By Pak Suro, Pak Ngatidjo,
Bekatigade (Regional Credit Union Coordinating Body, Yogyakarta, Indonesia)
Stephen DeMeulenaere,
Yappika (Institute for Strengthening Community Initiative, Participation and Partnership)
Jakarta, Indonesia, 2000

Outline

I. General Presentation

A. Background

B. The Locations

C. Goals

D. Benefits

II. Organization and Operation

A. The Community Coupon

1. Note Design and Security

a. Money Volume Calculation for Each Credit Union CCS

2. Administration Positions for CC Systems

a. Administrator

b. Teller(s)

c. Trustee

B. The Credit Union Community Coupon (CC) System

a System Accounts

b. Individual / Enterprise Accounts

a. Withdrawing Coupons on Credit

b. Depositing Community Coupons to Account

C. Noticeboard of Offers and Requests

III. Monitoring and Evaluation

A. Performance Indicators

B. Indicators for Monitoring and Evaluation

C. Result Assumptions

IV. Service Charges

A. Account Opening

B. Credit

C. Fixed/Variable Termination Date

I. General Presentation

A. Background

Through a workshop at Bekatigade and site visits made to 6 rural Credit Unions in the Bekatigade Network from July 29-August 2, 2000, on the topic of Community Currency Systems (CCS), we discovered a strong demand for three types of money:

1. A community currency accessible via credit.

2. A convertible community currency

3. A stable community currency.

After looking at the options, we determined that a Community Coupon System, in which coupons were withdrawn from Credit was the easiest to implement. A Convertible Community Coupon was a little more complex, and perhaps too complex to implement at the outset, thus we present it separately and it is not included in this document. Thirdly, after exploring possible designs for a Convertible Community Coupon that was always stable was a very complex process and would wait. However the participants were satisfied that raising the money supply to levels sufficient for the community was a suitable replacement for stability and convertability. A strong desire to see the system operate at the regional level was also indicated by a majority of the participants.

The following is a design created by Pak Suro and Pak Ngatidjo with Stephen DeMeulenaere at Bekatigade on August 7, 2000.

B. The Locations

Following the visits made to 6 Credit Unions in the Bekatigade Network, we chose three to host two pilot projects, with one Credit Union for a potential third project or spare:

1. Mendasar Credit Union
2. Tri Tunggal Credit Union
3. Subur Credit Union

C. Goals

The goals of this program are:

• To provide the means for a community to safely and simply increase the money supply in the community without causing inflation.
• To encourage economic circulation by enhancing local production capabilities in the community.

• Encourage circulation of community coupon while encouraging saving of national currency, to separate the contradiction of encouraging saving while at the same time trying to encourage spending.

• To separate the contradiction between the scarcity of money needed to maintain value with the need to have a sufficient medium of exchange in the community.

• To identify individual and community assets which can be directed towards the meeting of community needs.
• To increase community control over economic activities in a local area.

D. Benefits

• Increased volume of currency in the community without inflation.

• Reduced need to migrant to urban areas in a search for money.

(reduces pressure on governments to deal with urban poverty)

• Protection and enhancement of culture at the local level

(culture does not need to be sold for income)

• Promotion of multi-sector development

(income, enterprise, food, health, women's, education, savings & loan,

capital accumulation, infrastructure development, etc. By encouraging

• Increased amount of time the national currency stays in the local economy.

(decreases need for government capital input, increases multiplier.)

• Reduction of environmentally destructive activities.

(reduced need to clean up pollution or pay for effects of pollution)

• Increased support for small enterprise development.

(reduced need for government involvement and thus reduced cost)

• Demonstration of a counter-cyclical economic tendency.

(communities protected from national economic crises)

• New enterprise opportunities.

(stronger and more diversified community economic base)

• Increased support for beneficial community projects.

(less need for government construction of infrastructure)

• Protection and enhancement of culture at the local level

(culture does not need to be prostituted for income)

• Promotion of multi-sector development

(income, enterprise, food, health, women's, education, savings&loan,

• Increased possibility of local import substitution.

(increased employment and enterprise development)

• Increased employment opportunities.

(increased general standard of living)

• Increased importance of traditionally undervalued activities.

(women's work, community work gains greater significance and

respect)

• Reduction of environmentally destructive activities.

• Increased strengthening of social relationships and community bonds.

(better social reciprocation produces many benefits)

• Demonstration of a counter-cyclical economic tendency.

(community protected from economic downturn)

• Mobilizing the real wealth of a community.

