05 April, 2010

DO THIS NOW -- before the finance crisis starts

Box 6: A low-cost way to start a regional currency


The Roma currency system was invented by Gerry McGarry, an Irish engineer, cinema owner and social activist, to encourage the businesses in his area to do more trade among themselves and to raise money for local charities. The first notes went into circulation in Ballyhaunis, a small Irish town, in 1999 and were withdrawn as planned two months later. The experiment raised £1,500 for good causes but, despite a lot of interest, has not been tried since.

Romas worked as follows: members of two voluntary organisations approached local businesses asking for gifts of Romas to support their activities. If a trader agreed, McGarry used his computer printer to overprint pre-printed A4 sheets of Roma notes with the name, address and logo of the donor and that of the good cause to which the notes were being given. The business sponsoring the notes undertook to supply goods or services to the value of £1 for every note presented at its premises. It also agreed to honour notes issued by other sponsors.

The notes were also overprinted with a date two months from the time of issue after which holders could present them to the organisers for conversion into cash at a rate of one Roma to an Irish pound. The cash for the conversion came from the sponsors. If a business had backed, say, £500-worth of Romas that matured last month, it could cover the cost of its sponsorship by paying McGarry's team &poundl500 in cash, or by handing over 500 mature Romas no matter who had issued them or by coming up with a mix of cash and Romas. If the business handed over more than 500 mature Romas, it was paid £1 for every one above the 500 mark.

The reason for converting mature notes into cash and withdrawing them from circulation was to create space for later issues of notes in favour of other voluntary organisations. Otherwise, the benefits to the good causes would only have occurred in the early stages of the currency's development while the number of Romas in circulation was continuing to expand.

Notes that weren't presented for conversion within a month of maturity lost their value altogether. Otherwise, McGarry would have had to have kept reserves of national currency on hand in perpetuity in case the outstanding notes turned up. About 10% of the notes issued did not come back and, as McGarry did not have to pay out for these, he made £1 towards the system's running costs on each one. The Ballyhaunis traders benefited by donating Romas because, if they had given cash, the money would have been paid from the proceeds of sales that had already been made. A gift of Romas, on the other hand, came out of the profits to be made on future business, which the new money was going to help to generate. Moreover, the fact that a firm's name appeared on the note in association with a local good cause was not only good advertising but built a lot of goodwill.

The two voluntary organisations involved spent their notes in the local area just as if they were national currency. 92 out of the 95 traders in Ballyhaunis were happy to accept them. The public, too, was happy to earn them, or to take them as change, as they knew that by doing so they were helping the good causes named on them and that they could always spend the notes at the next shop.

McGarry's plan was make the system a co-op and to spread it to nearby towns. The number of Romas in circulation would have been increased until people began to be reluctant to handle more. After two or three years, when confidence in the Roma as an exchange currency was sufficiently high, the co-op would have opened cheque accounts for businesses to allow them to pay each other in Roma instead of Irish pounds. These accounts were to have operated on the same no-interest, service-charge-only basis as the WIR.

But it never happened. Just when the first issue of notes had gone out, Rural Forum Scotland, an organisation channelling EU research funds into the project, went into liquidation. McGarry had to devote all his energies to preventing his organisation, Enterprise Connacht-Ulster, from being dragged down too. There was no time to organise the second issue of currency and the momentum was lost.

Nevertheless, the Roma system is attractive because it is simple and cheap to set up since a lot of work is done free by the voluntary organisations. It also has the potential to be developed over a period of years into a fully-fledged regional currency, capable of freeing the people of an area from having to earn money outside their district before they can do business among themselves.

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posted by u2r2h at Monday, April 05, 2010

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