Mutual credit is 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. 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 button below. When we launch, we’ll invite interested parties to join.
Why should you join?
We think it’s a safe bet that scarcity of cash / difficulty of access to finance has a major impact on your organisation’s ability to do what it is set up to do. On the other hand, it’s probably also a safe bet that there are some things you can do which people would love you to do more of – if it wasn’t for the fact that they are also short of cash / find it hard to get finance to pay you with.
And if this is true for your organisation, then it’s true for tens of thousands of others. So it seems clear that scarcity of cash / finance is a major factor in holding everyone back. Not really news, is it?
But notice the other part of these statements – there are things you need, that you can’t get enough of; and there are things you could do more of, that potential customers don’t have the money to pay you for. And there are many other people in the same situation – people who want more of what you make/do, and people who want to make/do the things you want.
What if there was a way of connecting these needs up – so that you get more of what you need, while also getting to do more of what you’re good at – which didn’t depend on cash or finance, but which worked in a businesslike way?
Well, there is. It’s called mutual credit, and it works.
There are examples of schemes all over the world. In Sardinia, for example, there’s Sardex, a scheme that in 2017, involved trade valued at 81 million euros, on an island with the population of Birmingham!
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!):
- You don’t need to get hold of trade credit before you spend – you have a credit limit.
- 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).
- 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.
If you’re interested, you’ll probably have thought of a few good questions by now – some of which might seem like showstoppers. That’s great! We’re confident that the worldwide experience in this sector, and the expertise of the people advising us, have great answers – but we’d like to hear them in any case. Have a look at our FAQ page (which we’ll be adding to, from questions we receive). If your question isn’t on there, post it below.
Here’s an introduction to mutual credit.
And here’s an FT article on Sardex.
We want to build mutual credit as a credible – ie sustainably viable – alternative to monopoly issue debt-based money.
We believe that mutual credit has a strong structural bias against capitalistic, exploitative business modes.
We believe that, for capital-poor businesses, mutual credit will offer a business advantage.
What to do next
Well, you could send this post to at least two businesses you know that you think may be interested. That way we can really start to spread the idea. And of course please feel free to re-blog or share this on social media.
But we’re after expressions of interest for now. Send yours by clicking this button:
Thanks – hope to connect with you soon. If you’d like to ask anything privately, or to volunteer, please contact us directly.
The views expressed in our blog are those of the author and not necessarily lowimpact.org's
1Malcolm Purvis October 28th, 2018
Hi, great idea. Well done.
My wife and I are subsistence farming so sell (trade) very little and have a very small pension that we use for buying what we need (not very much). Is there any way that we can connect and trade with our small pension to get the things we need?
2John Harrison October 28th, 2018
I can see how this would work with a business network but how would it operate for an individual like myself or Malcolm Purvis?
Also, since this is effectively trade with a currency, what about those lovely people at HMRC? Would this not be treated as an avoidance of tax and even VAT?
3Peter Green October 28th, 2018
Hi, back as usual to highlight something that doesn’t work for me! ?
I am strongly opposed to using google docs, so I couldn’t show interest if I wanted to (except for here in the comments)…
4Dave Darby October 29th, 2018
Malcolm – we’re just collecting expressions of interest at the moment. We’ll only be able to see if we can build ‘trading loops’ after we’ve looked at the expressions of interest – i.e can we build a network of businesses that provide what others want and want what others provide. Sardex did it, so I don’t see any reason why we can’t.
5Dave Darby October 29th, 2018
John – it would work for anyone, as long as you can provide things that people in the network want, and want things that someone in the network provides. We want the focus to be businesses, because we don’t want it to go the way of LETS schemes, which were mainly about things like loft clearances, lifts, babysitting etc, that are often done for free in communities anyway. They will have brought interesting people in contact with each other and built community cohesion, which is great, but they’ve always been marginal, and tiny. We’re looking for ways to start to change the economy, and to trade without money (because money always concentrates in very few hands, which then corrupts the political system).
It could be described as a currency, but that would confuse people, because people then think of legal tender, cryptocurrency or local currency, and it’s none of those things – only credit and debit in an account – nothing that can be accumulated or spent outside of the system.
Tax is payable – in legal tender – which is why we’re only suggesting a small proportion of trade be carried out in the mutual credit system. One day, if a state joins the scheme, and accepts credits for tax, that would be a great day. More on the tax situation at the bottom of this page – https://www.lowimpact.org/lowimpact-topic/mutual-credit/
6Dave Darby October 29th, 2018
Peter – we’re all doing this voluntarily. You could join us and help, rather than posting negative comments that could (but I hope don’t) put people off. And if we sort this, I still don’t think that would be enough. We’re going to try to recruit via Facebook, for example (because we want to actually reach people, rather than stay 100% pure and reach nobody), and I’m writing this on a Hewlett Packard laptop, albeit second-hand and running Linux (what device are you using?); and I travelled on a Virgin train today – it was either that or put corporate fuel in a corporate car. We’re not perfect, but you have to start somewhere, in the real world, or retain ideological purity but don’t start anything. The best is the enemy of the good, as they say.
7Malcolm Purvis October 29th, 2018
Many thanks for your reply and comments Dave.
8John Harrison October 29th, 2018
Thanks for clarifying Dave. I think most of the Lowimpact community – so to speak – agree that the current system is now fundamentally broken and unfair. We can just sit and moan about it or try and fix / replace it. This won’t replace it in total but it’s a step in the right direction.
I’d not heard the phrase “The best is the enemy of the good” before – so true.
