Somchai Homla-or, representing the society, said the community-based system used in five villages in Kut Chum district was above board.

"Organisers of the bia system have no intention to replace the baht," said Mr Somchai. "The use of bia between members of the community represents a private contract. The bia is a credit note rather than money."Since March 29, villagers have been using the bia to trade in local produce and handicrafts at markets, a seminar at Chulalongkorn University was told on Tuesday.

Since then, the Bank of Thailand started taking an interest and sent officials from its northeastern branch to look into the legality of the system.

Pitttaya Songsawat, of the central bank's legal division, said: "In my opinion, the system is not illegal.

"There is clearly no intention on the part of the villagers to replace the national currency; the bia can only be used within the community. The principle is good, that is to strengthen the community economy."Man Samsee, a village head, said the system enabled people to borrow up to 500 bia, interest-free. "One bia is equivalent in value to one baht but cannot be exchanged for official currency," he said.

Mr Somchai said the central bank's main concern was the use of the word "bank" in the bia system which violated Article 9 of the Banking Act.

"The custom of using the word 'bank' was established by the government itself-rice banks, buffalo banks," he said.

While there was no direct reference to such a system in the constitution, it did guarantee citizens' rights to initiate programmes to strengthen communities.

In the view of the council, the bia is one such programme.

"If the government takes a broad interpretation of Article 9 of the Currency Act and decides the system is illegal, the Law Society will be pleased to represent the community," Mr Somchai said.

Several speakers called on the authorities to support the bia system.

Kanoksak Kaewthep, a Chulalongkorn economist, said: "July 2, 1997, will be remembered as the day the bubble burst. March 29, 2000, will mark the day villagers came up with their response to the crisis."Mr Kanoksak said the bia system responded to a number of underlying economic problems. "Community currencies are not a panacea but they do raise the question-do citizens have the right to start initiatives which distribute resources more fairly? This marks the first step in the construction of a new economy-a real economy."