6.3.4 Local strategies: Designing complementary currencies

Note to teachers and students: This section is a little longer than others in the book, so students will need more time to read.

In one of the poorest neighbourhoods of Ghent, Belgium, many people couldn’t find work. The city council saw that residents had time, skills, and a desire to contribute, but few paid opportunities. So they created Torekes (Figure 1), a local currency that people earned by helping in the community: gardening, fixing bikes, volunteering at events and other useful activities. Torekes could be spent on a variety of things like bus tickets and meals. The system worked because it was carefully designed to meet real needs.

All money systems are designed. States and commercial create national currencies, but residents and local councils can design their own. Each design choice affects who is included, what work is valued, and how money moves. Complementary currencies are another kind of local finance strategy in addition to those discussed in Section 6.3.3. In this section, you’ll explore how design choices shape what money does and who it serves, then try designing one yourself.

Every currency exists for a reason. National currencies help economies function on a large scale, but local currencies can target specific challenges such as poverty, waste, loneliness or the decline of local shops.

An example of this is Lisbon’s Campolide district (Figure 3). People were not recycling, so the council created Lixo, meaning ‘rubbish.’ For every kilogram of sorted waste, residents earned one Lixo, worth one euro in local shops. 

Why not just hand out euros? The Lixo currency made recycling visible, built community pride, and kept value circulating locally as people spent in local shops.

A good design starts by understanding local needs and resources, connecting unused skills or goods with unmet needs. As a currency designer, you should ask:

• What problem should your currency help solve?

• What do people need, and what could they offer in return?

• Who is involved, and who might be left out?

Issuing money is about power and trust. Whoever creates money decides how resources flow and who benefits. But it is also about capability. Creating and managing a currency takes skills, time, and reliable systems. The people with power to issue money are not always the same as those with the ability to design and govern it well.

In Lisbon, the Lixo currency was created by the city government. The goal was to reward residents for recycling while keeping money circulating in local shops. Because the municipality already managed waste and had strong links with local businesses, it had both the authority and the ability to run the system. People trusted the council, and the scheme worked because the rules were clear and the goal was shared.

In other places, community groups take the lead. The Sarafu network began as a collaboration between local communities and a social enterprise called Grassroots Economics. The social enterprise provided the technical tools and knowledge needed to launch the system, while communities contributed trust and participation. Over time, Sarafu has evolved, with local groups taking more responsibility for its design and management. This shows that the right issuer depends on both trust and capacity.

Money only works when people want to use it. Like a viral trend, its value grows as more people join. This is called a network effect, a reinforcing feedback loop that builds trust and usefulness (Section S.7). 

But currencies can build value in different ways. Some gain value through authority. National money works because states require it for paying taxes and debts. Others rely on backing. The Lixo in Lisbon and BerkShares in the United States could always be exchanged for national money, so people felt confident using them. Some depend on trust and relationships. In mutual credit systems such as those in the Sarafu network, value is created by people’s promises to one another; your credit is my income, and my credit is yours. Still others gain value through shared activity: people use the currency because it supports a purpose they care about, such as recycling, local food, or care work.

As a currency designer, you should ask:

• Why will people want to use your currency?

• What gives it value: authority, backing, trust, shared purpose, or a mix of these?

Every currency needs a way to begin circulating. Economists call this its distribution mechanism, how money first enters people’s hands. This decision shapes who benefits, how fairly resources are shared, and how motivated people feel to take part.

A new currency gains trust through its first users. The people who receive it and accept it first set the tone for how it will be used and valued. If they believe in its purpose and spend it confidently, others are likely to follow. A poor start where money stays unused or feels unfairly distributed, can weaken the system from the beginning.

In most national systems, money enters through banks and loans, meaning that those who already have assets often gain access first, and may use it for extractive activities. Complementary currencies can be designed differently to meet social or environmental goals.

In Ghent, people earned Torekes through community work. This rewarded contribution and made the currency feel fair. Lixo were distributed to those who recycled. Other currencies are distributed freely to everyone, like a local basic income, to build inclusion and equality. Some currencies can be bought at a discount—for example, paying 95 cents for 1 euro’s worth of local money—to encourage people to use the complementary currency to buy and spend locally.

Each approach has trade-offs. Linking rewards to work can motivate people but may exclude those unable to participate. Giving money away builds equality, but may weaken the connection to shared activity. Selling it creates stability through a link with national currency but reduces independence.

Ask yourself:

• Who should receive your currency first, and why?

• How does your method build trust and support your goal?

A currency must keep moving for the community to thrive. My spending is your income, and your spending is mine. When money stops flowing, exchange breaks down and people’s needs go unmet. Economists call the speed of exchange the velocity of money.

People often hold onto money when they feel uncertain about the future. In hard times, they save to protect themselves, but this slows the whole system. Shops sell less, workers lose income, and trust weakens. Local currencies can help by keeping trade alive even when national money feels scarce or risky. Local currencies work well because people can spend locally, while still saving national currencies.

Every money system needs both inflows and outflows (Section S.4). If too much money stays in circulation, it can lose value because there is more money than goods or services to buy. If too little remains, trade slows and people struggle to spend or earn. Having a clear way for money to exit keeps the system balanced and builds trust that it won’t get stuck or lose value.

People also need to know what will happen when they no longer want to hold the currency. Can they exchange it, donate it, or let it expire? The answers affect how safe and fair the system feels.

Some currencies are non-convertible, meaning they cannot be traded back into national money. This keeps value inside the community and strengthens local ties, but it depends on strong confidence that others will keep accepting it.

Others are convertible, meaning users can exchange them for national money. Some systems charge a small fee for this, which discourages quick cashing-out and helps fund community projects. Convertibility can make people feel safer about joining, but it also lets value leak out of the local economy.