9Peter Green October 29th, 2018
Dave, I take your point, you’re right basically. But google docs is not the only place to share data, and not using it, isn’t going to loose you any exposure.
With your use of fb which I understand your point about, and I can avoid that and (I assume) get the same information here on your website. i.e. I have choice when it comes to getting info’ vs no choice when letting you know if I am interested in joining your scheme.
I simply refuse to willingly give up information to google and I encourage others to do the same. That is not to say I want to scupper your endeavours here, I really don’t.
It’s not like there aren’t any open source alternatives – https://opensource.com/business/15/7/five-open-source-alternatives-google-docs
You could host your own and keep (my/our) data ‘in house’ where it belongs.
I see things a little differently from most and will always find issue with things others do, so I shall forthwith refrain from posting comments.
Keep up the great work.
10Dave Darby October 29th, 2018
Peter – you don’t see things differently from me, or from anyone else in this co-op. I will use the info you’ve sent to try to persuade Oli at Open.coop to switch to it (he set it up). This comment was better than a negative one with no alternatives. We can all learn together – there’s no need to refrain from posting. I don’t want to use FB either, but that’s where people are, and if we don’t, we won’t reach them. I use free/open source software and operating systems, and as soon as there are co-operative laptops, I’ll use them too.
11Oli S-B October 29th, 2018
@Peter “I am strongly opposed to using google docs, so I couldn’t show interest if I wanted to (except for here in the comments)…”
That sounds a bit like cutting off your nose to spite your face! ?
We’re not being purist about getting this set up – Google forms work well and filling in the form does not mean giving any more data to Google than they probably have already… any anyway, it wont make any difference to them unless they are thinking of setting up a mutual credit scheme, which seems highly unlikely! Filling in a google form does not require a google login, and so is not like using Docs – it’s just a way to collect data – sure, there are lots of open alternatives but we’re keen to keep things simple and crack on with the work of setting up a new economy, rather than debating the merits of open vs propitiatory software. We’re very keen to make this happen and hope you wont be put off getting involved by this small leaning towards usability over openness. All the best, Oli
12Dave Darby October 29th, 2018
Difficult one. I think I’d lean towards Peter, and not use corporate software if there were alternatives, and they were just as easy to use (and I think they are) – even it it’s just to show that they don’t have to own everything.
13Peter Green October 30th, 2018
Oli S-B, Yes, I often (metaphorically) cut my nose of to spite my face, I think I am too much of an idealist. Having said that I have long been trying to avoid any kind of monetary system (I’ve not go there yet – and it could be a while…), so this is not something I am that interested about. Maybe I should/will be.
“We’re not being purist about getting this set up” That puts me off, though most will probably not care (though personally I think they should).
“does not mean giving any more data to Google than they probably have already” You’re assuming I make no effort to avoid giving them my data, where as I work hard not to.
“wont make any difference to them unless they are thinking of setting up a mutual credit scheme” Of course it will, they want any and all data, it’s the new oil remember!
“we’re keen to keep things simple and crack on with the work of setting up a new economy, rather than debating the merits of open vs propitiatory software” I can see why you might want to do that, but be careful casting aside important ethical points along the way.
“hope you wont be put off getting involved by this small leaning towards usability over openness” You pose a false dichotomy and I am completely put off by that way of thinking.
Thanks for your thoughts on the matter though! ?
Damn, I’ve gone and commented when I said I wouldn’t! I update my declaration to – “this is the last ‘post’ I will comment on!” ?
14Dave Darby October 30th, 2018
Pete. FWIW, I agree with you. So stop sulking – there’s a species to save out there. Keep telling us off.
15Mike Pinard November 10th, 2018
This looks like the scene from Life of Brian where the Popular front for the liberation of Judaea fight other resistance movement to the exclusion of the Romans over semanticcs.
If you want to reach more than five people using the internet you need to use Microsoft, Google or apple as an OS or browser youve go to pay the man somewhere. There may be grey ways around with very minor products but it’s geek territory and count me and most out.
All life is a compromise if you want to achieve your objectives the trick is to use the path of least resistance be it for you or the planet your choice but pedants rarely succeed because life is too short.
Look and learn from nature, parasites are very successful, they get a free ride in return for loosing some freedom. Parasitise Google and use it against them classic resistance tactics actually.
16Dave Darby November 10th, 2018
Mike – we’ve got an excellent team together on this, and we’ve got really good responses from people we’re talking with about it. Sardinia, with a population of less than Leeds, has a scheme with trades worth 81 million euros in 2017. That’s not insignificant. We’re looking for ‘early adopters’ at the moment, after which we’ll try to get the mainstream interested. Don’t see much mileage in what you’re suggesting, tbh, and we’re on Linux, but I guess you’re well along the bell curve with that too.
17numblock December 8th, 2018
I’d be very interested in participating in a mutual credit system, but I am Dutch and live in the Netherlands. Any info you have on similar movements in our country would be very much appreciated. The closest thing I have found so far is Stichting Ons Geld (‘Our Money Foundation’) https://onsgeld.nu/, which is proposing to take money creation and lending away from private banks and bringing it back into the hands of the people who use it, through a sort of ‘state bank’ managing a ‘virtual’ (ie digital) euro.
Failing that, I hope your intitiative spreads to the Netherlands. Keep up the great work!
18Dave Darby December 9th, 2018
Thanks. We’re focused on the UK, but there are people working on mutual credit schemes all over the world. The idea (well certainly our idea) is for a global credit commons at some point.