Home » Library » Ethics and Economics  » Methods for Successful Complementary Currencies

Methods for Successful Complementary Currencies


STRO (Social Trade Organiser) is the international Research & Development organisation in the field of complementary currencies and is known under the name STROhalm in the Netherlands and inSTROdi in Brazil. For almost 15 years, historical and contemporary research, pilot projects and field research are systematically being organised throughout the world.

During those 15 years, STRO analysed many different experiences and implemented a number of ideas. Also, we closely study the vast amount of publications by different scholars, philosophers and activists.

We see two main shortcomings in the ‘monetary movement,’ both in theory and in practice:

  1. An emphasis on idealism rather than pragmatism (as in the ‘solidary economy’)
  2. The ignorance of what, according to us, is exactly the single most important element: method. Complementary Currencies can be designed in many different ways, including the backing, emission, circulation and administration, and it is exactly the way in which it is designed (and not the moral obligation of its participants!) that will define how the system will function.

These two shortcomings form a dangerous combination: too many resources are invested, over and over again, in systems that simply do not function well and do not create a significant impact. These systems try to convince through idealism and morals, its participants to change their ways and make the system work.

Much larger and durable results will be achieved when these efforts are invested in designing secure and transparent models that work, accepting the behaviour of mankind as it is, thereby making a much larger contribution to the transformation-process towards a fair and sustainable economy.

1. The Goals of STRO

1.1 Social Trade

Social trade is the kind of trade in which relations are mutual. Social trade tries to create a system where someone spends money which, at some moment returns as purchasing power to the business he works for, and ultimately to this person as income. This is a major difference to present day economy where two major aspects of money dominate: money is created by bank credit and it only circulates for a short time in the fields of production, commerce and consumption before it disappears to the speculative circuit.

For rich regions this means instable economic conjunctures, undervaluation of production and labour in relation to finance, and overall an economy forced to continuously grow beyond its sustainable and even desirable limits. Poorer regions suffer of an inadequate money supply, since the bank gives less credit and the production chains are shorter, which makes the money disappear even faster. This results in the wasting of viable productive, consumptive and labour capacity. This constant frustration of development potential is also known as ‘spare capacity’ and ‘unemployment.’ This behaviour of money is devastating for poorer economies and its communities.

In this paper we will emphasise some aspects of the work of STRO, with special attention to the different methods that the STRO is implementing today in various parts of the world.

1.2 Research

STRO has introduced LETS (Local Exchange Trade Systems) in the Netherlands. Strong and weak points of community mutual exchange have been analysed. Today STRO realises experiments in this field with partners in the Netherlands, El Salvador, Indonesia, Thailand and Brazil.

Also, strong and weak points in business barter have been analysed, with pilots such as Amstelnet in the Netherlands and through training by organisations such as TurkBarter.

The conclusions of our research are that in order to reach a successful complementary currency system, several things are needed:

  • Transaction software to reduce the administrative overhead
  • Notes: if scrip money is used instead of a digital form of currency, the notes have to be of high quality to prevent counterfeiting.
  • Method: backing, emission, and circulation, are conditions for the functioning of the system.

This combination of elements must be fine-tuned to the economical circumstances, such as the percentage of unused production capacity.

1.2.1 Software: Cyclos

STRO developed software specially designed for local currency systems , Cyclos. Cyclos software has been published open source and can be downloaded from: http://project.cyclos.org/

It has been built modular and is also usable for LETS-like groups. It has many interesting features such as:

  • a payment system;
  • all administration digitalized (transmitted through Internet);
  • a market place (e-commerce);
  • micro-credit administration;
  • high level security;
  • easy mobile phone payments for consumers;
  • option for smart-cards and other payment methods.

After been tested by STRO’s Dutch LETS partner Noppes, it is now used by various Complementary Currency systems in Latin America, LETSystems in Canada and Europe, and systems in countries such as Australia and The Philippines.

