January 2009
Chiemgauer, Germany and Banco Palmas, Brazil
Social money for sound community development
“Miguel” Yasuyuki Hirota

1) Introduction: What is social money?

Social money (alias complementary currency, local currency etc.) is a means of exchange to be used in parallel with the official tender of each country and its “mechanisms of issue, distribution and control are of transparent character and distributive equality” (Primavera, 2001) although this topic is foreign to a great majority of those who have been working arduously to build up the solidarity economy, especially in Asia. This short report is my humble essay to illustrate how this tool is effective in helping communities achieve its endogenous development, studying two practices.

It would be significant to begin this article with questioning something that we tend to take for granted: “what is money?” Lietaer(2001), who came up with the concept of “complementary currency,” defines that it is “an agreement within a community to use something as means of exchange,” suggesting us the use of something else as such if we are unhappy with the existing rule of the conventional money. He coined the word “complementary currency” as he found out that the conventional monetary system tends to promote domination, hierarchy, technology, peak experience and other sorts of male (yang) values from the Taoist perspective, suggesting the use of complementary means of exchange to nurture the female (yin) principles such as collaboration, equality, sympathy and sustainability in order to balance yin and yang in our society.

Thousands of social money initiatives have emerged all over the world since 1980s to deal with unsatisfied social and/or economic needs, such as LETS, Time Dollar (both in United Kingdom, United States, New Zealand, Japan and other countries), Ithaca Hours (Ithaca, New York) and Projet SOL (France) to fulfill some unattended demands. On this survey I will focus on Chiemgauer at Prien am Chiemsee, Germany and Banco Palmas at Fortaleza, Brazil, showing how they have achieved their own economic goals without abandoning their solidarity.

2) Chiemgauer (Prien am Chiemsee, Germany)

Chiemgauer, practiced in a part of Bavaria between Munich and Salzburg (Austria), is one of 30 regional currency systems in Germany, Austria and the Switzerland, defined as a way of complementary currency with the aim to satisfy unmet needs with unused resources at the regional level (Kennedy and Lietaer, 2004). These initiatives deal with a geographic area of approximately between 10,000 and 1 million inhabitants, with the hope to replace 30% of all economic activities there.

Chiemgauer was founded by Waldorf female students in January 2003 under the supervision of Christian Gelleri, professor of economics who taught them about the theory as well as practices of complementary currencies. Notes of 1, 2, 5, 10, 20 and 30 Chiemgauers (equivalents to euro) are issued and each note has a design by students.

Users exchange euro into Chiemgauer at local non-profits’ offices that they want to support financially and pay in these vouchers at local shops which accept this means of exchange, though the Regiocard allows its users to get this regional currency without having to visit the non-profit whenever they want to have this cash. Local businesses can spend Chiemgauer at other local businesses or reimburse in euro although 5% of commission fee is charged, of which 2 % is spent as Chimegauer office’s administrative expenditures and the rest of 3 % stays at the non-profit which sells these notes. Let us see which advantages each actor has with this system:

  • Non-profits: they get 100 Chiemgauer at the price of € 97 and resell them to their members et al at € 100, earning € 3 per 100 Chiemgauers that they sell.
  • Consumers: they exchange euro into Chiemgauer at the non-profit that they want to support and buy goods at local shops with these vouchers, supporting the non-profit financially without virtually spending anything.
  • Local businesses: they accept Chiemgauer as equivalent of euro and spend them to buy grocery from other local businesses or reimburse it into euro at the cost of 5% of commission fee. This charge is justified because of the very fact of improving these businesses’ image by supporting community activities by way of Chiemgauer, winning people’s trust and leading eventually to the increase of their turnover.

Another feature of Chiemgauer is that it has introduced the demurrage, proposed by Gesell (1920), in order to prevent this complementary currency from degenerating into a means of hoarding and to confer it on high liquidity. It is required to put a stamp of 2% of the face value (€ 0.10 for 5 Chiemgauer, for instance) every three months to keep it valid, obliging its bearers to give up hoarding this complementary currency and to spend it as soon as possible and stimulating consequently the regional economy.

2,975 members (1,992 individuals, 779 businesses and 204 non-profits / projects / municipalities) join this system with more than 300,000 Chiemgauers into circulation in February 2009. The annual turnover of local businesses in Chiemgauer is € 3,941,843 in 2008, 61% more than the previous year, and as a result donations to non-profits also grew to € 35,477, 38 % more than the previous year. Chiemgauer office itself is also a non-profit and is therefore managed by its members in a democratic way.

