Cape Verde Community Credit

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XO Limited
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Common Problems of Micro Enterprises

• Lack of Start Up Capital lack of money for
  local production
• Lack of avenues for micro entrepreneurial
  activity creation and development (including
  initial assistance to run a micro business)
• Lack of Financial and Marketing literacy for
  commercialization of micro business activity
  (including the use of current technology)
• Money that comes in as aid, goes quickly out as
  spending again.
• Financial Investment if any, siphons off a high
  portion of returns
• Lack of avenues for Micro Enterprise Literacy for
  non urban and/or non highly educated community
  members who may not lack skills/assets to build
  their own micro business
• Little or no investment funding available for
  informal sectors and if available comes at a cost
  of high interest rates
• Lacking money prevents people from participating
  in micro enterprise creation and development
  opportunities

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Community Credit Insulating
without Isolating
Reduction of exploitation, Enhancement of
economic vitality, Enabler of self-determination,
and Optimizing the communitys standard of
living and quality of life
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Community Credit covers a Fundamental Need

• Acts as a Credit Mechanism
• Enables all desirable trades,
• Reduces micro enterprise costs,
• Favors local suppliers, and
• Enables community control over its own economy.

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Community Credit Solution

• A Combined Synergistic Partnership Approach
• Banking Grade Transaction Processing Service
  for responsible
• account keeping
• - XOs web based secure internet based
  software platform
• Independent Community Credit Enterprises acting
  as Mutual Credit
• Clearing Centers
• - Services4us Implementation and piloting of
  Community Credit
• Enterprises to establish Cabo Verdean
  working model
• In kind support for establishment of CCEs as well
  as ongoing development and stimulation of local
  micro enterprises
• - IOAF - Funding SDF with in kind support
  (from New Zealand, Australia
• and other funding sources)

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Community Credit Funding

• Asset backed money (not FIAT)
• Informal / Traditional
• Sufficient
• Interest-free
• Community controlled
• Democratically allocated
• Self-adjusting
• Stable and Sustainable

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FIAT Money Quickly Flows Out of the
Local Economy
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Community Credit Re-circulation
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What is a Community Credit Enterprise?

• A community group of buyers and sellers that
  provides for the direct
• settlement of bills due to one another in moneys
  worth.
• It enables bills to be paid and income to be
  earned without money.
• Also acts as a micro community credit finance
  centre for community members

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How Does Clearing Work?

• Ultimately, goods and services pay for other
  goods and services
• Money is just an intermediary device that can be
  supported with
• Community Credit.
• When you sell something, your account balance is
  credited (increased)
• when you buy something, your account balance is
  debited (decreased).
• Remaining balances may be settled at periodic
  intervals,
• or may be carried over as revolving credit
  indefinitely.

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Towards Socioeconomic Health

• A Community Credit Enterprise
• A group of community members and micro
  enterprises preferably
• with local government support and collaboration
  can organize into
• mutual credit clearing circles to enable mutual
  credit trading among
• themselves.

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Credit Issuance and Circulation 1
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Credit Issuance and Circulation 2
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Community Credits Advantages of a Limited
Circulation

• Currency credits must return to the issuer(s) of
  the credit for redemption.
• For this reason they are captured within the
  local micro economy and
• will not stray very far.
• Their re-circulation within the community
  provides a built-in
• buy local bias, which stimulates entire
  clusters of local economies
• affecting the National economy positively.
• They give multiple local sources of supply
  preference over
• non local (external) sources.

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For Example 1

• 1,000 worth of community credits are spent and
  circulate in
• a group of micro enterprises.
• That means that their collective cash expenses
  have been
• reduced by 1,000.
• That 1,000 remains within the community instead
  of
• flowing out to pay for imported goods/services.

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For Example 2

• Recycling of the 1000 between micro businesses
• If the turnover is 10 times a year, that means
  10,000
• in additional local sales.
• Additional profit without more credit
• - If the rate of profit on sales is 20, that
  will result in additional yearly profits of
  2,000 without additional credit.

