Wales is to develop its own complementary currency which could boost the economy to the tune of an estimated £250m over the next decade.
The Welsh Government has announced that Circular Economy Wales is being awarded £100,000 from its ground breaking £4million Foundational Economy Challenge Fund to create a mutual credit system.
Based on a model in Sardinia, called the Sardex, the mutual credit system is targeted at Wales’ SMEs.
Eifion Williams CEO of Circular Economy Wales said: “The Sardex benefited the Sardinian SME economy to the tune of 50million Euros last year alone. Wales is similar to Sardinia in that SMEs make up 99% of our businesses, so this has the potential to significantly boost our economy.
“If Wales had initiated a copy of the Sardex in 2008, and it had followed the same growth trajectory, Welsh SMEs would now be strengthened to the tune of £256 million in additional turnover.”
The Welsh Government funding will allow for a consultation and pilot, which is planned to take place in North Wales.
Deputy Minister for Economy and Transport, Lee Waters said: “Our Economic Action Plan sets out the direction for a broader and more balanced approach to economic development focused on making communities stronger and more resilient. The Foundational Economy Challenge Fund is fundamental to this and I’m intrigued to see the results of this mutual credit system pilot by Circular Economy Wales.”
The pilot will be supported by Dr Paolo Dini, research fellow at the London School of Economics, who was a founder of the Sardex.
Dr Dini said: “The Sardex has been replicated successfully in many parts of Italy, so it’s very exciting to be able to pilot this in Wales. This will be the first replication outside of Italy.
“I think the similar economic factors bode well, our challenge will be ensuring that businesses understand the benefits, and will begin consultation shortly.”
The Welsh mutual credit system, called the Celyn, is a digital currency network that helps businesses exchange services and products without using GBP or other state currencies.
Through this inter-trade of goods and services needed to operate, using no cash, helps SMEs weather economic storms and maintain local jobs. As it evolves, credit can be used by employees and customers.
What is the Sardex?
Set up 2008, the Sardex is a business-to-business electronic credit system.
It allows small and medium sized enterprises to participate in a system of mutual credit and do business with other local companies without touching their cash reserves.
Instead of using cash, bank transfer, or standard credit cards to settle transactions, the euro-denominated amount can be recorded as a debt the buyer owes the Sardex network, not the seller.
The seller, in turn, records a credit to their Sardex account. This credit is, in effect, a debt owed by Sardex to the seller.
Participants are expected to keep their Sardex account level within individually agreed maximum credit or debt levels - usually a few thousand euros.
Members must buy as well as sell, and the net amount of credit or debt on purchases and sales made on their Sardex account should net to zero over the course of a year.
Celyn, or holly in English, provides the evergreen strength that we hope to contribute to the Welsh economy.
The leaves of the Celyn are designed to protect its assets; the same protection that was provided by the Sardex system in Sardinia during following the 2010 economic downturn.
The Welsh Government’s Foundational Economy Challenge Fund aims to test new ways of nurturing and growing the everyday parts of Wales’ economy, and is part of the Welsh Government’s work to reach out to those communities across Wales who are feeling disengaged and left behind.