Ask yourself:

• Can people exchange your currency for national money, and if so, how easily?

• If not, what will help people trust its long-term value?

• How will your exit rule keep the whole system in balance?

Trust isn’t something added after a currency is built. It grows from the design itself. People need to know that the rules are fair, decisions are open, and everyone has a voice.

Every money system has governance, the way decisions are made, rules are enforced, and problems are solved. Good governance keeps the currency aligned with its purpose, whether that purpose is to strengthen local shops, reduce inequality, or build inclusion. When people understand and take part in decision-making, trust grows.

Even well-designed systems face challenges. Maybe too few businesses join, or someone tries to take unfair advantage. These are moments to learn and adapt, not reasons to give up. A trustworthy system has clear ways to update its rules, share responsibility, and make sure leaders stay accountable to the community.

Ask yourself:

• Who is responsible for governing the system, and how can decisions be changed fairly?

• How will you keep the system transparent and inclusive so that people continue to trust it?

Designing a complementary currency means thinking like a systems designer. Every choice — who issues it, how it flows, and what builds trust — shapes how value moves through a community. The next activities invite you to explore these choices by studying real examples and designing a currency of your own.

Concept: Systems

Skills: Thinking skills (transfer, critical and creative thinking)

Time: Option 1 is for one ca. 40 minute period, but Option 2 on designing a currency would likely take two or more periods

Type: Individual, pairs or small group (Option 2 should be done as a group)

Option 1: The Wörgl experiment (practice thinking about money design)

Time: 40 minutes (or more depending on how the students’ discussions go)

Note: here is a worksheet if you would like to print out this activity

In the early 1930s, during the Great Depression, economies across Europe were in crisis. Factories closed, businesses failed, and banks stopped lending. When loans dried up, less money entered circulation. People who still had national money often did not spend it, but hoarded it because they feared losing their jobs or savings. 

In Wörgl, a small Austrian town of about 4,000 people, this meant there was very little money moving through the community. Shops stood empty, workers were unemployed, and public works like roads and bridges could not be repaired. There were still goods on the shelves and people ready to work. But without money flowing, exchange between people broke down.

This showed a conflict between two of money’s main functions. People wanted to use money as a store of value to protect themselves in hard times, but that meant it could no longer act well as a medium of exchange. In other words, the more people saved, the less money circulated, and the weaker the local economy became.

Mayor Michael Unterguggenberger believed the problem lay in the money system itself. In 1932, the town council issued a local currency called stamp scrip. This scrip was backed by a fund of Austrian schillings and could be redeemed back into national money, but only by paying a small redemption fee. Because of this cost, most people chose to spend the scrip rather than exchange it for shillings.

The first notes were used to pay workers on public projects. Shops agreed to accept the notes for goods, knowing they could redeem them if needed. To keep the money circulating, each note required a monthly stamp to stay valid. This system of demurrage made it expensive to hoard money and encouraged people to use it quickly.

Money left the system either when it was redeemed for schillings (with the fee) or when the town collected stamp fees. Those fees helped fund local services, which strengthened trust that the system served the community fairly. The town council set and enforced the rules, so people knew who was responsible.

The results were impressive. Local unemployment dropped, shops thrived, and public projects moved forward. Visitors from other towns came to see the ‘miracle of Wörgl.’ But in 1933, Austria’s central bank shut the experiment down, declaring that only national currency could be used.

Your task:

• Individually, in pairs or small groups, use Table 1 to understand the design of Wörgl’s stamp scrip. Fill in Wörgl’s choices and discuss/explain why the town might have made that choice. You can make this table on your own paper or digital document, or ask your teacher to print out or share the worksheet.

Option 2: Designing a new currency

Time: at least 2 x 40 minute periods,  longer if students share out their ideas afterwards

Note: here is a worksheet if you would like to print out this activity

In this activity you will design a currency that helps solve a social or environmental problem where you live. Your currency should:

• Support a clear goal (like reducing waste, ending loneliness, or building food security)

• Connect people’s needs with unused resources

• Include rules that shape how the money flows

• Build trust and fairness

Step 5. Debrief and discussion

Consider these questions together:

• Did some groups make similar design choices? Why do you think those ideas came up so often?

• Which parts of your designs were really different from each other? What might explain those differences?

• How did your group decide what makes your currency valuable — was it trust, backing, or activity?

• What problems did you run into when you tried to make the rules fair and keep people’s trust?

• After hearing everyone’s ideas, what do you think this shows about how money design affects people’s behaviour?

Ideas for longer activities and projects are listed in Subtopic 6.5

• Bangla-Pesa: Empowering a grassroots economy - a ca. 3 minute animation about the Bangla-Pesa currency. Difficulty level: easy

• Documentary on Will Ruddick and Kenyan Community Currencies - a ca. 25 minute documentary from Grassroots Economics about the Bangla-Pesa community currency. Difficulty level: easy

• Silvio Gesell's Forgotten Money: The Wörgl Experiment & Demurrage Currency - a ca. 16 minute oral explanation of demurrage and the Wörgl experiment. Provides more background than the case study in the activity. Difficulty level: medium/high (could be lowered if a transcript is printed as students’ listen)

• MOOC Paper Community Currency Design Course: add description: difficulty level: medium/high

• Grassroots Economics - the website of a foundation working to bring complementary currencies to local communities. Difficulty level: easy

Barinaga. E. (2024). Remaking Money for a Sustainable Future. Bristol University Press. https://library.oapen.org/viewer/web/viewer.html?file=/bitstream/handle/20.500.12657/89799/9781529225402.pdf?sequence=1&isAllowed=y

Barinaga, E. (n.d.). Re-imagining Money for a Sustainable Future (FEKG95)

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Coming soon!