NAIROBI, Kenya – Money is something that can be used to store value in a highly liquid form, allowing it to be traded for goods and services at the holder’s discretion to anyone who accepts the currency. It seems like a foolproof system–until the global economy reaches a point where the value of cash itself is treasured more than that for which it is exchangeable. At such a point, individuals will begin to hoard cash, leaving others to do with less. This means the flow of goods and services will cease despite the fact that supply and demand remain strong. In the Bangladeshi slums of Mombasa, this situation has been seen for the farce it is and a simple, obvious solution was generated: bangla-pesa.
This voucher system, not legally a currency, acts as cash to any individual or business who agrees to honor it. It is that pledge, and nothing more, that ensures the bangla-pesa has value. Bangla-pesa’s restricted scale makes this system not only viable, but an example for the rest of the world. There are currently only around 100 people and businesses accepting the vouchers in a tight geographic area, meaning anyone thinking about reneging on their pledge will have to face social castigation from the people they robbed–a recurring, endless punishment.
Whereas cash is faceless, being backed by a distant and abstract central government, bangla-pesa relies on and fosters a sense of community among people with shared experiences of poverty. It also is not amenable to crime, as any theft of the vouchers must be used within that tight community, where any newcomer attracts attention.
Working complementary to, and not in place of, the government-backed Kenyan shilling means the bangla-pesa does not constrict the economy or the people who opt in to the system. Studies by Koru, the Kenyan non-profit behind the idea, found the spending of shillings in the slum did not shrink after the introduction of the vouchers. Instead, people were able to manage their resources to spend shillings in businesses which were not in the system, improving their lives without extra cost and keeping more people in the slum working, not festering in poverty.
Bangla-pesa ran into trouble with the Kenyan authorities in June, who accused Koru of creating and distributing its own currency. Those charges have now been dropped, and more bangla-pesa distributed.
If there is a downside to the voucher system, it is hidden well behind an overwhelmingly attractive idea and successful implementation–not only in Mombasa, but in over 4,000 other communities around the world now using voucher systems. In an article for the Brookings Institute, Mwangi Kimenyi questioned the effects of the vouchers on the larger economy and the possibility of vouchers eventually replacing cash in areas like the Bangladeshi slums.
His concerns exhibit the irrelevance for which much of the discipline of economics may soon be known. If the vouchers enable the flow of goods and services among the poorest populations, who have faith in the system and in their community, there can be no downside; after all, the economic institution has already declared them to be virtually valueless. And if, by contrast, governments decide that the risk to their GDP supercedes the amelioration of extreme squalor among millions of people, and stamp out the vouchers, a clear message will stand for any who can see it: the system is broken.
-Alex Pusateri
Sources: Brookings, Koru Kenya, The Star, Auburn University
Photo: Aljazeera America