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For Example 3

• Further, the issuance of Community Credit will
  have enabled some
• interest-bearing debt to be retired.
• On 10,000 on loan with interest rate of 15,
  micro enterprises will
• save cash interest costs of 831 year and provide
  products/services
• at lower price (see calculations on next slide).
• Every dollars worth of Community Credit used
  means one less dollar
• that needs to be borrowed, and one less dollar
  that needs to be spent
• and one extra dollar that can be put to better
  use

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For Example 4
10,000 at 15 interest in 1 year 831
Simple Interest Amortization
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Circulating Community Credits

• XOs Banking Transaction Processing Software
• for Community Credits to circulate securely
• Simply as transferable account balances via
• Checks
• Online transfers (via the Internet)
• Swipe cards - Debit cards
• SMS/TXT Banking (mobile phone)

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Community Credits in
Circulation
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Community Credits are put into circulation
based on The Future Ability of the Issuer to
ProduceValuable Goods and Services
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Community Credits Spending

• Businesses spend currency into circulation when
  buying necessary goods
• and services, including employees labor.
• Community Credit provides an alternative means
  of financing that is
• A Merchandise Currency (backed by
  products/services)
• Informal
• Interest-free
• Locally created and controlled
• Available in sufficient supply
• Does not depend on Banks, the Reserve Bank or the
  Government.
• Enables small business to thrive on a smaller
  supply of scarce
• official money.
• Enables the sale of future and/or excess
  productive capacity.
• Enables local businesses and entrepreneurs to
  employ or utilize more
• of the locally available labor, skills, and
  resources without cash.

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Operate a CCE as a
Socioeconomic Business Unit

• Charge sufficient fees/charges to cover the costs
  of operation and
• make it self sustaining.
• Some fees will necessarily be cash fees needed to
  cover unavoidable
• cash expenses.
• Compliance with local laws and taxation
  requirements
• Administrative and personnel (facilitators or
  brokers) should be paid,
• but a portion of their income may be paid in the
  community currency.
• All salaries and related taxes where applicable
  should be paid out of
• revenues generated from service fees
• There should be no system account deficits
• There should be provision for covering
  socioeconomic needs during
• downturns and unforeseen circumstances

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Community Credits
Socioeconomic and Civic Use

• Provides for community credit as micro community
  credit finance
• for entrepreneurs
• Potential source of cost saving and additional
  revenue for local
• municipality services and support.
• Provides for emergency funding for social
  purposes
• Provides for shared assurance
• Provides for additional taxation revenue to be
  paid out of revenues
• generated from sales.
• Balance of Community Credit remains strictly at
  the individual level
• with multi group level support

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Community Credits International Use

• Provides for community credit as away to reduce
  national credit finance
• for countries
• Potential source of cost saving and additional
  revenue for national
• government services and support.
• Provides for emergency funding for national
  purposes
• Provides for shared international assurance
• Provides for imports to be paid out of revenues
  generated from sales
• Balance of Community Credit remains strictly at
  the individual level
• with multi national level support

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Examples and Precedents

• In 2003 in Argentina, various currencies were in
  general circulation
• Argentine Pesos
• U. S. Dollars
• Provincial Currencies (up to 20 kinds in
  circulation)
• Trueque Notes
• (community credit currencies - about 100 types
  in use)

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Provincial Currencies
Since the mid-1980s, due to the lack of
sufficient federal currency, many of Argentinas
24 provinces issued their own currencies to
meet their liquidity and budgetary needs.

• By 2003, 20 provinces had issued provincial
  currencies of various types.
• The province of Mendoza issued treasury notes
  backed by their oil royalties
• (150,000,000 worth).
• The province of Buenos Aires issued notes
  totaling one billion pesos.
• These notes, named LECOP, expire in 5 years, bear
  no interest, and are
• accepted in payment of provincial taxes. They are
  backed by the provinces
• power of taxation.
• LECOP is an interest free loan while while PETROM
  is borrowing for 5 years
• at 35 interest.

