Mutual Credit Services uses multilateral obligation set-off as the engine of our ‘Clearing Clubs’ platform. Participation is low risk, as it only requires businesses to share a small amount of non commercially-sensitive information about their purchasing from local suppliers. Benefits show increasing returns to scale and diversity; the more participants representing the more sectors, the more likely it is that debt-clearing invoice loops can be found.
These characteristics make it particularly suitable for bringing large numbers of businesses into initial collaborative finance relationships. The images below show screens from the Clearing Club app that MCS is developing.
Users submit details of their purchasing from local suppliers, defining the obligation network. MCS and Informal Systems periodically run the MTCS algorithm on the data and return the results (detailing which invoices have been cleared and by how much) to users, who then update their accounts payable and receivable accordingly.
As well as a dashboard that displays information about individual and network-wide results, the app also shows a directory of other registered businesses so that users can find new local suppliers and close more loops, benefitting themselves and other participants as more and more debt is cleared.
We are currently trialling the Clearing Club model with Lancaster-based partners as the Local Loop North West project. The video above introduces the initiative, and you can learn more or sign up on its website.
The map of the economy that arises as a by-product of collecting invoice data via the platform can also be used to identify trading clusters that could gain additional benefits from adopting mutual credit, and to identify opportunities and support the case for debt-free investment in new enterprises or community groups via use-credit obligations. As such, the platform provides a foundation for an evidence-based approach to community wealth building and the circular economy.
Left: obligation data from the Local Loop North West trial in Lancaster – as of February 2023, there are about 30 registered businesses with more than 60 obligations, but no loops yet. Centre: if obligations from each registered business to MCS are added (representing membership fees invoiced in arrears), MCS – which has suppliers in Lancaster – becomes a ‘super-connector’. Right: the resulting loops. The Local Loop North West team are working to sign up more businesses and anchor institutions to create lots more loops.
Following validation of the approach (including the business model that makes running and growing a Clearing Club economically viable), we intend to replicate the system across the UK and have already had several expressions of interest from potential on-the-ground partners. If you would like to learn more about joining this first cohort of our social franchise, please contact us.
Local Loop North West website.
How credit clearing can help system change: Michael Hallam of Local Loop North West, Lowimpact.org.
Woodroof, T.F. et al., The Local Loop North West clearing club: A case study of a community-based implementation of multilateral obligation set-off (abstract), 2022.
Woodroof, T. F., Green, D., Local Loop North West: A Community Implementation of Multilateral Obligation Set-off, 2022.