(community activity and production is valued and respected)

• Decreased gap between the richest and poorest members of a community.

(better community relations, improvement in standard of living of the poor)

• Increased support for beneficial community projects.

(community benefits from infrastructure development)

• Positive Advertising for Credit Union's role in CED.

• Promotion of multi-sector development

(credit Union seen as taking a lead role as initiator and financier)

• Increased liquidity and velocity of the currency.

(increased use of Credit Union services)

• Increased access to the local market.

(increased use of Credit Union services)

• Increased possibility of local import substitution.

(enterprise financing)

• Increased employment opportunities.

(increased use of Credit Union services, increased saving)

• Increased support for small enterprise development.

(enterprise financing)

• Demonstration of a counter-cyclical economic tendency.

(stronger community economic base for Credit Union)

• Increased personal savings & disposable income.

(increased deposits)

• New enterprise opportunities.

(enterprise financing, diversification of economic base)

• Increased support for beneficial community projects.

(enterprise financing, positive advertising for taking lead role)

• Increased purchasing power at the local level.

(local needs are better met, local production increases)

• Increased liquidity and velocity of the currency.

(multiplier effect, increased economic activity)

• Increased amount of time the national currency stays in the local economy.

(everyone benefits)

• Increased access to the local market.

(increased production and ability to purchase locally-produced goods)

• Increased possibility of local import substitution.

(employment, training, enterprise opportunities)

• Increased employment opportunities.

(increased training and standard of living)

• Increased importance of traditionally undervalued activities.

(recognition and valuation of women's and community work)

• Increased support for small enterprise development.

(training, enterprise development and employment)

• Increased strengthening of social relationships and community bonds.

(increased well-being and community cooperation)

• Mobilizing the real wealth of a community.

• Fostering local self-reliance & individual self-esteem.

• Increased personal savings & disposable income.

(increased ability to meet needs)

• New enterprise opportunities.

(employment and enterprise development)

• Decreased gap between the richest and poorest members of a community.

(standard of living of the poorest increases)

• Increase possibilities for re-employment in the local economy, acting as an intermediate step to assist people to learn skills for new jobs.

II. Organization and Operation

A. The Community Coupon

The Community Coupon System (CCS) as it will be called until a suitable name in Indonesian can be found, is a service offered by Bekatigade to its Credit Union members. Bekatigade will work in cooperation with Yappika in this program.

The means of exchange are a Coupon, as yet unnamed nor designed, which is valued at par with the Indonesian Rupiah, and denominated in equivalent values of 1, 5, 10, 20 and 50,000 notes.

The Coupon is issued through the account of a member. We are in discussion about future forms of issuance.

At first, however, members will only be able to withdraw non-convertible Community Coupons (CC) on credit, from their account with to a limit of 100,000 rupiah equivalent. However, a 7% charge in Rupiah is attached up front.

1. Note Design and Security

The appropriate design of a Community Currency note is essential to ensuring the legality of the system, a clear understanding of the goals of the system by those who will receive and use the currency, and an appreciation of the cultural and identity issues involved.

1. Value of the Coupon

Coupons can be valued in different ways, either at par value with the national currency, in terms of time, related to some method of backing the currency. This is not an issue of note design, it is an issue of system design.

The value of the coupon must be identified in the language used by the community, and in the language used by the country.

As many people know the value of a currency by its color, different valuations of the note should be represented visually, by using a different color.

2. Name of the Coupon

The name of the coupon should be chosen by the community, reflecting community identity, culture and linkage to previous forms of money or forms of social reciprocation.

3. Graphic Representation of the Community

Graphics should be chosen by the community which reflect the identify and livelihoods of its citizens. Graphics should consider issues of: cultural life, community life, economic life, seasonal activities, natural resources, local vegetation, geographic features, and favorite activities of the people, and objects or examples of community pride.

4. Resemblance to National Currency

So as not to be confused with national currency, the note must be of a different, size, color, design and text than the corresponding national currency.

5. Text and Authorization

To ensure legality, a statement limiting the circulation of the currency to the local level must be stated on the note. For example, in Thailand, the note contains the following statement, "Bia can only be used to exchange goods and services in the Kud Chum community". The text must also state that signatories to the note are not responsible for redemption or any other rules as stipulated in the system's articles.

The text must be authorized by those who are responsible for the system through which it is issued, and any disclaimers must be printed on the note. In Thailand, the note carries the signature of the Bia System Manager, and the Abbot of the Buddhist Temple.

