Multilateral Obligation Set-off

Scontration was a process for cancelling out debts that originated in European mediaeval market fairs, and was adopted by the early banks of Renaissance Italy. Multilateral obligation set-off is a modern accounting process that works on similar principles. Slovenia has implemented it at the national level for over thirty years, cancelling out invoices between businesses using a tried, tested, and optimised algorithm called TETRIS.


The algorithm finds ‘loops’ circular patterns of payments due that connect businesses (such as A owes B, B owes C, C owes D, D owes E, E owes A) in trading networks, with each loop an opportunity to clear debt for all participants. Apart from reducing the need for money, it also resolves payment gridlocks, whereby a firm cannot pay its suppliers because it hasn't been paid yet. Late payment is a key cause of business failure, and unblocking the drain using an algorithm like TETRIS means that participants get paid faster. This both increases their resilience and improves their relationships with their suppliers.


TETRIS helped Slovenia get through its war of independence with Yugoslavia and the aftermath of the 2008 financial crisis, with a typical reduction in participants’ mutual obligations of around 10-15% and a strong countercyclical effect on the economy as a whole. Another implementation in Bosnia and Herzegovina shows a significant reduction in firm default rates and increased sales activity.


The map of transactions in the economy that results from collecting invoice data can also be used to identify trading clusters that could gain additional benefits from adopting mutual credit, and to support the case for investment in new enterprises or community groups. This provides a foundation for an evidence-based approach to community wealth building and the circular economy. The banner image on this page was produced from real data collected in Slovenia, and the video below (produced for our Local Loop North West project) explains the loop detection and set-off process.

Mutual Credit Services is working closely with Informal Systems (the developers of an open source version of TETRIS called MTCS) to deploy multilateral obligation set-off as the first phase of Local Loop North West. Following validation of the approach, we intend to replicate the system in communities across the UK.

Further reading

Incredible new research: how small businesses can be saved post-Covid, Dave Darby, lowimpact.org.

Fleischman, T. et al., Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis, Journal of Risk and Financial Management, 2020.

Fleischman, T. and Dini, P., Mathematical Foundations for Balancing the Payment System in the Trade Credit Market, Journal of Risk and Financial Management, 2021.

Božić, M. and Zrnc, J., The Trade Credit Clearinghouse: Liquidity and Coordination, 2021.