LETSystems and the community way
A LETSystem is a community currency, a money only usable within a particular collection of people, businesses and other organizations. An effective community currency can do wonders for community economic development.
Community currencies can be set up in many ways - paper, coin, account system, smart card - but some are more successful than others. The LETSystem is currently the most widely adopted, with over 800 applications in various forms world wide. There are reports of 400 in the UK, 300 in Australia and New Zealand, many in Ireland and increasingly more around Europe. In contrast, there are only a dozen or so currently active in Canada, and maybe four or less in the USA.
Two of the things that are perhaps most remarkable about this development are its progressive acceleration, and the fact that there is still almost no business participation in LETSystems, even where it is considered most successful. We (Landsman Community Services - lcs - the original designers of the system) believe that when business does take part, the rate of growth
will be still more rapid, and the effects increasingly significant.
Community way is a program we have designed to introduce business to community currencies.
While most of our current efforts (lcs and associates, mainly in Canada and the UK) are focused on applying community way on a major scale in Manchester in the near future, we are in the meantime publishing the program to encourage parallel initiatives, which we will support wherever possible. The concept is designed to be largely self-starting, and we want to see what
comes of it.
Some facts and figures
In 1982, interest rates in Canada reached 20% and the money dried up in the Comox Valley, B.C. My business evaporated, as did others. Several of us were in agreement that money was the only thing missing, that the necessary people and things were still here, and all we needed to do was organise a way to get people's needs matched to each others' capacities.
We looked at computer supported barter, but realised one-to-one barter was impractical, and that we needed to use a money - of our own. The simplest way we saw was to start an account for each person or organization, starting with precisely zero "local" $, and to keep records of transfers between accounts. The LETSystem is a process "owned" by the community, all action is by consent, interest is zero, and counting is in $. All the details are on our web-site (http://www.u-net.com/gmlets/).
We opened the first LETSystem in the Comox Valley in December 1982, and by May '83 we had 300 accounts, an administration process and the beginnings of a software system (both of which we still use today). Our operating costs were already less than banks. But we couldn't get our local business community to participate. Not then, and not since.
And that's really most of the story. The Comox Valley system presently has about 300 nominally active accounts, but almost all of the average $6,000 trading per month is among about 100 accounts. Administration costs average $250 per month. The system works and it runs, but not fast enough to fly.
Clearly, if a community currency doesn't involve business - groceries, restaurants, mechanics - it's not very much use, and it's not very much used. Activity in the network is peripheral to everyday life, and people only make small and occasional transactions. There is benefit, but not great benefit, and little or no difference in the main issues - managing the getting and spending of hard cash.
However, if using a community currency saves substantial amounts of hard cash, then it's definitely worth earning. When people can use community money in local retail stores, particularly for food and other necessities, the money takes off.
Up till that point, the system will generally provide various personal, social and community development benefits, some perhaps quite significant, but it has little real substance in an economic context. A LETSystem is probably "real" for anyone when it accounts for 10% of their income and expense, but it's only going to be effective on a local economy when maybe
10% of the population find it at least that "real" - about 1% of the local wages, and spending, in that economy.
LETSystems are not yet close to that, anywhere in the world, based on current numbers. In organization, however, they are very close to it indeed, which means they may also be very close in time.
For instance, consider the proposition that any credit union could implement a LETSystem for its membership - at no cost, and no risk, anytime. And that most of the smart card trials already taking place in various sites around the world could be immediately adapted to support community money.
Simply, community way
We now recommend to people considering start-up of LETSystems, that they should install community way instead, and let that process evolve into LETSystems.
Community way is an innovative fund-raising process that uses a local currency to raise both cash and credit to meet community needs. While the initial program can and should involve as many businesses and beneficiaries as possible, it can also start perfectly well with just one of each.
Here is how it works:
This is one of the simplest forms of community currency. It is a "loyalty" program for business, which also provides them with a way of contributing to the community without parting with cash. The credits can be in the form of paper or coinage, but account based methods are more efficient from the outset, and are immediately compatible with LETSystems and smart cards.
- business donates credits, not cash or products, to the charities and/or projects of their choice, undertaking to accept the credits just like $, in part payment (usually between 15% and 50%) of a sale.