The general definition of "Legal Tender" is that "legal tender must be accepted in any quantity for the repayment of all debts, public or private." Thus it should also be stated that the note may not be used for the repayment of national currency debts.

6. Protection Features

As community currencies are limited by geographic or social area, and are often spent in conjunction with the national currency, there is little interest in counterfeiting them, and to date there is no example in the world of counterfeiting among mutual credit (systems where the currency is issued as loans) has been found. That said, a number of measure can and should be taken.

A. Termination Date

A termination date for the note can be set, one or two years from the date of issue. Expired notes can be given as souvenirs, samples, or used as decoration, ceremony, etc.

B. Serial Number

The notes can be serialized and recorded for transparent account-keeping.

C. Paper Type

Special paper can be purchased or produced locally, which can make it very difficult to match, and very easy to spot forgeries.

D. Offset Print

Unusual printing methods can be used that make it difficult to photocopy, scan or mechanically reproduce the note, except through the exact printing procedure used.

E. Stamps and special marks

The note can be press-stamped or marked with special inks, readable with common readers such as blacklight ink.

a. Money Volume Calculation for each Credit Union CCS

Estimated salary spent on a range of key basic needs x number of families x 12 months. Projected volume per month / year. Or, credit limit x number of members + one half of volume

eg. 100,000 (credit limit) x 100 (members) + 5,000,000 (one half of volume) = 15million

2. Administration Positions for CC System

a. Administrator

• Initials administration and community fund transactions.
• Supervises account keeping.
• Helping existing members to spend the coupons they earn.
• Signing up new members with an eye to expanding the skills base / resource base.
• Identifying and developing small business opportunities.
• Educating the community on topics of self-reliance and empowerment.
• Linking the system with regional and national bodies.

b. Teller(s)

• Opens Accounts.
• Fulfills requests for withdrawals and deposit.
• Maintains Accounts.

c. Trustee

• Ensures correctness of transaction ledger and accounts, transparency.
• Ensures correctness of System Summary.
• Acts as representative to general membership.
• Handles low-level dispute resolution between members.

Advisory Board

An Advisory Board is needed to ensure that the members of the system have full input into the process and design, and that their opinions are heard. This Board is chaired by the Trustee, who is elected by the members at the Annual General Meeting.

This Board can raise issues for discussion about the development of the system, discuss violations of the articles and make recommendations for action. They can also form sub-committees to promote the use and development of the system, such as a promotions committee, market committee, events committee, community projects committee, and etc.

B. Credit Union CC System Management

The Community Coupon System is managed by the Credit Union. Each Credit Union provides the services of:

• Opening Accounts for its Individual and Business Members.
• Handling withdrawals and deposits from/to these accounts.
• Applying service charges.
• Maintaining the Noticeboard of Offers and Requests
• Involving the membership & community in design of the system.
• Assisting members to use the new currency.
• Coordination of Markets.

• Management of the Community Fund

• Coordination of Community Projects

-Water Storage

-Rice & Harvest Storage

-Transportation

-Community Infrastructure (electricity, roads, buildings)

• Training and Education

-skills and basic education

-value-added production

The Community Fund is a fund for financing Community Projects. These Community Projects are determined by the whole membership of the Credit Union. It is suggested that a piece of paper be put up on the Noticeboard of Offers and Requests asking members to list which Community Projects they consider to be most important. At the General Meeting, members can decide which Community Projects are to be funded.

1. Membership and Accounts

A Community Coupon (CC) System is a system of accounts. Each member opens an account, providing information about themselves, what they have to offer, and what they need. They receive information about how the system works, and what goods and services are currently being offered and requested in the community. When an account is opened, the new member is free to withdraw coupons from their account, or convert their Rupiah for convertible community currency.

a. System Accounts

When opening the CCS, two accounts are managed by the administration:

1. Administration Account #1 for receiving fees in Coupons,

2. Community Fund Account #2 for receiving fees in Coupons,

The Administration Account receives money from withdrawals of Community Coupons to use for its internal expenses. The Community Fund Account is used for grants, loans, membership development and other community expenses and projects, agreed to by the membership.

System Account Ledgers

b. Individual / Enterprise Accounts

Account Opening Form

Each individual has two ledgers in their account, one for non-convertible and one for convertible community currency. Each time a member makes a withdrawal of non-convertible community currency, or converts their Rupiah into convertible community currency, the transaction is recorded on a transaction ledger which is later transferred to their account.

