use and understand, and we’re working to continually make less about strange conversations about money and more about building something that’s just like what people are used to. Just look for a business that says they’re part of the mutual credit world, and you can pay them easily, like using paypal or a bank transfer.

I can see how an accountant or a local authority could convene a club. Who else might be able to?

Business network organisers of all kinds. There are lots of business networks all over the country, ranging from ‘you scratch my back and I’ll scratch yours’ networks to friendly Rotary Club types that meet in the pub, to solidarity networks in disadvantaged communities of one sort or another that know that they need to help each other, to campaigning business groups that want to promote a certain type of business. The Co-op is the biggest one of these. Any group of value-producing organisations that do a certain amount of trade together – doesn’t have to be a high proportion – that want to work more collaboratively, to get some benefit in relation to the wider world. Mutual assurance is the term for that.

What about an individual who might want to start a business network in their town?

That’s a great thing if someone can do it. It’s easier if you’re already well-connected. If you’re trying to do it by cold-calling businesses, that’s great, but it will be hard work. You might be better off finding a few other people to work with first. As time goes by, we’ll be producing more materials and toolkits, but we don’t have those yet. But we will.

Can it all be done without brokering? Sardex, who you mentioned earlier, have a lot of paid brokers – will these be needed for small networks of businesses that already trade with each other, and may not have hard cash post-Covid?

Sardex is interesting. It’s the model we used for the OCN. There’s one big network, rather than small groups that know each other. Even though it’s Sardinia, an island with a small population, there are 4000 businesses in the Sardex network, and it’s true that the only way they’ve been able to keep trading volumes up is by having brokers on the phone all the time, telling traders about opportunities / deals etc. That’s a brake on Sardex’s development, because it’s very expensive. What we’re hoping that if the structure that emerges is of relatively small groups that are already trade with each other, they won’t need brokers to get them to trade with each other, because they already do. They’ll see straightforward business benefits, like improvements in cashflow, reductions in risk. Then over time, with increases in access to interest-free credit, they’ll want to do more. When those networks aggregate together into networks of networks – so there might be a regional network with a lot of clubs of between 10 and 100 businesses – whether it’s then obvious that it’s beneficial to trade across that network, with businesses you don’t already know and trade with. Then, whether it will be possible to trade without any brokering at all, remains to be seen. The best idea we have is that we’ll have freelance brokers, so there might be a market for referrals.

So we’ll just have to wait and see.


What successes have you had so far?

The biggest, obvious one is that working with a brilliant local food partnership called Food Plymouth, and some local food business consultants who’ve worked with the Open Food Network – another great organisation, we’ve put together a bid to Innovate UK (govt. money) with a proposition for building a model for local food business networks, and we got funding to start a project that will be finished next year, and that has mutual credit built in at the core, as a key plank of increasing the margins and the benefits of participation for all the small businesses that have to come together to form a local food network. Assessors from the government, who don’t care about new economy stuff, thought it was a good proposition.

We’re also working with some accountants – we’ve been talking to them philosophically, but we’ve been asked to build clubs for them. So they want to help design clubs that work well for accountants.

We’ve got a group of community businesses – dynamic, interesting people in Brixton, and Lambeth council are interested in a project too.

And we’re just starting a conversation with a fantastic group of businesses in London called the East End Trades Guild – 300 businesses, many traditional, local small businesses, plus some people with real vision about how to move the collaborative economy forward, and they’re interested in the idea of a credit club.

I’ve talked with people from Chelsea Green about having a mutual credit account. They said they’d talk with colleagues. I’d like to walk the walk and for people to be able to buy the book with mutual credit. Not sure how that would work though, with a big international publisher.

Very interesting. I’d have to think about it. It raises all sorts of interesting problems. If Chelsea Green take mutual credit in payment, they need to know they can spend them. They can pay some of your fees, but where are you going to spend it?

Well, my accountant takes mutual credit, and has taken it, via the OCN.

Hopefully your fee for the book will be larger than your accountant’s bill! But this illustrates the question that one always needs to ask about any participant in a mutual credit economy – you have to look at the other side of the equation. So for the people buying your book in mutual credit, you’d have to ask where they’re going to earn credits into balance. Those questions need some thought. There’s a long history of mutual credit start-ups that operated on the ‘build it and they will come’ mentality, who didn’t know how it was going to pan out, but if they made something beautiful, and enough people join, it’ll all sort itself out. The sad reality is that it doesn’t, because those questions really matter. People who earn a lot of credits think that’s great – but it’s only great if you can spend it. If they look around the network and can’t find anything they want, or anyone who actually accepts credits, they’ll quickly become dissatisfied. Or – if people get a big negative balance, and they’re not allowed to spend any more because they’ve reached their limit (and there might be an official system limit, that prevents trades beyond a limit), then they’re going to want to earn; and if they can’t find anyone who will pay them credits for whatever they’re willing to provide, then they’re going to be disaffected, and may walk away.

It’s worth anyone interested in experiencing this going to join You can join for free – it’s a global mutual credit network, with a beautiful app, thousands of members, they give you free credits to start with. You can see what it’s like to be in a ‘build it and they will come’ network, because although everything about it is great, it just has this flabby, unreal feeling to it. We believe in not building networks for places and groups that we can’t predict will get some fairly immediate concrete payback from their commitment.

Finally, would a credit commons, a mutual credit economy, have to grow forever, like the current economy does. Could it stabilise so that we can live without destroying nature?

There’s really good precedent on this. There are a lot of LETS schemes, that operate on mutual credit principles and mechanisms. Lots of LETS schemes that started up as long ago as the 90s still survive, and those networks don’t want to grow. They’ve become networks of 20-25 people. They’re friends, and it’s quite hard to join those groups. They’ve stopped bothering either to keep accounts – they just do stuff for each other. The whole point of mutual credit is that it emphasises the value exchange (I want something – a book, some babysitting – anything) over the number of credits. There’s a theory of exchange that says if the amount of money in a system doesn’t change then no value was created – but that’s obviously nonsense, because why would 2 people go to the bother of making a trade if they didn’t both feel better after it? So there’s always value created in a trade, but not necessarily in numbers of units – it’s human value. So what we hope and assume that yes, mutual credit will not have an inbuilt growth imperative, like the money we use at the moment does – because people take money out of circulation, for savings, and because of the fact that the banks create money from interest-bearing debt, so people have to go and do work, before they can clear their account.

Thanks Dil. Any questions you have for Dil – please post them on the blog, or on YouTube – but they’ll have a better chance of being answered on the blog. Dil, I’ll blog your ‘2 Planks and a Bridge’ article soon. This is the first of a series of interviews accompanying the book, so if you want to follow them, subscribe to the blog and / or the YouTube channel.

Yes, if I said anything too fast, or in jargon, please ask and I’ll try to explain more fully.