BANGLADESH, Kenya — Residents of Bangladesh, a large slum town outside of Mombasa, Kenya, have come up with an ingenious solution for boosting their business and benefiting their community. That solution is called the Bangla-Pesa, and it is a little piece of paper that is changing the way people do business.
The Bangla-Pesa takes its name from the town, which in turn comes from the the crowded southeast Asian country of the same name. It is a form of alternative currency developed to stimulate the economy and to increase the wages of local business people.
The system works by creating a market for excess goods and services that would otherwise go to waste. Often in Bangladesh, business owners will have plenty of product available, but because the economy is in a downturn, no one has any money to buy these products. Even if every single business owner works hard, they might still not bring in enough money to buy food, medicine or school supplies.
With the Bangla-Pesa, these same business owners can essentially trade their excesses for those of a neighbor. A baker can sell his excess bread even if his customers don’t have shillings, then he can turn right around and spend that Bangla-Pesa on groceries, clothing or transportation from his customers, also business people, and also facing an excess. The result is a kind of extended barter system.
The Bangla-Pesa is used by small business owners, churches and schools. Over 180 participating businesses and institutions accept payment in Bangla-Pesa. The currency is not a voucher, coupon or any form of legal tender.
There was some initial confusion with the Kenyan government over the status of the currency. Will Ruddick, an American economist living in Kenya and the inventor of the Bangla-Pesa, was arrested along with five “accomplices” for illegally producing a competing currency. Only after Ruddick and his fellow businessmen explained the Bangla-Pesa, its function and its separation from the existing shilling economy were the charges dropped.
One of the biggest benefits of the Bangla-Pesa is its durability. Though only a local currency, the Bangla-Pesa helps to stabilize the market, especially after heavy spending periods. School fees, holidays and emergency expenses can all hit a family’s savings in shillings hard. But with Bangla-Pesa, any business person who continues to produce goods and services can continue to afford the essentials.
An organization called the Bangla Business Network (BBN) is in charge of managing the Bangla-Pesa and is comprised of all Bangla-Pesa businesses. These businesses provide services as varied as house building, clothes making, hairstyling, automotive repair, transportation, food, water, cleaning supplies, education, medicine and more.
To join the network, a business owner must apply to the BBN with four backers from within the organization. These four backers are responsible in part for the success of the new business until it proves itself capable of functioning without oversight.
Upon start-up, a new member business receives a zero-interest loan of 400 Bangla-Pesa, which it is required to earn back. Failing to do so can get the new business and its four backers all ousted from the BBN. This system not only improves the accountability of the Bangla-Pesa economy, but also encourages increased networking among business owners.
A second safeguard is the strict cap that has been placed on the amount of Bangla-Pesa in circulation. There are only enough bills in print at any one time to cover each vendors’ daily transactions. This prevents business owners from accumulating Bangla-Pesa “wealth” and encourages active usage of the currency.
The Bangla-Pesa is over a year old now, and its successes have been tangible. So far, 83 percent of merchants who deal in Bangla-Pesa have reported sales increases (fewer than 1 percent have seen a decline). Bangla-Pesa sales reportedly make up 22 percent of total daily sales for members of the BBN, yet their number of Kenyan shilling sales has remained consistent. This indicates that the Bangla-Pesa sales are ones which probably wouldn’t have otherwise occurred. Further data shows that the average business owner earns 16 percent higher profit since the Bangla-Pesa was first introduced — a substantial increase sure to lighten the load of any household.
And then there are the intangible benefits. For all the financial benefits the Bangla-Pesa has brought to Bangladesh’s business community, the new currency has shown just as much power in bringing people together. Through the BBN, business owners have experienced more community involvement than ever before and have put cooperation ahead of competition.
Still a very new currency, the Bangla-Pesa will need to spend more time in circulation before its long-term benefits and effects can be adequately assessed. However, for the time being, these brightly-colored bills are making a difference for Bangladesh’s entrepreneurs.
– Patricia Mackey