As members withdraw and make deposits to their account, their accounts are updated. The individual account ledger should be duplicated using a photocopier or carbon copy so that the administration always has a master copy. As this information is very important, it should always be kept in a safe, fire-proof place.

Members are allowed to withdraw non-convertible community currency from their account subject to an up front 5% charge. They are free to convert as much Rupiah into convertible currency as they wish, but must pay 10% on conversion back to Rupiah.

Individual / Enterprise Account Ledger:

2. Transactions

All transactions (withdrawals, conversions, fees) are first recorded on a Transaction Ledger.

3. Process

a. Withdrawing Community Coupon on Credit

1. Ask for the Member's Name and/or Account Number.

2. The withdrawal amount requested is charged 7%, 5% for Administration Fee and 2%

for the Community Fund.

3. The Transaction Ledger is filled out by the Teller

-The withdrawal amount is listed in the Coupon Out column,

-5% of that amount is listed in the Administration Fee column

-2% of that amount is listed in the Community Fund In column.

4. The Ledger line is signed by the member.

5. The Community Coupon Note is given to the member.

6. The Member's Account is updated at that or at a later time.

7. The Administration Account is updated at that or at a later time.

-The Administration Fee in the Transaction Ledger is recorded in the

8. The Community Fund is updated at that or at a later time.

The Community Fund Fee in the Transaction Ledger is recorded in the

Community Fund Account.

b. Depositing Community Coupon to Account

1. The Amount to be deposited in counted by the Teller.

2. The Transaction Ledger is filled out by the Teller.

The In Column is filled by the Teller.

3. The Transaction Line is signed by the Member making the deposit.

4. The Member's account is updated at that time:

-The In Column in the Transaction Ledger is copied to the Member's Account.

5. When the Member's Credit Limit (500,000) has been deposited, their account is

marked to show the new Credit Limit.

4. Periodic Account Clearing (Period End)

At the end of every month, the System should be cleared and totals generated for publication to the membership. Administration charges are applied to each account.

• Total the Coupon Out (Credit) column and write it in the Out Column of the System Journal.

• Total the Coupon In (Deposit) column and write it in the In Column of the System Journal.
• Subtract the Out Column from the In Column provides the figure of Cash in Hand.
• This should be equal to a System Balance of Zero.

System information is collected from individual accounts, and entered into a system ledger that looks like this:

The totals from each member's account at that time is summarized onto each individual account, and then entered into the system account.

Any accounts that have closed should be balanced at zero (the member is required to make up their negative account balance before leaving the system) otherwise funds need to be transferred from the balance account in order to balance the account at zero before closing.

5. System Summary

General Summary of Accounts

The following system summary should be posted in a public space for all members to see.

Specific Summary of Accounts

A thorough summary of accounts will list each member's name and their account balance for the period.

C. Noticeboard of Offers and Requests

Each member, upon opening an account and at any time they wish, lists the goods or services they are Offering or Requesting for display in the Credit Union.

The Noticeboard can be organized into categories, for example:

III. Monitoring and Evaluation

A. Performance Indicators

Information required before program starts:

1. Account Average before program started. Overall average and highest increase,

lowest decrease.

2. Savings average before program started. Overall average and highest increase, lowest

decrease.

3. Average Asset Growth of Credit Union. Overall average and highest increase, lowest

decrease.

4. Average Savings Deposit. Overall average and highest increase, lowest decrease.

B. Indicators For Monitoring and Evaluation

• Number of new accounts in CC system.

• Velocity of Community Currency using a "Tracer Note" & research.
• Number of new businesses formed as a result of CC system.
• Estimate of monthly spending in CC as portion of income.
• Increase/decrease in accounts and savings in rupiah (Credit Union accounts)

C. Result Assumptions

• Credit Union will see an increase of new accounts above the previous average.
• Credit Union will see increased savings of Rupiah above the previous average.
• Credit Union will see increased money supply in the community.

• Business members will see increased business both within and outside of the community.

• Individual members will see increased economic activity for themselves and the byproducts of this activity in their community.

• Community will see benefits of increased local economic activity.

These indicators will be used to generate specific results of the impact of the system.

IV. Service Charges

A. Account Opening

Account Opening is Free.

B. Credit

-7% flat charge on receipt of Credit in Community Currency.

-5% to Credit Union, 2% to Community Fund.

-Repayment rate of 10% of balance per month?

(still in discussion)

C. Fixed Termination Date

-The termination date on the note is fixed at September 1, 2001. All notes must be exchange for new notes at the Credit Union, for which a 7% charge is applied.