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When People Begin to Create Their Own Solutions
Anything is Possible !

• The first barter club in Argentina was started
  in 1995 by 3
• professionals seeking to create better social,
  economic and
• environmental conditions.
• Within two years, other trueque clubs sprung up
  around the
• country, and began to organize into a network
  called
• Red Global de Trueque.
• Trueque clubs issued their own currency - credito
  notes.

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WIR A Successful Mutual Credit Clearing
Association
The WIR business circle cooperative
(Wirtschaftsring) was founded in Switzerland in
1934 as an answer to the money scarcity of the
Great Depression, and still thrives after 70
years. Membership, at first completely open,
was later restricted in order to build
solidarity among the entrepreneurial
middle-class. A balance between ideology,
adaptability, and good business sense has
enabled its long-term success.
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Cabo Verde Implementation

• Hands on We take an active part in implementing
  a new CCE within a regional community and
  pilot the implementation
• Hands Off - We take a less active role and play a
  supportive/supervisory role in
  implementing an additional CCE within the same
  region and assist an existing CCE providing
  the implementation. The new CCE
  community also pilots the implementation with
  assistance of the existing CCE
• Hand Over We hand over implementation via
  accreditation to the CCE that has proven
  capable to provide CCE implementation services
  and they can offer additional
  implementation services for other community
  groups within the region or other regions
• NOTE A Region Can be geographical and/or
  functional

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Stages 1
Hands On
Hands On

• Organize a limited size CCE circle of trusted
  members
• (from micro enterprises and community members)
• having overdraft privileges
• (preferably supporting and providing local
  government support)
• Accept other diverse participants to CCE
  membership without
• overdraft privileges to begin with.
• Persuade non-member local micro enterprises to be
  
• Community Credit users willing to accept and
  spend issued credit
• jointly by the members of the CCE mutual credit
  clearing circle.

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Stages 2
Hands Off

• Ease the restrictions on membership and extend
  the credit privilege
• (overdraft privilege) to more members, but
  determine credit limits on
• the basis of repayment via recent sales history
  and inventories of
• goods offered for sale or potential sale.
• With assistance with an existing smoothly
  functioning CCE,
• seek help to create another CCEs where
  Community Credit is
• can also be used by the community and support it
  until it also
• goes smoothly

Hands Off
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Stages 3
Hand Over

• Once two CCEs are functioning independently, they
  can be linked to
• each other. CCEs trading multi-locally is
  extended to regional and
• then national levels.
• Easing restrictions on inter-CCE member community
  credit extension
• after successful stand alone operation provides
  each each CCE
• member access to bigger market and its privileges
  to enjoy the
• advantages of a larger customer and supplier
  base.
• Each CCE still retains its ownership and
  management of credit
• limits monitors its trade cycles locally in a
  decentralized manner
• with members autonomous administration. Members
  share the
• CCEs Community Credit information openly while
  keeping personal
• privacy on detailed confidential trade
  relationships.

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Multi National Implementation

• Access to international exchanges phased in
  stages within
• 1 year of successful Cabo Verde pilot
  implementation
• Up to 1,000,000 USD worth closed mutual multi
• reciprocal credit
• Countries include South Africa, Australia, NZ,
  Singapore,
• Thailand and others

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Funding Provisions 1

• XO New Zealand
• Pilot Implementation Support
• Training and Support
• Mentoring
• Turnkey Software Solution
• Provide Systems

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Funding Provisions 2

• Services4u Australia
• CCE Model
• Model Implementation
• Model Accreditation
• Model Training and Support
• Mentoring CCE administrators/trustees
• Model Support from International NGOs

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Funding Provisions 3

• IOAF New Zealand
• - Setup of SDF
• - In kind support for establishment of CCEs
• - In kind support for CCE members
• SDF Cape Verde
• - Setup of Local CCEs
• - In kind support for establishment of CCEs
• - In kind support for ongoing operation of CCEs
• - In kind support for members

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