Complementary currencies can take a wide variety of forms to adapt and fit specific needs, but the main features of a complementary currency are that it earns zero or negative interest, it often comes with an expiry date, and its circulation is limited to a local ‘community’. Sometimes the currencies are electronic but others take the form of physical vouchers. Complementary currencies can be backed by the government’s currency (e.g. one Local Currency Dollar = one US Dollar) or they can be entirely separate from the country’s currency system (e.g. one hour of work = 10 Local Points). The creators of the complementary currency will decide the value of the currency, and where and how the currency can be exchanged. Complementary currencies do not aim to replace the national currency, but work alongside it. Complementary currencies are legally classed as ‘vouchers’, but are subject to tax in the same way as cash.
Complementary currencies are designed to keep money flowing within a particular geographic region, or within a certain network of businesses or individuals. They have also been used to promote eco-friendly behaviour by encouraging people to purchase local items, thereby reducing transport costs and emissions.
Community currencies are often used to keep money flowing within a particular town or city. The currency often resembles the national currency, but with local celebrities featured on the designs. The currency is valid only with participating retailers. Community currencies are often used in order to promote local businesses, to reduce the environmental damage of transporting goods, and to boost pride in the local area.
The Lewes Pound is one of a number of similar local currencies in use throughout the UK. The currency can be purchased at a rate of one Lewes Pound to one Pound Sterling, but it can only be spent in a certain number of participating local retailers in the town of Lewes. Residents are able, at any time, to exchange their Lewes Pounds for Pounds Sterling, and vice versa. The Lewes Pound was introduced in order to ensure that money circulated within Lewes, and was not siphoned off by large national chains who didn’t reinvest their profits back into the local area. The scheme aims to improve the economic, social and environmental situation of the city by:
See also: The Lewes Pound, The Totnes Pound, The Bristol Pound, Transition Towns
Loyalty cards, air miles and discount vouchers are all examples of businesses using the concept of complementary currencies to increase profits or market share. As with the Lewes Pound example, its purpose is to keep money flowing within a particular network of businesses. By rewarding customers with points, discounts or other incentives when they spend money, the customer is encouraged to be loyal to a particular shop, brand or chain and to continue spending money within that system. The points are not legal tender but are instead legal vouchers entitling the customer to specific rewards. Usually, the points cannot be exchanged for the national currency, but can sometimes be transferred and used to make purchases or earn discounts from partner organisations.
Sainsbury’s is a national chain of supermarkets. Customers of Sainsbury’s are encouraged to sign up for a Nectar Card. When making purchases the customer earns Nectar Points. These can later be exchanged for discounts on goods and services from Sainsbury’s, or for vouchers to be redeemed with partner companies such as restaurants, travel companies, hardware stores and cinemas. The Nectar Points cannot be redeemed for Pounds Sterling. The purpose of Nectar Points is to encourage customer loyalty by rewarding customers who spend their money with Sainsbury’s, or their partners.