Programmers all over the world have expressed their interest in the project and collaborated on specific elements.

1.2.2 Notes

In some projects, it is practical to have part of the trade realised with notes instead of digital forms of Complementary Currency. Johan Enschedé, the company that printed the euro-notes for several European countries, has printed high-quality vouchers for STRO that are difficult to counterfeit due to the watermark and the silver thread in it. Locally, the Complementary Currency systems must finalise the denominations on the notes, by adapting the amount of zeros on it (e.g. 1, 10, 100 or 1.000 notes). Also, the logo of the project can be printed on the notes by which the notes get a local appearance.


STRO promotes a sequence of Complementary Currency systems that fits the different levels of social and economic organisation. Each of these has clear limits wherein the advantages must outweigh the disadvantages.

At the social and local level a community can use a time-based exchange that stimulates the social qualities of the community and values the efforts of all participants equally. For higher levels of specialisation and organisation STRO has developed three different systems: Controlled Currency System (CCS), Valuable Local Currency (VLC) and Circuit of Consumers and Commerce (C3).

Essential differences in these methods are the elements of backing, emission and circulation.

2.1 CCS = Controlled Currency System

The CCS is a highly social and community-building model of mutual exchange. The major difference with most LETS or Trueque-systems is that the local currency is distributed in the form of a loan, which must be renewed every 3 months. All participants are given a loan for the same amount of units, called the ‘basic credit’. The amount of the basic credit can be adjusted upwards or downwards in the future.

In this way the emission of the local currency is clearly under continuous control. This is essential for a policy of loosening or tightening the total amount in circulation, simply by augmenting or diminishing the amount of new loans. In case the total amount must be diminished existing loans are not re-issued, or re-issued with a lower value.

The credits are formalised in contracts that represent a debt that is ultimately cashable in national currency, if necessary. This creates a stronger backing for the local currency.

By introducing flexible credit-amounts apart from the basic credit, the CCS evolves into a VLC (see 2.2).

In Rubem Berta, a neighbourhood in the Brazilian city Porto Alegre, loans worth an equivalent of about 30 Reais (10 euros) are issued. The local currency, Rubi, can be spent at local fairs, for local services such as the painting of apartments, donated to the churches and partially spent at local shops.

Every three months the contract has to be renewed or repaid. This gives a moment of contact to see if members might use help to learn either spending or earning their Rubis. If it appears that people have become a member just to spend without discussing their debts with other members, legal steps might be taken.)

At this moment some 5,000 Rubis are in circulation and the system is moving towards a VLC.

2.2 VLC = Valuable Local Currency

VLC is a highly innovative combination between a CCS and interest based growth compulsion.

The analytic background of the method is that in the formal economy interest charges on credits push the economy towards competitiveness and growth, because the economy as a whole has to produce extra to be able to pay the interest and at the same time is forced to capitalise the speculative circuit.

This mechanism, has of course two main negative aspects: on the one side it forces the economy into unsustainable growth (or financial crisis) and on the other side it is a way of expropriating value from the productive economy by the owners of financial capital.

The VLC is an attempt to introduce the growth drive that is created through interest-charges, but at the same time to keep these values in the ownership of the community, and re-invest them in local production.

In the VLC, the credit debts have an ‘interest’ charge, although a better denomination for these might be ‘forced community savings’. Through this interest, debts are augmenting and at the moment the accumulated debts and interest are cashed, they are the driving forces for development. This is very much comparable with the international effects of debts, but with the major difference that this driving force is pushing the community development forward instead of some impersonalised development elsewhere on/in the world wherever the financial markets see fit. It is a community based investment program in which the community owned debts, and demand to repay them, stimulates investments.

The amounts of local currency that are paid as interest-charges are used to form the Local Development Fund, that is owned by the persons who paid these charges and is used for risk-sharing local investments. A form of social control towards successful entrepreneurship is introduced, because the returns on these investments depend on the performance of the local entrepreneurs,

In a VLC system the local currency is non-convertible with national money.