- people exchange cash with the charities for those credits, $ for $, and support community needs at no personal cost - the credits are as good as cash in participating stores, restaurants, etc.
So three different sectors - business, community organisations, and the public at large - all gain substantial benefit, nobody is out any cash, and a local currency is moving.
community way ......
.......involves businesses and charities in a fund-raising cycle
for example ......
.......a restaurant donates $1000 to a charity, in the form of credit at their business. The charity exchanges this credit for cash with supporters, who can then use the credits at any business in the program
this benefits ......
.......all three parties - the charity raises money, the business gets customers and does good in the community (and is seen to do good, which is also good), and people get to help without hurting
community way is ......
.......the program that connects the businesses with local charities and projects, and the public.
"... I know precious little and have read even less about LETS. I don't even
know what questions to ask, all I have is a wild sense of urgency. I fail
to understand what the objections to it are. What am I missing? Is this
the abc kindergarten lesson one?"
You've got the picture - now read the story!
Some possible ends of a beginning - newmarket scenario - version:o
Notes from Newmarket, Turtle Island.
The community way installation is now complete, just under six months from its inception. Now that donations have reached $1.2 million ($1 per person in the region), no further commisions on donations are paid to the development group, and its direct involvement in community way is over.
From the 10% commision on funds raised, the budget for opening community way has been $120,000. Of this, $25,600 has been applied to the usual overhead and material costs, and $94,400 has been paid to the 18 people and to the contractors who have been active in the project. Six people worked full time from the beginning for an average rate of $500 per week.
The installation crew, which now has 10 full time and 20 part-time and contract workers, are now active as a regional LETSystems Development Initiative, which is expected to run for about three years and support at least 20 full time equivalent positions within 6 months.
Initial financing of $10,000 was arranged through a local credit union, and guaranteed by a group of depositors. The stability of the start-up was also greatly assisted by the Newmarket regional council's early commitment to exchange half the development budget credits for cash. The government is recirculating these credits through their purchasing and grant aiding
programs, and establishing an ongoing policy of acquiring community currency for these purposes. (see community information services)
From this point, the accounting of further community way donations, exchanges and trading will be maintained by the LETSystems registries as part of their normal service, typically for a few cents per transaction.
Funds raised during community way installation
1240 businesses (over 2% of the 60,000) donated an average $970 through community way, ranging from $500 to $35,000. Most businesses have been keen to specify precisely which causes they want to support, and how much, while others have elected to "go with the flow" - to have their contributions distributed across all recipients, in proportion to the support already conferred by others.
range no. of recipients donations received
average total (rounded)
$50,000 1 (cis) $100,000 $100,000
$10,000 - $50,000 11 $33,000 $345,000
$5,000 - $10,000 15 $8,300 $124,000
$1,000 - $5,000 122 $3,100 $375,000
$50 - $1,000 412 $330 $136,000
10% commission to development group $120,000
The funds have been distributed to: %
food, clothing, and shelter services 24
environmental projects 17
community development 13 *
health safety and security 12
education and training 11
sports / recreation 7
external 6 **
arts / culture 5
ongoing support 3 ***
emergency disaster 2
* cis (community information services) the focus project for the community way installation, accounted for $100,000 itself, 9% of the total funds raised in this initial phase.
The credit-cash exchange (cce) is naturally the last part of the cycle to get going - business has to first respond to community requests, and people need to see a range of places to spend before they will readily participate. In this instance, it was the participation of various local newspapers, radio, cable tv and internet services, and their particular support of the
community information service project, that made the idea of "cce" very straghtforward to the general public.
** mainly medical research, third world aid, and global environment issues.
*** mainly local co-op and university radio.
As project organizers and community fundraisers are becoming more familiar with community way, public acceptance of the idea is increasing rapidly. A total of 2800 people have now exchanged $830,000 cash for credits - over half of this total ($480,000) in the last month alone, from 1200 new accounts, and 300 earlier accounts coming back for more.
Several projects that have previously been unable to attract conventional funding due to a lack of formal standing, risk of failure, or radical approach are finding support through community way. The positive response has encouraged a second wave of proposals for funding, as all participants - merchants, community groups and the public - become more imaginative and daring.
