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ISSUE 132 - VOL 2
July 15 - October 14, 2013

Dr. Bienvenu-Magloire Quenum
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The Usage of a Complementary Currency as Financing Catalyst to Boost the Developing Process In African Countries.

By Dr. Bienvenu-Magloire Quenum

In most African countries, money's circulation in rural areas is strictly minimal, thus hampering the development and or expansion of economic activities undertaken by rural folks.

They are not in the position to increase productions, sell and purchase goods and services, permanently and on large scale. They have no purchasing power, living daily with US$1-2, surviving from hand to mouth. Consequently, they do not fully contribute to the expansion of the global economy.

In brief, the huge economic development potential existing in African rural areas is not exploited to its maximum because the official money circulation is too slow.

Right now, food safety is not even guaranteed in most African countries - since 2008. Thus hard won foreign currencies reserves are used to import large quantities of food stuffs - cereals, meat, and fruits. Etc. An absolute abnormality when acres and acres of arable land are left fallow.

To compensate for the lack of liquidity (of the official money,) rural folks barter to trade goods and services between villages and communities, using exchange-mediums such as pebbles, beeswax, beads, calves, fur, almonds, cowries, and various animal shells. Etc.

These above listed exchange-mediums are not easy to carry around to purchase commodities, goods and services - when large quantities of these are concerned.

Further, they also lack the multiplier effect needed to boost the global economy. Not to mention that they cannot be safely stored, to retaining their monetary value any time in the future.

Thus African rural folks have always been in search for reliable medium means to supplement bartering.

In order to speed up the developing's pace in African countries, it is an urgent necessity to diversify the economy in rural areas, transforming crops to added value products - targeting double-digit growth rates, year-in year-out, to creating riches for all, and thus, accruing financial means to efficiently fight against poverty -as exposed in Africans, Stop Being Poor!

Rural folks representing the majority of the population (up to 90% in some African countries,) providing to them exchange-mediums, which firstly, circulate at high pace, and secondly can be safely stored, would vastly assist boosting economic activities in rural areas, to increasing the productivity and accumulating riches for all - as briefly exposed in above paragraph.

- Types of Complementary Currencies

As explained at the beginning of this article, the purpose of a Complementary Currency is not to compete with the National Currency but to complement it as medium of exchange in communities in which the official money's circulation (liquidity) is scarce or altogether nil.

Generally speaking, there are three types of complementary currencies.

1- The first is a token currency, money issued privately that refers directly to a certain good.

2- The second example is script money, a localized medium of exchange that could be redeemed for a variety of goods and services, not just a particular good as with token currency. Script money, thus, functioned alongside the official currency as a medium of exchange.

3- The third type of complementary currency relies on a system of mutual credit reminiscent of barter exchange.

A service/work is paid to a member in the form of credits, which are deducted when said member ‘pays’ another one for a good or service that are (upon his request) delivered to him.

The mutual credit currency thus represents a certain amount of action or work that can be transferred.[Source]

In the latter half of the twentieth century, there was a surge in the number of societies that embraced mutual credit complementary currency, due to the disharmony introduced in the social fabrics of developing nations by rampant globalization free market's destabilization bad practices - as extensively exposed in Africabiz Online [1, 2, 3, 4].

- Several Experiences of Complementary Currencies Running Around the World

Bernard Lietaer, co-designer of the Euro, notes that the use of complementary currencies took off in the last 15 years.

Indeed, in 1990 there were less than one hundred complementary currency systems worldwide. Today there are over 4,000 [Source] complementary currencies participating in Local Exchange Trading System (LETS) around the world, with large numbers of LETS communities in Canada, Australia, South America, Europe, and the United States; also in Israel, Japan (more than 300), and some African nations - South Africa and Kenya in particular.

The most successful complementary currency system is run by Switzerland's WIR-Bank - and established since 1934!

View/listen to the YouTube video below exposed to quickly learn more about the WIR Franc economic circle, running together with Swiss Franc, to understand why Switzerland is a "haven" of prosperity - compared to other surrounding European Union countries laden with debts and in crisis since two decades running.

In South Africa, there is the interesting experience of Cape Town citizens (Capetonians) who exchange "talents" with each other for goods and services without exchanging cash. All transactions are recorded in digital ledgers in cyberspace, and transactions are interest-free. Not to mention, users can see each other’s account balances; thereby, creating a transparent “banking” system owned and maintained by the CES community, rather than by the faceless, nameless employees of the monetary system. For more click here.

The Kenyan experience has been introduced here. Bengla-Pesa is a program to strengthen and stabilize the economy of the informal settlement of Bangladesh, Kenya by organizing its more than 200 small scale businesses into a Bangladesh Business Network (BBN).

Businesses in the BBN include services such as: clothes washing, tailoring, cobblering, manual laborer, house builders, salons, mechanical and electronic repairs, and porting. Other businesses include: Water, transportation, hardware, soap, general shops, food services, raw food (Including fish, meat, eggs, vegetables, fruits and grains), farming, charcoal, lamp oil, education (Primary and nursery school), clothes, medical clinics, drinks (including alcohol, soda and fruit drinks).

- Productivity Increases Drastically With the Usage of a Complementary Currency

The WIR-Bank complementary currency to the official Swiss Franc permits Switzerland to sail safely bad weather economic crisis - since 1934!

