Private money in Mombasa

Fellow GMU graduate Mwangi Kimenyi has an interesting piece (co-written with David Muthaka) on the creation of the Bangla-pesa, a voucher currency used in a slum called Bangladesh in Mombasa.   The currency is called the Bangla-Pesa (pesa is the word for money in Swahili) and the vouchers are really beautiful.  Here is one example:

banglapesa

For other denominations, click here.

The idea behind the voucher currency is to help residents, who often face a lot of income volatility, essentially smooth consumption. The authors give a description of how it works:

“Businesses that are members of the Bangla Business Network enroll in the program, which distributes an equal number of vouchers to each member. In addition, all the members agree to honor the vouchers as means of exchange. Now when all or some of the traders experience downturns in their business, they can make business transactions among themselves with Bangla-Pesa. Given that the bicycle operator needs to purchase some groceries, he will give the grocer BPs (amount depending on quantity of groceries). The grocer accepts the BP vouchers and gives him the groceries he needs. When the grocer needs to get somewhere via bike, she can go to the bicycle operator (who is also a member of the Bangla Business Network) and take a ride using her BPs. The transactions do not have to take place simultaneously. This is not a barter trade system because the vouchers are used to make transactions for many goods and services among all members of the business network. As a result, the traders in this slum are able to engage in a whole range of transactions using Bangla-Pesa.

Initial results show that Bangla-Pesa is making a real difference in members’ lives.  A survey showed that 83% of the members reported an increase in sales due to the vouchers, while only .05% report lower sales.  The vouchers make up a good amount of the transactions these participants make, about 22% of daily sales.

The authors note that these types of programs can increase community participation and spirit, although they raise some interesting questions to consider before recommending widespread adoption of vouchers: Could such use of a localized currency weaken linkages with other communities and the larger economy? What might be the impact on the economy if many other slums in country or city adopt their own complementary currencies? Is this a program that should be restricted or regulated? Is it a case of “bad money” driving “good money” out? 

Fore more information on Bangla-pesa, click here.

One thought on “Private money in Mombasa

  1. I’m trying to think about why there is a need for a voucher system instead of just giving cash. Is it a lack of faith in the official currency? Or perhaps to ensure that the users won’t remit the extra money and instead use it for their daily needs, as is the intention of the voucher program? Otherwise, it seems that the defining feature of the voucher vis-a-vis cash is that it can only be used within the network, which ostensibly promotes trade within the community, but is there a strong reason to suppose that wouldn’t happen if they got cash anyway?

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