Rethinking Money: How New, Cooperative Currencies Can Save Small Businesses

With the traditional economic system so often failing entrepreneurs, can we design a new form of exchange that makes it easier for small businesses to avoid the usual pitfalls?

Rethinking Money: How New, Cooperative Currencies Can Save Small Businesses
Coins via Shutterstock
This is an excerpt from Rethinking Money:
How New Currencies Turn Scarcity into Prosperity
by Bernard Lietaer and Jacqui Dunne, on sale now.

Santa Fe Institute economist Brian Arthur cogently describes the ongoing transition from industrial to information age: “With the coming of the Industrial Revolution–roughly from the 1760s, when Watt’s steam engine appeared, through around 1850 and beyond–the economy developed a muscular system in the form of machine power. Now it is developing a neural system. This may sound grandiose, but actually the metaphor seems valid. Around 1990, computers started to talk to each other, and all kinds of connections started to happen. The individual machines–servers–are like neurons, and the axons and synapses are the communication pathways and linkages that enable them to be in conversation with each other and to take appropriate action. So, we can say that another economy–a second economy–of all of these digitized business processes conversing, executing, and triggering further actions is silently forming alongside the physical economy.”


The upshot of this second economy is that while it’s an engine of growth and prosperity, it does not provide jobs. In fact, it erodes entire sectors of traditional jobs. Much of the job creation that has taken place over the past 20 years has been in small enterprises. Businesses with fewer than 100 employees provided the largest percentage of gross job gains, almost 60 percent. Additionally, entirely new job categories have surfaced that didn’t exist a decade ago. Technology, cultural shifts, and changing demographics combine to create new career fields all the time.

As this emergent economy meets with the current harsh realities, new money in the form of cooperative currencies is being designed to address the needs of up-and-coming enterprises with some very interesting early results. Innovative blueprints linking unused resources, such as the time, energy, and creativeness of individuals, are making it possible to pay for labor and services in imaginative ways. Furthermore, work that has not been rewarded financially in the past can be honored now with these new currencies. Besides helping enterprises meet their obligations, these currencies foster greater cooperation and potentially more ingenuity because of the trusting relationships they engender within a business, a network, and a community at large.

One of the most pioneering organizations internationally in the field of research, development, and implementation of cooperative money is the Dutch NGO STRO. Organized and run for more than the last two decades by Henk Van Arkel, STRO grew out of the publishing company he and his brother ran with an editorial focus on environmental and social issues. Using money from a Dutch government program, he was able to hire full-time and part-time employees to research currency models following STRO’s early adventures into implementing LETS systems in the Low Countries.

Keenly aware that business is the backbone of any community, Van Arkel focused on the successes in South and Central America of microcredit lending and started to look for new designs and models.

Van Arkel remembers, “We started with the relations we had at the time. The manager that we had in Porto Allegre, Brazil, was a former director of the UN small enterprise program. Prior to working with us, he had initiated a program in Uruguay and introduced IT and new technologies and other innovations. It turned out to be a very successful project that led to Uruguay being one of the most advanced countries in that business.”

Van Arkel and he together designed a currency that would address the critical issue of cash flow facing small and medium-size enterprises when their suppliers extend credit for 30 days while their larger customers may not pay for 90 days. Often there’s a credit crunch, as banks refuse to provide bridge financing or do so subject to very onerous conditions. Furthermore, if the business is a new one, a credit line can be virtually impossible to secure. These problems are endemic in businesses in both developing and developed countries.


The solution that emerged is called the Commercial Credit Circle, or C3 for short. The C3 plan uses insured invoices or other payment claims as backing for a liquid payment instrument within a business-to-business clearing network. Each recipient of such an instrument has the choice to either cash it in national money (at a cost) or directly pay its own suppliers with the proceeds in a cooperative currency backed by the insured invoice (at no cost).

Participating businesses start by securing invoice insurance up to a predetermined amount, based on the specific creditworthiness of the claims they obtain on third parties.

The business (hereafter referred to as business A) that has obtained such insurance on an invoice accepted by one its clients (called business B) opens a checking account in the clearing network. Business A electronically exchanges the insured invoice for clearing funds (called C3 funds), and pays one of its suppliers (business C) immediately and in full with these C3 funds.

To receive its payment, business C only needs to open its own checking account in the network. Business C now has two options: either cash in the C3 funds for conventional national money (incurring a cost computed as the interest for the period until the maturity of the invoice, plus banking fees) or pay its own suppliers with the C3 clearing funds, at no cost. Whatever the timing of the payment is to business A, business C is in a position to use the positive balance in its C3 account in the network, for instance, to pay its supplier, business D.

Business D needs only to open an account in the network, giving it the same two options as business C: either convert the clearing funds into national money or spend it in the network. And so on. At the maturity of the invoice, the network gets paid the amount of the original invoice in national money, either by business B or by the insurance company in case of default by business B. At that point, whoever owns the proceeds of the insured invoice can cash them in for national money without incurring any interest costs.