Indeed, currently (July 2013) Switzerland has 4.5% jobless level compared to double-digit jobless level in surrounding European Union countries. Listen to the above video in which a Switzerland's businessman praises the benefits of having WIR-Frank complementary currency together with the official Swiss Franc.

The Kenyan experience started on May 11, 2013 and run into trouble with Kenya's authorities and the Central Bank on May 29, 2013. During that short period, sales of participants into the scheme increased 22%. That means increasing incomes and purchasing power by 22% in just 18 days. A remarkable achievement.

These increases in exchanges were for goods and services that without the complementary currency would have been thrown away, not because they were unmarketable but because potential customers did not have access to the (official) money to buy them.

Doubtless, the introduction of the complementary currency (Bengla-Pesa) into the Bangladeshi/Kenyan community boosts production levels of all kinds of goods and extraordinarily expands exchanges of services amongst community members, driving the economy forward, and up-lifting their standard of living.

This remarkable achievement prompted Ellen Brown in the article here available, to propose a re-definition of the concept of Gross Domestic Product. She rightly thinks that:

The Bangla-Pesa experience demonstrates what policymakers often overlook: gross domestic product is measured in goods and services sold, not goods and services produced; and for goods to be sold, purchasers must have the money to buy them. Provide consumers with excess money to spend, and GDP will go up.

It is also good noticing that because a complementary currency is (in principle) interest free, the cost of production of goods and services would be far lower compared to the one achieved using the corresponding official currency.

That advantage, however, might diminish or altogether disappear when gained complementary-currency's vouchers are traded (at the clearing house) against the official currency's notes.

Hence the importance to have written agreement with countries authorities and the national central bank about interest-rate/discount (if any) to be applied to exchange between the complementary-currency's vouchers and the official currency's notes during the compensation/clearance procedure.

Indeed, one important issue that might surface is the potential conflict between the national government and the local entity embracing LETS with regards level of taxation to apply to gains/benefits earn by LETS members/participants.

- The "Optimal" Compensation/Clearing-House's Structure

The ideal clearing house/structure of a Complementary Currency scheme would be a National Development Bank in which citizens in general, the Government and or the Central Bank are partners to make liquidity available (interest free) in poor rural areas - and to negotiate taxation framework that does not penalize the progressive and continuous productivity expansion that bring increased prosperity to the members of complementary currency network.

If this is not the case, that is if the scheme is fully setup and only managed by grassroots activists, as these types of systems expand, national governments may be tempted to apply "normal" taxation rules that would rip off the benefits gained using a complementary currency as described in above paragraphs - and consequently kill the development and expansion of economic activities in rural areas.

- The Introduction of a Complementary Currency Would Tremendously Boost The Economy

Based on economic productivity's increase achieved since several decades by the WIR-Bank complementary currency system in Switzerland, and the astounding one performed by the Bengla-Pesa system in Kenya - as above reported, one could assert that the introduction of a complementary currency into the framework of emerging nations's development-schemes would, doubtless, tremendously boost their developing process.

The eBook, Africans, Stop Being Poor! The Roadmap to Prosperity for African Nations, exposed an Integrated Development Scheme that harmoniously blends agricultural development, transformation of resulting crops and services (storage, transport, distribution. Etc.)

The Scheme is below schematized exposing the main component economic activities included: Agriculture development/Industrial Processing/Agro-Allied and Food industries/Chemical Industries/Animal Breeding/Research Institutes/Mechanical Industries. Etc.

Oil Meals
Edible Oils
Agro-Allied Foods Industries
Power generating sets / Renewable Energy

The fundamental of this strategy is the creation of a Synergetic Impact Factor: that is the accelerating impact exercised (on the global economy) by the several component economic activities interacting each with the others, to driving upward the economy. The moving arrows on above diagram represent the accelerating impact.

The more component economic activities in the scheme, the more powerful the accelerating impact. (You may need to hit your browser's refresh/reload button to see the arrows in action).

This Synergetic Impact Factor amplifies Professor Abramowitz's Catch Up Factor, to boosting the economy that consequently generates double-digit growth rates, year-in year-out, over at least 10 years, averaging +21% annually, when the scheme/scenario is applied to the economy of a Least Developed Country in Africa.

For its part, per capita Gross Domestic/National Product (GNP) would improve as follows:

•From US$380 to US$2,273 in ten years.

•From US$2,273 to US$4,000 – for 10 additional developing years.

Above scenario is comprehensively described in Africans, Stop Being Poor! without taking into account the influence that the introduction of a complementary currency would have impacted, amplifying the Synergetic Impact Factor, and consequently extending Abramowitz's Catch-Up factor over lengthier periods.

The combined action of the multiplier effect of the Synergetic Impact factor and the dynamic introduced by Complementary Currency would, doubtless, boost the economy and the global developing, to assist countries (which would implement the Integrated Scheme,) to progressively create riches for all to efficiently fight against rampant poverty.

Such results cannot be achieved with micro-credit financing schemes, that just provide survival means to the poorest among the poor - and do not assist alleviating poverty as here exposed.

Click following link for more on Complementary Currencies

About the author: Dr. Bienvenu-Magloire Quenum is the principal/ managing director of Dr. Quenum & Associates, IBC; an experienced Investment & Business Planner with 30 years consulting practice in African countries; author of Africans, Stop Being Poor! and the editor in chief of Africabiz Online

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  Dr. B.M. Quenum
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