WIRBANK: a Swiss initiative to help small businesses

Some people do misunderstand that local currency and other initiatives aren't for the business world: the WIRBANK(in German, French and Italian) in the Switzerland, founded in 1934, has been quite successful to help small businesses by offering them cheap loans in its own complementary currency called WIR("we" in German).

The bank was created precisely in times when the Swiss were still suffering from the huge impact triggered by the Great Depression. Several people who already knew Gesell's idea of "Freigeld"(free money) gathered to set up a clearing circle which later would evolve into a cooperative bank. People used WIR instead of Swiss Franc(CHF) as their means of exchange since the conventional money's circulation wasn't enough. Although WIRBANK gave up sticking to Gesell's original idea of demurrage in 1948, it still serves for trades among small businesses in the Switzerland.

As a rule only small businesses can join this cooperative. They use WIR(equivalent to CHF) in parallel with CHF on trading with other WIRBANK members(for instance, WIR 30 + CHF 70). They can also enjoy loans in WIR whose interest rate is lower than in CHF because WIRBANK can create WIR by itself while it has to borrow from the central bank with the burden of official rate, and it can offer, for instance, 2% loan in WIR and 5% in CHF in case the official rate is 3%.

Another advantage for WIRBANK members on joining WIR is the increase of their customers: those who have WIR can't spend it to non-members(huge and/or foreign companies), so WIR members have the advantage to attract other members. In this way they make up a circle in which their purchasing power stays without flowing over the border.

A survey proves that WIRBANK balances economic ups and downs, playing the complementary role to the conventional economy(to be depicted next time). WIR members trade more in WIR when the Swiss economy is staggering while they exchange less during the boom, so they are less afraid of economic recessions. More than 70 years of their history has a lot from which we can learn…

A book on WIRBANK

Chiemgauer in Germany: A new currency to regain regional economic autonomy

The globalization which enriches only a few in the world at the cost of the vast majority gives rise to a number of counter-movements and some insightful people have found out that another currency system may give a fundamental change in our socioeconomic system. This time I would like to depict an interesting initiative in a tiny community not far from the marvelous experiment in 1930s.

Prien am Chiemsee, some 80 kms to the East from Munich, is a Bavarian resort where thousands of tourists enjoy their summer vacations along the lake Chiemsee. Christian Gelleri, teacher of economics at that time at a local high school who had learned Gesell, Wörgl and other related topics, came up with the idea to hold a curriculum to run a local currency in fall 2002. Six female students showed interest in joining this project and the Chiemgauer project took off next January.

This system was conceived to create a win-win relationship among non-profits, consumers and local businesses. Each actor has the following advantage and this means of exchange promotes local production and consumption.

* non-profits: purchase 100 Chiemgauer(=€100) at €97 and resell it to consumers at €100, therefore earning €3 to be spent for their own activities

* consumers: purchase 100 Chiemgauer at €100 and spend it at local businesses at its face value, therefore donating 3% of their consumption to local non-profits without additional expenditure.

* Local businesses: accept 100 Chiemgauer and spend it for other local businesses or redeem it into €95 paying 5% of commission. The 5% commission can be regarded as an advertisement fee and they can attract more consumers who want to help their community.

* Chiemgauer office: sells 100 Chiemgauer at €97 and pays €95 on redemption. The €2 difference is spent to cover its running cost.

It has been successfully increasing Chiemgauer users as well as local businesses’ turnover in Chiemgauer. Now 700 consumers and 380 businesses join this system, recording the annual turnover of 720,000 Chiemgauer(see here for details). It is expected to grow furthermore as the smart card is introduced, receiving more and more attention all over Germany and abroad.

A local currency to revive the local economy in Austria

Gesell’s demurrage theory is hardly told without referring to the successful historic experience which took place in the middle of the Great Depression in Wörgl, Austria. This time I’d like to show you how effectively this monetary system worked to help the economic recovery of this Tyrolean community.

This small town, like everywhere else at that period, suffered from the recession: As many as 350 people were jobless in a town with the population of only 4,216 and more than 200 had already run out of their unemployment insurance in spring 1932. The tax revenue diminished and the city hall too was on the verge of bankruptcy. Then the mayor Michael Unterguggenberger decided to issue the “labor certificate” in July 1932 as a local currency to get rid of this plight.

Bills of 1, 5 and 10 Schillings were printed and paid by the city hall as a salary for construction workers. Each bill expired every month and a stamp of one hundredth of its face value was needed to keep it valid again. That means, your €10 “labor certificate” is only valid until May 31st if you receive it today(May 09) and you need to buy a €0.10 stamp to paste on this bill if you fail to spend it by the end of this month. So bearers of this local currency were encouraged to circulate these bills rather than to hoard them, reviving economic activities in Wörgl. The average money supply of only 5,490 Schillings created more than 2.5 million Schillings of transactions during merely a bit more than one year, allowing the city hall to spend more than 100,000 Schillings for its public works and decreasing the unemployment by 1/4. There were even some people who offered to pay tax in advance(would you do so even when you were rich enough?) because they were so affluent.

This boom of parallel currency, however, frightened the central authority in Vienna and Wörgl had to stop the circulation of this wonderful currency in September 1933: but this success was reported in different media and has been proving how effective Gesell’s theory is. Now the Unterguggenberger Institute has been working to collect related materials as well as promoting the contemporary local initiative “I-motion”, receiving many visits of those who work for “Regio”(regional currencies, to be presented next time) practices in Germany.

Banca Etica: a bank for social and eco-friendly projects

This blog is not only to harangue my theoretical framework which may sound like an utopian illusion to some of you: This web space will be used to show you some ongoing practices which seem to be indicating the way towards the economic democratization as well, proving that what I have in mind is not unfeasible.

Banca Etica(Ethical Bank), founded in 1999 in Padua(Padova in Italian), Italy, is a good example to pour our asset towards socially-and/or-environmentally responsible projects. It has gathered more than €400 million from more than 20,000 members to invest for more than 1,700 projects.

http://www.bancaetica.com/ (in Italian, English and French)

This bank was created by a group of people, for instance activists for non-profits and members of cooperatives, who were not satisfied with conventional banks(read my previous post to learn why). Savers can choose one of the four realms(social co-operation / eco-friendly projects / aid to developing countries / cultural events) their deposit will be used for and the bank analyzes the social and/or ecological impact of the project as well as whether the borrower can repay money to decide whether a loan is given or not. Here are several examples of projects which have been financed by this institution.

- Fair trade for a Honduran coffee cooperative- Reconstruction of a historic district in Riace, Southern Italy

- Organic farm by a Benedictine monastery

- Organic farming to lessen people’s dependency on the underground economy

- Support for the drug-addicted

- Health-care support system for prostitutes

- Economic aid to Albania

And another feature of this bank is that this financial cooperative is managed by its own savers, although in fact indirectly by their representatives. Transparency on all information about loans is assured and anybody involved with this agency has a clear picture on its administration. Maybe your return from Banca Etica is smaller than in other normal commercial banks, but you’ll be always proud of what your money is achieving(your contribution to the society and/or to the Mother Nature). Isn’t it a good deal for you?