Thus, businesses increase their working capital and the use of their productive capacity by using the C3. The size of this increase can be built up to a stable level of between a quarter (covering therefore up to an average of 90 days of invoices) and half of annual sales at a cost substantially lower than what is otherwise possible. Suppliers are paid immediately, regardless of the payment schedule of the original buyer, injecting substantial liquidity at very low cost into the entire small and medium-sized enterprise (SME) network. The C3 network grows rapidly, as both clients and suppliers benefit from joining.


Furthermore, the technology is a proven one that doesn’t require any new legislation or government approvals, and the necessary software is available in open source. Additionally, the most effective way for governments at all levels to encourage the implementation of the C3 strategy is for them to accept payment of taxes and fees in the C3 currency. This encourages everybody to accept the C3 currency in payment and provides additional income to the government from transactions that otherwise wouldn’t take place. Furthermore, that additional income automatically becomes available in conventional national currency at the maturity of the original invoice. At the end of the process, the government has only to deal with conventional national money, thereby not upsetting any existing procurement policies.

Interestingly, where this concept has gotten the most traction while staying truest to its initial design is in northern Europe. The European Union has agreed to fund a feasibility study for the C3, which will be managed by the Dutch NGO Qoin. Its scope will cover Ireland, the United Kingdom, the Netherlands, Belgium, Luxembourg, northern France, and the western provinces of Germany. It plans to use the procurement power of municipalities and large companies that will buy products and services from companies within the C3 network.

Edgar Kampers noted, “C3 allows injecting working capital in a region’s private sector, at no cost to the authorities. SMEs, being the most vulnerable during economic downturns, get funding options that are considerably cheaper than existing options and obtain working capital precisely at the point and time when it is most effective, thus creating or preserving jobs. This financial product will be controlled by the users and opens new markets and marketing channels through e-commerce. It is indeed a small step from processing all your invoices and financial flows electronically, to launching an e-business outlet, further improving the capacity of businesses to successfully compete.”

He provides the following example: A municipality or larger company wants to purchase LED lights costing 120,000 euros. The C3 network, with some 3,000 members, allows it to pay in six months. The municipality pays a fee for this service.

The LED installer gets the 120,000 euros immediately in C3 clearing funds. After two months, the LED installer spends the C3-euro with other members of the C3 network, such as a marketing company. After one month, the marketing company spends the credits to pay the printer’s bill. The printer needs to pay a party outside the network (say, for taxes or hardware) and exchanges the C3 clearing funds directly to euros at a small exchange rate, called a malus

The C3 will need to borrow 120,000 euros from a financial institution for three months to finance the LED installer. The costs of this loan are much lower for the C3 network than for an individual company. The costs are covered by the fee paid by the municipality and the malus fee.


When this program was launched in Uruguay, political problems arose. “We had everything ready to go, including an agreement for the partial payment of taxes. We had all the major ministers convinced–there are five ministers in the economic cluster in the cabinet, such as finance, labor, and economy. At the moment we were ready to take off, there was a change in government,” recalls Van Arkel.

Currently, what is operational in Uruguay and El Salvador is a subset version of the full-blown C3 program.

Koen de Beer, project manager for STRO in El Salvador, makes an interesting observation about the business climate in South America in comparison with the United States or Europe. “Something that has fascinated me is there are so many businesses and entrepreneurial activities here. When I was living in Europe, you think about setting up a business, and after 10 minutes you decide not to do it because there are so many rules, regulations, and laws. And you need so much money. Then you come over here, and everybody’s thinking of setting up a business. There is this huge amount of ideas and initiative. Many of them don’t make it after six months. But that’s OK. People aren’t afraid of picking themselves up again and trying another commercial idea.”

In El Salvador, the C3 concept is known as Puntotransacciones, and the currency is called puntos.

Esperanto was a small restaurant in San Salvador, the country’s capital city, famous for its international cuisine. It was founded in the house of the parents of Andrés Noubleau, a chef from Spain. After two years, the restaurant moved to a more exclusive place in the city. Although the location was great, the investment was steep, and operational costs rose dramatically. Short of cash and without access to more credit from banks, Esperanto became a member of Puntotransacciones. He got a credit line in puntos to complete several upgrades in the restaurant and for some operational overhead, which he easily paid off when customers paid for delicious meals in puntos.

Today, Esperanto has become one of the best and most exclusive restaurants in town and continues offering its fare to members of the network. Noubleau is still proud of his decision to be the first restaurant joining the business network: “Thanks to this currency we’ve survived a very critical period of the business cycle.”


Artyco is a small family business specializing in furniture and accessories crafted from wrought iron and steel. The products are handmade, and their production cost is high. An economic crisis struck; simultaneously, demand for the company’s products dropped, and the business had to be restructured, closing down some shops and points of sale. But the owner, Guadalupe de Artiga, was very creative. She joined the network and bought and sold as much as possible from others in the network, both for her business and for her family, everything from food to medicine on a daily basis. “Economic crisis or not, through this network and currency, I have managed to maintain my way of life and that of my family,” says de Artigo.