Chiemgauer is helpful for the sustainability of socio-economic activities within the region by providing an additional income to non-profits and creating another economic circle within the region which is different from the one created by the transnational currency euro, since member businesses become more competitive thanks to the incentive given by this system which encourages member businesses rather to spend this currency at other member businesses than to reimburse it into euro. Chiemgauer is regarded as a reservoir which stocks money = purchasing power within the region so that it should flow out neither to huge financial centres nor to multinationals, strengthening the region and making its development more sustainable and endogenous.

3) Banco Palmas (Fortaleza, Brazil)

Another remarkable initiative of social money has been operational since 1998 at Fortaleza, Ceará, Brazil. A neighbourhood called Palmeira, where some 32,000 people live, was a shanty town founded in 1973 and ASMOCONP (Associação dos Moradores do Conjunto Palmeira, Association of Residents of the Palmeira Neighbourhood) was founded in 1981 to struggle against their miserable life standard, winning the fresh water and electricity services in 1988, sewage in 1990, and thus nurturing their social capital. Despite such developments the poverty was everywhere at the community, and ASMOCONP founded the Banco Palmas in January 1998 to improve people’s economic life, mainly with its volunteers administering this financial institution. Nowadays more than 38 similar systems are active throughout Brazil.

Currently Banco Palmas gives different financial services not in real (Brazil’s official currency, R$) but in their local social money called palma (P$). Each P$ is backed with a R$, each note is equipped with bar code, serial number and other devices to prevent counterfeits and manufacturers/merchants are allowed to reimburse R$ with P$ for their external trades. It offers the following financial services at lower interest rates than conventional commercial banks on top of giving different training courses, supporting entrepreneurs:

  • Microcredit for production, trade and service: up to R$1,000 (about US$450), interest rate of 0.5 to 3% / month
  • Credit Card “Palmacard”: up to R$100 (about US$45), only accepted within the community and no commission fee is charged for this service
  • Microcredit for women: the bank has financed women in precarious situation
  • Palmacasa: another financial service to help people improve their home

Some of member businesses offer discounts for purchases in P$, encouraging people to spend and accept this local currency.

An interesting experiment took place there in 2002 as a trial to see the feasibility of the Fomento Project by Strohalm, a Dutch NGO which is specialised in setting up social money systems in Europe and Latin America. R$50,000 donation came from the Dutch government to build a school at Palmeira and only R$10,000 was paid directly in the national currency to construction workers while they received the remaining amount in P$. The R$ which stayed at the Banco Palmas was used for microcredits repayable either in R$ or P$, encouraging such entrepreneurs to accept P$.

The actual amount of “cloned” real for microcredit services was R$48,587, slightly even more than the projected one because the R$ devaluation at the very period increased furthermore the value of the donation from Europe, although the total amount of microcredit was R$52,664, slightly even more than the deposit, because some businesses repaid at least partially in R$, allowing the Banco Palmas to lend it once more (Ramada et al, 2003).

This mechanism allows the donation to trigger further economic developments, creating the two different currents of money, towards construction workers on one hand and towards local businesses on the other hand, while in ordinary projects only the first current would be possible. Although it is hard to evaluate how much transactions saw the light thanks to this project, it is estimated that at least 80% of P$ bills were spent more than once before returning to the Banco Palmas (ibid).

4) Conclusion and more

Two different sorts of social money initiatives have been briefly studied in this article to prove their effect onto the local / regional economy. Chiemgauer is an euro-backed voucher to be circulated among local businesses and consumers, encouraging the endogenous economic activities in a rural part of Bavaria while Banco Palmas, operational in a neighbourhood at a huge city, is helping local businesses and entrepreneurs by offering microcredit in their own means of exchange. It is worth reminding that these two examples are just a tip of the iceberg of thousands of different social money practices.

I would like to add that the appropriate design of social money is essential in achieving your own goals: it is highly advisable to use manuals such as Lietaer and Hallsmith (2006) and/or to partner with experienced social money experts to introduce a successful social money system into your community.


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Lietaer, B., “The Future of Money,” Century, London, 2001
Lietaer, B. and Hallsmith, G., “Community Currency Guide,” http://www.global-community.org/gc/...
Primavera, H., “LA MONEDA SOCIAL COMO PALANCA DEL NUEVO PARADIGMA ECONÓMICO,” 2001, http://www.redlases.org.ar/HTML/DOW...
Ramada, C. et al, “Manual Bônus de Fomento”, Porto Alegre, 2003, http://www.instrodi.org/downloads/a...