A VLC programme starts with loans to entrepreneurs in national currency, with interest payable in local currency. The ‘interest’ payments create a scarcity of local currency that results, for those who have debts, in a pressure to obtain it. Therefore, scarcity is what makes the local currency “valuable” and equally as attractive as a national currency.

When businesses have to pay their interest in local currency, they are offered (partial) refinancing these local currency debts with new loans in local currency. This leads to the increase of the local currency debts and therefore to an increase of spending abilities of the local currency, and an increase in the demand for (low-cost) loans in local currency.

The participation of a formal financial institution is required to manage the demand and supply of the local currency, as well as the regular activities of management of credit portfolios.

2.3 VLC in Practice

The first step of starting any local system is to make people know and trust the local currency, that is why STRO works with the Bonus/Fomento method. In Fortaleza (North-Brazil) a pilot-project has been conducted with positive results. Instead of using a grant from a donor to build a school in a conventional way (use the money to pay for the building-project), 88% of the money has been substituted by local currency. The money has been used to give loans to local enterprises in national currency that were repayable in local currency. At the same time, the constructors and suppliers of the school were paid in local currency, which they could spend at the enterprises that had the loans and others that also accepted the local currency. The project ended when all loans were repaid. Evaluation from the University of Bahía showed that the project resulted in an extra economic activity of 87%. This is in comparison with a project where the money was spend directly, without calculating the impact of the emitted credits, which are of course also an extra impulse, because in a conventional spending of the money these credits would not have existed.

At www.strohalm.org/fomento one can see a flash animation of this method.

In Honduras a project is running in which the local currency is permanently in circulation. COMAL, STRO’s local partner in Honduras, is a cooperative that buys products from farmers and distributes them to over 400 small member-shops. Credits are given in a mix of national and local currency to several agro-industrial projects, representing a value of approximately €40.000. The local currency can be spent among others at the shops; the shops pay COMAL with it for the products they supply. COMAL, in turn, pays the farmers partly in local currency that they can spend again at the local shops.

2.4 C3 = Consumer and Commerce Circuits

C3 is a hybrid of the internal administration and integrated bank-accounts that large companies use to diminish their financial costs, and the ‘negative interest’ or ‘Liquidity-Tax’ experiments realised in 1956 in Lignières en Berry in France and of course in the famous Wörgl experience. These experiments showed that forced local spending because of the use of a local currency, combined with accelerating the local circulation by charging the possession of currency, results in significant economic growth.

C3 combines the elements of a consumer-loyalty program in which producers offer consumer-members a bonus to attract their money into spending inside the Circuit. This money is used as backing for internal liquidity-units and owned by the Circuit that compensates the businesses where the consumers buy with the digital units. The units can be used for purchases elsewhere in the local or regional network. In an internal accounting system, the digital units are being transferred when transactions between members are taking place. Just as in barter-networks, no conventional money is needed for these transactions.

An important difference between C3’s and Barter Networks is the inflow of consumer money, which permits the total or partial convertibility of Internal Liquidity Units into money with deduction of the amount paid as bonus to attract the money. A financial institution guarantees the exchangeability of the internal units. As more and more internal liquidity units circulate internally, more and more national money is stored in the bank as backing. The bank can use this money to realise a low-cost credit program to finance investments by the member companies.

In order to create a strong and dynamic system, the C3 method uses the following two instruments:

  • A charge on positive balances (“demurrage” or “Liquidity-Tax”) to stimulate and accelerate transactions within the system. Positive balances are taxed with a 1/30% Liquidity-Tax per day. The Liquidity-Tax accelerates the circulation of the internal liquidity units, and at the same time generates an income for the system. This system is used to provide the means for extra bonuses to consumers, to pay for professional staff, to reduce the risk premium on loans to members and/or to finance community projects.
  • A Bonus/Malus system: Consumers that buy the Internal Liquidity Units with money get extra Units as a bonus. Thus, the bonus attracts the inflow of money. This bonus is balanced by a “Malus” that will be charged to whoever converts the Units back to money and by the Liquidity-Tax. Because the Malus members prefer to spend locally if the extra costs are not higher than buying outside the region (see box: What is the flavour of your tractor?).

