LETSgo anywhere, like London
The basic style of a LETSystem Development Initiative (LDI) will be more or less the same in all communities, a result determined by market forces and the nature of the systems rather than any presumption of authority, or legal constraints.
The LDI will be a form of virtual corporation through which those people and organisations that have realised that local currencies are not merely workable, but have an almost universal application, will follow that realisation to its logical conclusion - that all the businesses in their community will use local currencies in due course, will use several of them, and will comfortably contribute £100 to a community project or charity for that privilege.
A conservative % of those £100 contributions will provide a fairly predictable revenue source, which will comfortably support people commited to developing LETSystems - provided they are willing to work first and get paid on the results of their efforts.
The typical opening will be a collaboration between a group of investors and a group of people jointly directing the deployment of their time and their backers' resources towards clear objectives. Since the job will be best done by many rather than a few, and the project will be open to all who demonstrate a serious interest, the revenues to repay people for work done will always lag behind the claims on that revenue.
Hence all who are involved will have to ongoingly balance what they draw from the project against the needs for working capital to maintain its development. Thus they will, by deferring immediate payment, gain equity in the project, and thus become progressively more responsible for its longer term goals.
A group that is effective in introducing local currencies will attract others to the task, which will accelerate the development - and preclude excessive rewards to the initiators. A group that is ineffective will not generate either revenues or ongoing borrowing. A group that is effective, but exploitative, will soon find that the revenue source is denied to them.
For details on the LDI process, review the design manual, section 5.0 System Development; in particular 5.4 Regional Development Plan includes projected revenue figures for a series of population bases from 20,000 to 5 million.
The following notes are based on materials in preparation for a business plan for the development of local currency systems throughout the Greater London region.
A service bureau will be established to support the maintainance of accounting services, information services and general system development.
The first phase of the project will centre on introducing a Community Support Cycle (CSC) to generate corporate donations of £2.5 million in London £, of which the LDI will realise a fee of £250,000, also in local currency.
The first tasks will be
As these tasks are accomplished, the emphasis shifts progressively to the introduction of the general public, which requires more effort with education and training, particularly with variations of the LETSplay game sessions. The demand for this will be matched by a progressive increase in the number of people joining the LDI.
One of many possible scenarios is outlined in the table below.
Monthly expense and income (£,000)
1 2 3 4 5 6 staff (total FTE) 5 10 15 20 25 35 salaries (£3,000 per month) 15 30 45 60 75 105 drawn (2/3 of total) 10 20 30 40 50 70 overhead/materials expenses 20 10 10 10 20 30 -- -- -- -- -- --- total outgoing 30 30 40 50 70 100 income from CSC 50 50 100 50 CtC 5 10 20 40 -- -- --- -- total income 55 60 120 90 (borrowing) / cash (30) (60) (45) (35) 15 5 accumulated equity 5 15 30 50 75 110
Here the initial donations of £1 million are secured in the third and fourth months of the project, providing substantial income - in local funds - to offset expenses. It is intended that a major proportion of these local pounds can be exchanged for conventional funds with various supporting organisations - perhaps local government. If this cannot be achieved, borrowing will be correspondingly higher, and/or staffing lower.
Notice that the accumulating equity of the participants, which equals the deferred portion of their salaries, is very substantial by the end of the first six months. This greatly strengthens the borrowing capacity of the project, which is a critical matter at the end of the CSC phase, when revenue becomes totally dependent on the continuing expansion of the systems and further corporate accounts taken out at £50 local and £50 cash. The equity in the project held by the active participants will encourage financial sources to continue to provide support.
The borrowing necessary to support this particular initiative is around £50,000 - only some 20% of the revenue to the project that derives from the CSC itself. Since the CSC is a very secure proposition, and the more speculative aspects of the budget will be dependent on the success or otherwise of this first phase, the exposure of the lenders seems quite tolerable.
It is preferred that the borrowing be arranged through several lenders or backers, rather than depending on any single source. This is not merely practical, but also allows for the development of community lending systems consistent with the nature of the project and its intended outcomes, one of which is to establish locally owned community venture capital systems.
The ideal arrangement would be to negotiate with a normal commercial lender, preferably a bank with community roots, a line of credit for the project, secured by many small guarantors. Thus, in London, the project will be seeking some 10 guarantors for an average of £5,000 each.
It is anticipated that a successful CSC project will encourage the charitable sector to take an increasingly active role in the evolution of local currencies. We foresee an arrangement whereby the induction of new business accounts is done mainly by charitable fundraisers implementing the CtC programme. The business will be invited to donate £100 to the charity, with the option that they can if they like pay half of that in local money, and thereby, in addition to making a charitable donation, also become part of a very profitable new market.
If this pattern evolves, then the activity of the LDI can be much more widely and effectively distributed, and can focus more on productive aspects of development and less on merely getting people and business (and government) into the game.
It is projected that system development in the region of greater London will lead to perhaps 500,000 businesses opening on average 10 accounts - a total revenue of about £500 million. The 10% applicable to system development is sufficient to finance about 2,000 work/years at a median rate of £25,000 p.a. - which will probably mean a staffing profile of 200 / 800 / 700 / 200 / 100 over a 5 year period.
Further details on this and other initiatives will be published as they are elaborated.
Written by Michael Linton of Landsman Community Services Ltd. Version #005 27-7-96