Alternative Currencies and Barter Systems

Some development projects promote the use of alternative currencies and barter systems to become more self-sustainable since this helps them make the most of locally available resources and encourage local engagement.

Many initiatives create or promote alternative exchange systems to strengthen the economy of the communities they work with and reduce their dependence on official money (which, because of its scarcity, often pushes them to emigrate or to live in poverty). These exchange systems encourage the production and circulation of goods and services that were no longer made or sold in the region for lack of money. 

Some of these systems –such as barter– may have already existed in the communities themselves but have been lost. Others, such as alternative currencies, are used to facilitate the exchange of goods or labor in much the same way as official money is. These new currencies only have value within the region or community that agrees to exchange them because the value of currencies is backed by participants’ trust: people will be able to use and exchange them thanks to all the other participants, who will fulfill their commitment to validate them as well.

That is why many initiatives find these systems useful to foster the growth of a community’s economic activities and knowledge, which might otherwise be lost. Furthermore, the intention behind alternative barter systems is to encourage solidarity and engagement among people so that they may solve their common problems with less dependence on external resources. This new instrument that encourages exchange (it may be vouchers, digital currencies, coupons, etc.) creates a collaborative network that can better pinpoint and tend to the needs and interests of the different members of a community. 

To implement local currencies or barter systems, some initiatives start by collaborating with communities in order to pin down their most urgent needs and what their members can offer to solve them as comprehensively as possible: goods, services, knowledge, etc. They then form a listing with all participants, detailing who offers what and what the rules of exchange will be. Some initiatives create time banks to exchange services using man-hours as currency instead of official money; others use point systems or other digital mechanisms; still others print or manufacture their own bills, give them a name and create a network of partners offering a portfolio of various goods and services. Normally these exchange communities operate at the local level, although some have managed to expand to many regions because of the type of goods or services they exchange.

In any case, the success of the system depends on how diverse and comprehensive the network of goods and services is because this determines whether the different needs and interests of the community are met. (A network with five dentists and a baker, for instance, may be able to polish smiles and offer breakfast, but it will hardly be diverse enough to solve everyone’s many other needs). Success also depends on the participants’ commitment to show solidarity and actually use these currencies for at least a percentage of their exchanges –otherwise these would be worthless. This arrangement gives people reasons to cooperate in common development projects and transcend, at least in part, some of the social, cultural or economic barriers that may divide them.