Local Currencies Have a Good Return

Doulgas Rsuhkoff is guest blogging on boing boing and today he wrote a neat post on his small town. A restaurant owner there is trying to expand, but in order to do so he needs to raise cash. The owner turned to the community instead of a bank by selling local credit.

So Halko’s idea is to sell VIP cards. For every dollar a customer spends on a card, they receive the equivalent of $1.20 worth of credit at either restaurant. If I buy a thousand dollar card, I get twelve hundred dollars worth of food: a 20% rate of return on the investment of dollars. Halko gets the cash infusion he needs to build the new restaurant – and since he’s paying for it in 20% tab adjustments, it just comes out of profits. He gets the money a lot cheaper than if he were borrowing it from the bank, paying back in cash over time. Meanwhile, customers get more food for less money.

But wait, there’s more: the entire scheme refocuses a community’s energy and cash on itself. Because our money goes further at our own restaurant than a restaurant somewhere else, we are biased towards eating locally. Since we have a stake in the success (and the non-failure) of the restaurant in whose food we have invested, we’ll also be more likely to promote it to our friends. And since we have already spent a big chunk of money on Comfort’s food, we’re more likely go get food there than dish out more cash for a meal somewhere else.

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