A New Instrument for Effective Development Aid
In emerging economies, the lack of disposable income is a real obstacle to economic growth. Adding evenly distributed currency in a local setting can tackle this problem. Especially, if the supply and usage of said currency is governed democratically. The Encointer Association has tackled this opportunity in the past 6 years and developed a system facilitating a simple solution leveraging technological advances such as mobile phones and blockchain technology:
A local community currency, paired with a fractional reserve governed by democratic principles, issued as an unconditional income to all community members. The system has been battle-tested for two years and can now be scaled.
Encointer System
The Encointer Association is a Swiss-based nonprofit organization dedicated to empowering communities worldwide by enabling them to generate their own local digital currencies. The system consists of a local currency, issued as a regular unconditional income and a liquidity fee. This stimulates local economies and reduces inequality. Our digital technologies allow bottom-up participation with the principle of subsidiary democracy.
Encointer’s currency system distributes a community currency regularly, similar to universal basic income, and requires in-person meetups where community members mutually attest each other to verify recipients. Key benefits include increased local spending, mitigated inflation, promoting financial inclusion without needing state-issued IDs, and enhanced social capital. The platform is accessible via free apps, is cost-effective, and ensures trust through regular community meetups.
By fostering regular physical meetings and adhering to democratic principles, Encointer builds strong communities and offers a system for effective development aid. The LEU pioneer community in Zurich has demonstrated Encointer’s feasibility.
Nyota Community
The Nyota community currency was launched in September 2023 as an experiment in Dar Es Salaam, using the technical tools and protocol provided by the Encointer Association. Nyota is the most promising implementation, paving the way for many other successful programs in emerging cities. It is a joint venture of the Encointer Association, Chatafisha and Jukumu.
After a successful launch, Nyota’s community leaders quickly expanded to nearly 100 participating individuals, proving the viability in the Mbuharati region. Nyota has been established as a payment alternative for locally produced goods and services. The community leaders leveraged the local tradition of saving groups (mchezo) to accelerate acceptance. The Noyta community reserve is initially filled through cash injection. As this reserve secures the value of the local community currency, it acts as a fractional reserve: Each dollar injected into the reserve can facilitate multiple dollars of turnover within the community economy. Nyota uses the community reserve to invest in starting local businesses that are targeting basic needs.
Chatafisha
Chatafisha is a community-driven team building digital solutions for marginalized communities. The word Chatafisha itself comes from two Swahili words; Chata meaning mark & Safisha which means cleaning or enhancing. Put together it means enhancing and advancing communities by leaving a mark. Chatafisha works with various communities on the ground such as waste pickers and community savings groups. Understanding their pain points and challenges allows them to tackle these through disruptive solutions.
Jukumu
JUKUMU is the short form of the words Jumuiya ya Kiuchumi, Ujasiriamali na Maendeleo ya Umma which means Economic Community, Entrepreneurship and Public Development, this is a non-government organization that helps build good relationships in the community, by creating and uniting groups of entrepreneurs, business professionals, and other services providers to solve various challenges that our communities face in economic and social matters. Further, members are kept close to investment opportunities, self-awareness education, and marketing techniques. JUKUMU works within the borders of Tanzania, and so far has engaged more than 200 groups represented by 58 Community base Trainers (CBTs).
Outlook
Local currency brings prosperity:
Education is an important aspect of our community-building approach. With an increased financial literacy the reach and the adoption of the local currency within the Mbuharati Region in Dar Es Salaam can be increased.
Economic sustainability of all participating actors:
The financial sustainability of all actors in Nyota is ensured by fostering a resilient local economy. We focus on the effective use and replenishment of the community reserve, support continuous local spending, and enable the growth of new local businesses.
Develop impact assessments:
Comprehensive impact assessments will be created to evaluate the social and economic outcomes of the local currency initiative. These assessments will guide improvements and demonstrate the initiative’s effect.
Preparing for growth within Dar Es Salaam and Tanzania:
We are preparing to scale the local currency model within Dar Es Salaam and eventually across Tanzania. This preparation includes building the necessary infrastructure and partnerships to support widespread adoption.
