Exploring the Power of Complementary Currencies for Revitalising the Caribbean Economy
Complementary Currencies (CCs) have been around since the 1980s and are currently being used by
over 5000 communities worldwide – ranging from small villages in Africa to whole countries such as
Switzerland. CCs have proven to support economic development specifically in regions plagued by
liquidity issues, which begs the question: Can a Complementary Currency solution revitalise the
Caribbean economy?
What are CCs? CCs are defined as alternative forms of currency that work alongside a country’s legal tender and whose use is confined to a particular region, business network or sector. Design wise, CCs may be backed by different forms of reserves, may be convertible to national currencies, and can take cash, digital, or hybrid mediums.
The Swiss WIR (Wirtschaftsring) is one of the oldest surviving and most successful CCs. It was
created in Switzerland during the 1930s in response to currency shortages and global financial
instability. Today, the WIR is used by 20% (around 62,000) of Swiss small and medium-sized
enterprises as a settlement mechanism allowing them to buy from each other without using Swiss
Francs. On average, the WIR facilitates exchanges representing between 1-2% of Switzerland’s GDP
and has an equivalent annual turnover of $1.31 billion USD. This CC has been credited as a key
driver of counter-cyclical stabilisation of the Swiss economy for the past 80 years, through its creation
of purchasing power for SMEs outside of the Swiss Franc.
Similarly, a Caribbean CC has the potential to benefit the region’s economy in several ways, including
among others: boosting intra-regional trade; tackling USD liquidity drenches and economic leakages;
and buffering from large-scale volatility.
The Caribbean’s lack of a direct inter-island settlement system presents a significant barrier for
intra-regional trade, which only accounts for around 10% of CARICOM’s total trade. Currently,
cross-border payments rely heavily on foreign correspondent banks, making them expensive, slow
and susceptible to the ongoing de-risking phenomenon. Actors like micro, small and medium-sized
enterprises and entrepreneurs are further excluded from participating in the regional economy when
they are unable to obtain merchant accounts to settle cross-border transactions. A stable,
asset-backed Caribbean CC, fully convertible to the region’s national currencies, can provide a
financial bridge fast-tracking the CSME, acting as a direct high-speed, low-cost, cross-border payment
medium.
Trade imbalances and capital controls in the Caribbean makes US dollars inaccessible, which is
problematic given the current settlement system’s reliance on US dollars. Caribbean currencies have
very low trading volumes which attract higher spreads (fees) and several exchange pairs are not even
available. The region’s overreliance on US dollars continues to place pressure on foreign reserves.
However, a Caribbean CC can create much needed liquidity by making accessibility as simple as
possible, incorporating rules to keep money circulation among users and by broadening business
opportunities. By design, a CC has confined use which encourages local wealth circulation – a feature
particularly beneficial for plugging some of the region’s economic leakage. This can stimulate a
multiplier effect of increased economic activity, employment and standards of living.
CCs buffer local economies from global shocks as they can be deployed to boost economic activity
when the financial system is unstable and in the Caribbean’s case foreign currency is scarce. Given
the region’s multidimensional vulnerabilities (e.g. susceptibility to de-risking and financial crises
originating in the US, natural disasters, public health emergencies), CCs are particularly beneficial for
building resilience in Caribbean economies.
Evidently, CCs have tremendous potential to revitalise the Caribbean economy and address existing
challenges. Recognising this, Barbados-based FinTech company CaribCoin has developed Carib$, a
Caribbean CC which encapsulates this article’s value proposition. Carib$ is an asset-backed digital
CC facilitating high-speed, low-cost, cross-border payments between businesses in CARICOM.
CaribCoin’s mission revolves around creating a fast-track towards the CSME by enabling seamless
digital cross-border payments throughout the region.