Internal Liquidity as Credit

An innovation in the C3 method that is being introduced in Brazil is the availability of Internal Liquidity Units that are not backed in money, but in guarantees in money. In this way the C3 can offer extra liquidity to its members, without being limited to the availability of money, which is generally scarce in countries as Brazil.

The C3 can thus opt to issue Internal Liquidity as credit, but only when the member has a solid and liquid guarantee. A Financial Institution or an insurance company must issue this guarantee.

The insurance branch is involved by providing contracts that allow collective insurance of internal credit at very low costs. Since Brazilian interest rates are immense, cheap credit is the key for success.

C3 International

C3 provides the possibility to allow international trade between C3’s, even in different countries. To avoid the same effects of under-use of potentials in weaker regions and maintain the focus on local economic activity, the inter-C3 transactions are subject to rules highly similar to the Bancor-concept proposed by Keynes’ in 1944 in Bretton Woods Rules to optimise world trade while at the same time allowing and stimulating every nation to optimise its internal economy.

C3 in Practice

Currently STRO researches C3 pilots in a great diversity of situations and also with diversity in methodology:


In San Salvador, the RET (Red Empresarial de Trueque = Barter Network of Companies) is a network of more than 100, most informal micro- enterprises that partly trade in Internal Liquidity Units, called UDIS. The RET-network is still much like a conventional barter, but has transforming into a C3 as its main strategic objective. The internal monthly turnover is small, but doubling every half year.


In the southern state of Brazil, Rio Grande do Sul (RS), a system with the name CompRaS has been set up. “Comprar” is the Portuguese word for “buying”, and “compras” are then “the things one buys”. By the emphasis on the letters R and S, the name indicates “buy from RS, buy locally”.

The objective of this project is to develop a method that provides a tool to improve the competitiveness and financial sustainability of micro- small- and medium sized entrepreneurs in the state of Rio Grande do Sul and to increase the purchasing power and living conditions of the consumers. Other beneficiaries are social and welfare projects in the region and the Public Sector in general, that can optimise the impact of their expenditures by channelling them through the C3.

Today, in Brazil and in many other countries, the high cost of money has made it scarce in local circulation, and therefore much, otherwise viable, productive and commercial capacity (including labour) is unused. By trading in a C3 the participating companies have more access to liquidity, because through the Internal Liquidity Units that can be emitted as credit against solid guarantees, the spare economic capacity is activated.

The C3-CompRaS project has been formalised in the beginning of 2005 and produces a lot of documentation such as manuals and a Business Plan usable in other C3’s. Some adaptations were done in the C3 methodology to suit the Brazilian legislation.

The CompRaS Association (www.compras.org.br) is the core organisation in this project. An important partnership has been achieved with Banco do Brasil, both at national and local level. At national level the idea is an institutional collaboration between STRO and Banco do Brasil. Banco do Brasil has also conceded to provide human resources, like experts, on a voluntary basis to support projects. At the local level, an agreement was reached with the local branch of Porto Alegre to perform the bank activities in the C3 network, such as the management of the credit portfolio and the evaluation and reinforcement of loans.

Other partners are SEBRAE (RS), a large semi-governmental business-support institute and IES, a credit advisory institution.

With Federasul, the federation of 110,000 companies in Rio Grande do Sul, a program to involve their member businesses is executed.

An agreement is made with the Guarantee Fund of RS to cover the risks of loans in Internal Liquidity Units (by giving a guarantee in formal currency) against approximately 10% of the cost of a bank-loan.

