Our last blog post, from steering group member Stuart Bowles. Read on!
– Karen Leach – chair – Birmingham Pound
I first became engaged with the concept of the Birmingham Pound when the founders of the Birmingham Impact Hub ran a series of events back in 2015. At the event there was a speaker from the Bristol Pound, who outlined their challenge to develop and run a local currency scheme. There I met Karen from Localise West Midlands, who said that they were interested in developing a local scheme in Birmingham. Six months later I joined a local steering group to consider the development of a scheme in Birmingham. Today we are announcing that this programme of work under this group is now coming to an end.
The Birmingham Pound group has been an incredibly interesting experience for me and has formed part of my research towards my PhD. It gave me a privileged position that allowed me to take my research to the next step. Not many researchers can say that they were able to test drive the grand theories of their subject area, but for me it was different. With the help of Localise West Midlands, we had a platform to start to put some ideas into practice. Over the past couple of years we considered what other towns and cities across the world are doing. I came to understand all of the different types of alternative currency; LETS, Timebanks, cryptocurrencies. But, as covered in blog posts in Spring last year, we have concluded a Birmingham Pound is not applicable in our context. I will remind you of our reasons.
Our aim for the project was to develop a sustainable model that could support the Birmingham economy and help the wider society. Feedback from other cities suggested that if we could get proportion of the money locally to be converted into a Birmingham Pound, this would further encourage that money to stay local. The benefits of this are associated with a multiplier effect; money spent in independently owned businesses have a greater impact and stay local. We initially modelled our project on the Bristol Pound, which provided us some financial support to test our ideas locally. However we ran into some fundamental problems. The first was the financial sustainability of the project. The Bristol Pound was new and innovative and quite rightly received grant finance to develop. We were hoping to apply a social enterprise model to our scheme, where the revenue raised from the use of the scheme covered costs. The business model was simple; 1.5% transaction cost on every Birmingham Pound spent. However, we realised we would need over £10 million worth of transactions to cover our running costs, where Bristol we believed had around £1 million. This is without considering that the average person may not want to pay a 1.5% transaction fee when their current payment options are free. Secondly when we looked more closely we felt the complexities of the local economy would prevent as much real shift as was needed. Although the scheme would have been aimed at independent shops and businesses, many of their supply chains are not local and it looked unlikely that a local pound would encourage a shift on its own. After engaging with a group of businesses in Bristol, I found many struggled to purchase anything and was therefore reluctant to accept them. There is a likely indirect impact from the greater visibility that a local pound brings to the idea of local sourcing, but this is hard to measure and therefore hard to justify to backers, To me it seems unlikely a true parallel economy using a local pound could exist at city level.
We wouldn’t want to put you off trying your own scheme. Through our research we found many others developing schemes. These may fit within their own context. There is a Lake District Pound that will effectively sell its currency to tourists, encouraging it to be spent in local shops and hoping they take it away as a souvenir. The money retained would then be spent on local community projects, I do think this could work. Then there is the Liverpool Pound. In my opinion, this is where this local pound model will now be tested to its limits. The initiative is supported by Colu, a Israeli company who is hoping to spread the idea to many cities around the world. They have deep pockets and are trying different models to find a sustainable solution. They are asking retailers to offer discounts in Liverpool Pound and giving users a 10% uplift on money converted into Liverpool Pound, paid out of their marketing budget. Without outlining the ironies of a multinational “local” pound, I feel that this will make or break this idea. I think it’s worth paying attention, even if you disagree with their approach.
So what has since become of the Birmingham Pound project, and where is it heading? Firstly, the learning has been captured and due to my University funding, I am on hand to help advise other developing schemes, if they should need it. But since last spring, the group has also been exploring an alternative model, for which I have been doing much of the research. This scheme is a business-to-business mutual credit system, where local independent businesses extend one another credit within an alternative currency, and it learns from similar successful models elsewhere. The Birmingham Pound steering group are confident that this scheme is viable and will meet many of its original aims. But the model is going to take a huge amount of work and resources to set up and test, so after intensive discussion, the steering group has taken a decision to step back and allow me to pursue it separately at my own risk. In fact this represents a success of sorts, having helped the new scheme come into being. The steering group will fold, although Localise WM and other members will continue their work in creating a more equal, inclusive and beneficial local economy.
The project being developed is termed “Credex” and I will be engaging a range of potential stakeholders in the coming months to see how it could be delivered in the West Midlands. Its aim will be to close the funding gap that Small and Medium Enterprises experience when engaging with the traditional financial industry. Many businesses struggle to borrow between £0-£150k and the approach Credex is taking, may help to close this. This would then achieve many of the initial aims of the original project; support for the local economy, regionalisation of supply chains and money being spent with local businesses. If you are interested in following progress, our initial website will be up in the coming weeks with updates; https://credex.network/ or you can engage the project on email@example.com.
Thanks again for following our journey. I hope it has been an interesting one. We feel we have learnt a huge amount and are all looking forward to following the development of the Credex scheme.