With new business registration now averaging 15 per day and rising, at least 3,000 businesses are projected for the first year, making a joint contribution to community needs over $3 million.
Community information services (cis) was established as the focus project for the community way launch.
Essentially a youth computer/internet training project, the $100,000 raised through community way attracted equal matching funds from higher government. Regional government exchanged cash for $50,000 of the credits to reflect their commitment to youth training and employment.
cis has become a public information service and cybercafe, complete with pool table, juice bar, and internet connections. Fully staffed by youth-in-training, cis is a gateway to the world of information for people without internet access, or the time and resources to find what they need. Individually tailored information packages are prepared by the youth
co-operative and distributed to clients through a network of bicycle couriers and street vendors.
cis has many satellite operations in other parts of Newmarket. Kiosks in various suburban malls, on the university campus, several neighborhood recreation centres, and in the downtown business district act as ordering and distribution points for cis. These outlets are also transaction centres for LETSystem registries, recharging of community way cards and cash-credit
Higher education and research
The university and colleges, in perpetual funding crisis, are studying the matter and monitoring the process. In addition to student fees payable in community money, and increased support from the expansion of local and regional tax base, they see strong possibilities for community oriented and financed research programs.
A proposal for a long term research and development program on community money has already attracted considerable interest (and potential finance) from the software and systems industry.
In the meantime, several simulations of full scale community currency systems are already very advanced; most effort is being applied to the macro-economic implications for the Newmarket region over 5, 10 and 20 year time scales. Others focus on higher education funding patterns, and emerging projections may account for the unusually persistent good mood of the University President.
Credit unions getting smart
Several local credit unions are well advanced in preparing their account base to support multiple community currencies for their members. There are no technical impediments to be resolved, it is expected that full service (direct debit at point of sale) will be available within the next few months, once the concerns of various regulatory authorities are satisfied.
The credit unions are actively participating in the development and testing of a community way smart card carrying five currencies. The tests are yielding useful data on the public and business acceptance of this new technology. The credit unions propose to introduce cash services on the card when all the security issues are resolved.
Coincidentally, regional elections were held during the community way installation period. Through a special progam, all done with coloured stickers on card, a number of businesses initially issued $5,000 worth of credits to an election fund which was distributed equally to all 7 candidates. The voters' willingness to convert the candidates' credits into cash became an informal poll. Soon many other businesses joined the game until the fund peaked at $15,000 in credits, of which $11,000 was exchanged for cash by election day. Some candidates were unable to find enough supporters to buy their credits.
The old island hotel restoration project uses community way to raise capital. The building needs more money than the owners have on hand to bring it back up to code, so they have formed a community corporation to implement the renovation and operate the building. The comcorp is seeking investment in credits from local contractors and tradespeople within a special purpose business-business system. The cash funds raised from the exchange of some of the credits will cover materials, and the contractors who actually do the work will be partly paid in the remaining credits which they will use in that business-business network.
Transition to LETSystems development
With the success of community way, the grounds for further LETSystems development is well assured. Businesses, by donating, are automatically registered in the primary community network. The benefits to their cash flow make the case for continuing to use community money.
When people have spent their credits, they too are offered a complimentary LETSystem registration and 85% of them now have personal money accounts.
Many businesses are already participating in several LETSystems, some serving particular groups around the city, and in the region. Systems have been started by the women's network and the university students association. The Italian community was the first of several "cultural" systems to go public. There are already 5 church congregations trading and tithing, both the sports/recreation and the arts/culture communities will announce the opening of trading in support nets next month, and the chamber of commerce has introduced a business-business LETSystem to support their members' mutual trading.
for current information check cis.
end of scenario - version:o
These current materials (version:o) have been developed from our experience in Manchester and the Comox Valley, and are (partly) crash-tested. We recommend that they be used only as directed, and entirely at the user's risk. The workshop in Hawaii, in early May, will hopefully create 6 months full employment for 6 to 10 people, raise $1m for community needs, and begin the implementation of community currencies on the islands. Other workshops and trainings can be convened where/as interest develops.
another little green idea from the comox valley
Michael Linton Landsman Community Services 604 338 0213 firstname.lastname@example.org
Ernie Yacub Cumberland Business Services 604 336 8155 email@example.com
Last Revised 6 June 1996 by Nigel Stewart