C3 Paraná

Paraná, and especially its capital Curitiba, is one of the more technically advanced areas of Brazil. But even here, as is mostly the case in Brazil, the economy does not allow a lot of poor people to live a decent life and to work and earn money. In Paraná, a Local Exchange Circuit is created to address the housing problem, both for the benefit of the homeless and for the civil construction sector that has a serious problem of unused capacity. The project C3 Paraná is the result of a strong partnership with the business community of Paraná. This project is the perfect paragon of the potential of the C3 methodology to boost the local economy whilst addressing pressing social needs at the same time. In this particular local context the social need is a shortage of housing.

The objective of the project is to raise and maximise the economic and commercial development of the construction sector. The Chamber of Industry of the State of Paraná (FIEP), the main actor in this C3, has identified the construction sector as the most suitable for the operation of a trade network with an internal currency and credit system. This in order to address the following problems: the scarcity of liquidity in the construction sector, the restricted access to expensive bank credit and the high level of default of the clients of the firms, jeopardising their financial stability. At the same time this sector already participates in several kinds of barter-transactions, thus the idea of a Local Exchange Circuit is not an alien one, but rather an unexpected bonus! Making a financial technology available that can increase the efficiency of finance and mutual transactions in the sector can therefore help to resolve its main weaknesses.

Given the existing multiple intra and inter-sectoral relations of the construction sector, the potential outreach of the project in terms of increased financial efficiency and investment possibilities outside the expensive conventional sector, is relatively high. In addition, to these direct economic effects for the construction sector, there are expected indirect effects at the level of the access to housing, employment and social welfare.

Tobias Barreto

Tobias Barreto is a small city in the Northeast of Brazil that never had a fair chance to realise its full potential due to a lack of monetary means of exchange and a lack of local purchasing power. The projectMais Tobiaswas developed specifically to activate the existing spare productive capacity, mobilising local resources for the construction of local welfare.

First step in the project is the developing a local currency system. For trade between the city council and both existing and new enterprises, a locally circulating Liquidity Unit is introduced: the ‘Topaz’. These Topaz are circulating within Tobias only, in this way stimulating local companies. The next step is to give all enterprises access to the Internet, to stimulate trade in Topaz and give the possibility to advertise, all through the Cyclos software.

The city council of Tobias converts Reais into Topaz through payments of salaries and social welfare and spending at local companies. The people of Tobias can spend the Topaz at local companies. Converting Topaz to Reais is charged with an exchange-fee (see ‘Bonus/Malus’) to stimulate the local circulation of the Topaz before it is converted. The city council will bring Topaz into circulation continuously, making/creating a permanent economic impact the economic impact of the project permanently.

Other Projects

STRO works in different projects in different countries, all using the above mentioned methods. In the Netherlands a group of young Muslim-entrepreneurs is working towards an interest-free mortgage, starting from a C3. The inflow of consumer money will be used to create interest-free credits to participants in the network.

In Poland, a C3 is in preparation as the result of the co-operation of Polish initiators, STRO and TurkBarter (a Barter company in Turkey with a turnover of over 200 million dollar, see www.turkbarter.com).

For these and other projects, STRO has an international helpdesk at http://www.complementarycurrency.org/helpdesk.html.


The international efforts of STRO have proven in the pilot-phase (1999-2003) that the innovative methods such as CCS, VLC and C3 are practically, juridically/legally and economically viable. This has resulted in the decision to realise model projects in different countries.

Today, these projects are in the execution phase/ being implemented.

The conclusions that have been reached until now are:

  • Method is essential for success
  • To have an economic impact, projects must have a strong business orientation and therefore a style and language that is attractive to businesses and their representative organisations
  • Small-scale projects are more difficult to realise successfully than larger scale, because of the need for internal variation, and the relation between overhead costs and impact.

