A change of direction for Birmingham Pound

As you can read in previous posts, the Birmingham Pound group, coordinated by Localise West Midlands, has been meeting for two years now exploring the potential for a Birmingham Pound and as we’re now at a ‘watershed’ moment we thought it was a good time for an update.

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Early conceptual designs for the Kingston Pound paper currency

The idea of the project was simple; to consider what all the fuss was about with these other local currencies and apply the findings to Birmingham, with the aim of a stronger, more diverse and more redistributive local economy. Although we have focused primarily on the ‘transition currency’ model (Bristol, Exeter, Brixton, Totnes – see here for a description of how it works) we have more recently explored local currency schemes operating across the UK and Europe, following a diversity of models and operating within vastly different circumstances. The research taught us that there are essentially two reasons why local currencies develop. Firstly, they are used in places where there a lot of progressively minded consumers who are concerned about social and economic issues. Secondly, they develop in places that are under a degree of crisis (think Greece), the local currency fills a void left by traditional currencies. The steering group were interested in a scheme that could be inspired by both of these reasons. We wanted to develop a currency that could support communities and businesses within Birmingham that are economically disadvantaged. The Independent Money Alliance provided a small pot of funding to conduct some outreach activities and consider the development of a business model for a Birmingham Pound. Meanwhile a bit of LWM’s time was covered by funding from the Barrow Cadbury Trust, who have an interest in inclusive local economics in the region. A lot of volunteer time has gone in too.

A model developed by the steering group focused on sustaining the project using revenue, opposed to relying on funding. Some of the earlier currency schemes benefited from financial support from funds due to the new and innovative nature of their projects. The initial seed funding allowed the currency projects to develop a network of businesses who would acct the currency, which in turn encourages consumers to use it for payment. The Bristol Pound has an example of a truly impressive network with hundreds of businesses, see here for a virtual map. The initial funding allowed the Bristol Pound to pursue a “loss-leader” type of model. Generating revenue was not necessary to finance the scheme, but could be pursued later to when take-up was higher. They are now considering options to become sustainable including charging a membership fee for businesses to join the network. The steering group believed that a Birmingham local currency could not rely that level of early funding. . Our model therefore depends on generating revenues from a mixture of transaction, conversion and membership fees. However, the kinds of transactions needed to support a currency scheme is around £9.5million annually. There is a further possibility of offering related services at a cost to member businesses to subsidise the currency, or printing limited edition notes to sell as souvenirs. But these could only be secondary. We would have to ensure that there is enough demand for a Birmingham Pound to support these transaction levels, as revenue would be required to maintain infrastructure alongside paying back the initial investment to create the scheme.

The steering group considered how to achieve the levels of transactions needed. We conducted an outreach event that wasn’t hugely well attended, suggesting the kind of consumer support needed for the scheme is currently low – although other events have suggested a very positive reaction to the idea once people broadly understand it. We have had initial discussions with Council, as being able to pay taxes in a local currency would drive a demand, but given the various pressures Birmingham we cannot rely on their support just yet. After exploring these avenues, the steering group therefore believed that the business model used by Bristol is unlikely to be economically feasible in Birmingham at present. This has put the brakes on our hopes to launch a pilot, and while there is much still to work with in the ‘transition currency’ model, there is now an element of ‘back to the drawing board’.

So one thing we are now considering is a much more a business-focused offer, rather than consumer-focused. An alternative currency can benefit from transaction fees that are lower than traditional payment systems. Businesses that have supply chains locally may be able to reduce their costs through using an alternative currency. The volumes of trade that business-to-business transactions offer would allow the scheme to raise the revenue needed to sustain and grow the project. We have also been inspired by currency schemes in Italy and Switzerland that are focused on providing low-cost finance to businesses. A sort of peer-to-peer credit union within an alternate currency, for independent businesses unable to source traditional credit. Similar peer-to-peer lending projects around the world currently demonstrate remarkably low default rates. This is an area that we believe could create? demand, as finance for small businesses is not easy to obtain and some commercial loans have been a little predatory. We believe the next steps for a ‘Birmingham Pound’ – whatever that may be, is developing a potential offer to businesses. We will be working over the coming months to develop this, including investigating international schemes in more detail. We will also be considering alternative finance mechanisms that are being used on a national scale. Funding Circle is a commercial business that offers peer-to-peer loans at a national level. There may be some appetite for this kind of model at a local scale. We believe that pursuing this kind of model may help us achieve our overall aim of support communities and businesses within Birmingham that are economically disadvantaged.

So what can you do? Well, stay interested and continue to share our posts. We’re sorry it has not turned out to be the simple case of following Bristol’s excellent example that we had hoped, but we do think we will discover something interesting as we pursue this. We also would like to hear what you think. We have a short survey in partnership with the University of Birmingham that is conducting research in this area. Please take a moment to fill it in.

Stuart Bowles

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