Community Credit Mechanisms

Community Credits: The community credit can be privately issued under the administration of independent co-ops.

Standard national reference. The community credit initiative will be fully backed by national or international currency and/or local goods and services, thereby providing, for the first time, a national standard of unit of measurement that is inflation-resistant (the standard national reference is simply a unit of measurement for Community Credits).

The Community Credit is designed to operate in parallel with national currencies. Therefore, everything that exists today as monetary and financial products or practices continues to exist. The mechanism is only one additional option available for those national and international socioeconomic actors who voluntarily choose to use it.

Private issue:The Community Credit will be issued as an inventory receipt by the Co-ops within the National Co-op Alliance, a community driven private, non-governmental initiative with an organizational structure that is open to all newcomers meeting certain pre-established criteria (organizationally similar to that of the Mondragon Corporate Co-operative (Spain) and the Visa credit card system).
Such inventory receipts are issued for the value of the goods/ services sold to the local co-op and linked National Co-op Alliance independent member co-ops by producers of those goods/services that are components of the Community Credits Basket.

Private community initiative: As a private community initiative this does not require governmental negotiations or international agreements. From a legal and taxation viewpoint it is simply a standardization of counter trade. And legislation for counter trade exists already in practically all nations around the world.

Economic Fluctuations: It counteracts the boom/bust fluctuations of the business cycle, thereby improving the overall stability and predictability of the national economic system.

The Community Credit is demurrage is charged. This has advantageous economic effects with regards to long term investment financing by changing the dynamics of Net present value (NPV) calculations. All else being equal a currency system with demurrage places an increased bias towards the long term returns on an investment. As such it may create an incentive to invest in longer-term sustainable growth and keeps the excess unutilised/underutilised units in circulation (it also prevents the hoarding of Community Credits).

Cash flow : It realigns financial interests with long-term concerns and provides cash flow liquidity.

Costs: Lowers costs by reducing the need for expensive hedging counter measures as well as having no rent component when used for loans (interest free).

Opportunities enable greater opportunities (including investments in developing countries) by providing stable alternative mechanisms by which to conduct commerce;

Stable reference mechanism: Offers a dependable, cost-effective reference mechanism for long term stable global trade.

Facilitates Social Trade: The use of Community Credits for planning and contractual purposes reduces the conflict that currently prevails between the stockholder’s financial priorities and the long-term priorities of humanity as a whole.

Social Trade Economy: Makes it possible to convert inventories of illiquid assets, such as goods/ services, raw materials and skills into liquid ones.

Capital: Provides working capital at a lower cost than with conventional national currencies, as the community currency demurrage fees only kick in for a particular user if they are not spent, thereby stimulating and keeping only what is needed for circulation.

The closed Community Credit Enterprise model involves the issuance of interest free currency to members of the community (applicants) based on their ability to offer goods or services to repay the loan (rather than cash). The community credits in electronic accounts can be used to purchase goods and services from members within the network of participants. Community Credits are backed by the community’s time/skills/products which are either :

• currently unutilised (i.e. people have skills but the local community cannot afford to employ them due to lack of currency and inability to secure traditional loans)
• currently underutilised (i.e. people have excess time or produce)
• not currently available - but which would be available once the borrower has sufficiently developed their skills or products as a result of the investment.

Participants are given credit based on their ability to offer their own skills, products or future products against the credit issued within a required time-frame (the shorter the timeframe the higher the circulation of currency within the local community, and the more net-wealth able to be generated within that community). As with any model used it is subject to local governance and adherence to quality standards to ensure safeguards are in place, high circulation of community credits, balance within the community, supportive administrative infrastructure and good credit management processes.

Ormita can work with multiple models of governance than can be applied to suit a wide range of local community environments and these include respect for diverse social and cultural norms that exist within these communities. Here are some model examples that provide for social and socioeconomic benefit and a way to indicate how different models can be implemented in different circumstances to address related key issues.