Mutual Credit Services’ Clearing Clubs and Trade Credit Clubs models are designed to serve business-to-business exchange. Although supply chains in developed economies are global (and therefore essentially linear, at least from a local perspective), decades of experience with multilateral obligation set-off in Slovenia shows that there is always some residual circularity which can be identified and reinforced.
Furthermore, there are plenty of businesses that do not utilise their full capacity; this observation is the basis for the various business barter networks that facilitate use of this spare capacity using a form of mutual credit.
However, at least in developed economies, it is not immediately obvious where the local circularity is in business-to-consumer exchange; many people cannot afford to take advantage of whatever opportunities to buy locally still remain, and even fewer are primarily value producers with respect to their community. In other words, most of us work for and/or buy from companies that are not local.
Despite these constraints, it is apparent (from the shop local movement, and numerous attempts to implement local currencies) that there is an enormous appetite for thriving high streets. In many localities, there are enough people with sufficient spare spending power not only to buy from local businesses, but also to invest in them.
Matching this spending power with business’ spare capacity for mutual gain is the premise of MCS’ ‘High Street Voucher’ model for business-to-consumer collaborative finance:
Businesses issue vouchers (effectively use-credit obligations) to consumers on the basis of their spare capacity; if a restaurant could serve an additional hundred customers per week, they have an issuance limit that corresponds to the value of the extra meals served. If the restaurant is open anyway and already breaking even, then every additional table filled results in gross profit.
Vouchers can be redeemed by consumers at any participating business, regardless of which business issued them.
Of course, many participating businesses will have thinner profit margins than a typical restaurant; a grocer may only make a few percent on each sale. Vouchers are therefore sold to consumers at a discount that is slightly smaller than the smallest margin of any participating business. This ensures that no business makes a loss by accepting vouchers.
However, businesses are also free to apply an additional discount at the point when the vouchers are exchanged for their goods or services. The grocer may never wish to do this, but the restaurant could conceivably offer double-digit discounts at slow times.
Since the vouchers can be redeemed across the network, businesses will end up holding each others’ vouchers. These can be cleared against each other on a shared ledger using the Credit Commons Protocol, or using multilateral set-off if the network is large. As in a Trade Credit Club, issuance and acceptance limits are agreed on the basis of mutually-assessed spare capacity and acceptable risk.
The overall effect is that consumers get a discount (sometimes small, sometimes substantial) on their local purchasing, whilst businesses get a cash boost upfront whenever they sell vouchers.
Whilst similar to a shopping centre voucher, the model is designed for independent businesses and the consumers who wish to support them, and has stronger financial incentives for all parties. Community wealth is created by the combination of businesses mobilising their spare capacity and consumers investing their spare cash in them (potentially creating yet more capacity), with all participants sharing in the gain. Furthermore, the circular economy (understood through the lens of reciprocal financial flows) is extended into business-to-consumer exchange.
MCS is currently prototyping an app based on this model for our Shubh Vyapar project in Nagpur, India. We intend to replicate it as a follow-on to our Local Loop Lancaster & Morecambe project in the UK, and as a virtual high street for Lowimpact.org.