Through the work on the projects and also through the project of programming the Cyclos Software it has become clear that many initiatives all over the world are ready to use more complex, larger scale, business oriented and thoroughly prepared methods for sustainable local economic development.

Because the STRO methods are showing results right now, we expect in the next years to see a significant growth in the implementation of these methods, when local groups include them in their projects.

What is the Flavour of your Tractor: Local or Foreign?

This example aims to show how a C3 system can stimulate local consumption, and offer a solution for the prisoners’ dilemma of local consumption.

The Prisoners’ Dilemma of Local Consumption

It is easy to understand that if everybody consumes locally, the local economy will be stimulated. This is the basic assumption of such old and proven strategies as protectionism and mercantilism.

In weak regions, a period of accepting to consume low-quality or expensive local products can lead to economic development, and therefore in the long(er) run to higher quality or lower costs for the same products. The prisoners’ dilemma here, is that while this collective action would be in the medium-term interest of all, the individual short-term interest is oriented towards consumption of cheaper or better external goods. Because the economy is made up out of a total sum of individual short-term decisions, this local economy will end up being dependent on external goods, and will not develop its own full potential.


Let’s assume that 15 Brazilian farmers all want to buy a tractor. There is a choice between buying a tractor produced in their own region (Brazilian) or a tractor imported from Japan. The Japanese one costs €1,000, including importation, whilst the Brazilian one is slightly more expensive at €1,100. The immediate conclusion will be that it is better for the farmer to buy a Japanese tractor.

Purchase of a Brazilian tractor, however, leads to an extra income for the local tractor-factory. We know that any local expenditure will result in more local economic transactions. In a macro-view, the local expenditures will thus lead to extra business for the local producers. If everybody would buy local, everybody would have more sales.

In this example, let us assume that the labourers at the tractor factory, and the business partners of the tractor factory, will consume more, and that this consumption will in part flow to the farmers, every time a tractor is sold. Let’s say that the impuls for local economic transactions that is caused by the buying of a Brazilian tractor results in extra sales of €40 for each farmer.

If all 15 farmers were to buy Japanese tractors, the farmers as a whole have a net outflow of €15,000, without getting any of this money flow back into their business. If however, all the farmers decide to purchase the local tractors, every farmer will earn an amount of 15 x €40 = €600 extra income back, thus compensating the €100 that is lost in buying the more expensive tractor by the additional €600 of income. This example illustrates how the purchasing power attracted by one member of a chain of producers can overflow towards other members.

There is however one catch: whenever one of the farmers decides to buy a Japanese tractor, this will lead to all of the farmers only receiving (14x €40 = €560) whilst the “free-rider” will earn this amount plus the €100 that he saved by buying the cheaper tractor. In this example the farmers would have to organize themselves collectively to be able to realise the longer-term benefit of buying the local product.

The Local Exchange Circuit as an Implicit Form of Collective Organization

Let’s say that these purchases would have happened within a Local Exchange Circuit, such as a C3, using Internal Liquidity Units …

Because of the Bonus/Malus system, those who exchange 10 euros for these Units will get, say, 10% Bonus (thus €11 Internal Liquidity) whilst those converting the Units back into money after a while get the exact opposite Malus (when converting 11 Units, only 10 euros will be received).

Let us calculate again: When the farmer has to purchase the Units he has to pay only €1,000, whilst getting Internal Liquidty worth €1,100. In this way the Brazilian tractor and the Japanese one have equal prices, whilst at the same time the purchasing power will return to the farmer network help with the additional advantage of stimulating the local economy and creating employment. Now all 15 farmers have a short-term self-interest incentive to buy the local tractors, while serving the medium-term community purpose of more local production, which results in each farmer having the extra sales of 600, this time in Internal Units. If the farmer decides that he wants to convert the claims into national money, he only receives 600 – 10% = € 540. This will cause the farmers to rather spend their claims within the Circuit and thus keeping the purchasing power circulating within the Circuit and therefore strengthening the community.