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February 20, 2014

Can Complementary Currencies Level the Gender Gap in Slums?

Originally published by Morgan Richards on Bangla-Pesa blog.

Resilience and ingenuity are trademarks of impoverished communities here in Kenya. When we first introduced Bangla-Pesa it had a few ups and downs, but now it is being used in ways we had never imagined.

We recently completed a follow-up survey asking members of the business network who are using Bangla-Pesa about how they are spending it, how they are making sales with it, and how it is impacting their business. Bangla-Pesa user case study experiences, like Marciana, have also been documented to backup survey claims below.

What is the Bangla-Pesa doing?

Currently 123 surveyed businesses conduct on average 7% of their daily trades using Bangla-Pesa. Assuming these sales would not have occurred without the voucher, we can call this a 7% increase in local sales. And, given that members have actually experienced an overall increase in sales in Kenyan shillings compared to baseline data**, we believe these sales in Bangla-Pesa are “new” trades due to the program’s ability to utilize excess capacity.

Further, overall trade for businesses in the network has increased on average by an astonishing 83% compared to baseline data**. While we can’t claim 100% of this increase is due to the program, based on interviews, we believe much of it is due to greater liquidity and stability of the market created by the complementary currency, which is especially meaningful since this survey period covers one of the worst market seasons of the year.

With roughly 9,600 KSH ($111 USD) worth of Bangla-Pesa transacted daily, the increase growth in the local economy can surpass the cost of the program implementation in about 3 months!

This survey indicates that Bangla-Pesa not only increases overall trade in the community, but also specifically increases the trade in the national currency (Kenyan Shillings). This indicates that the program has measurable benefits for economic development and could subsides services otherwise provided by county governments. This shows that empowering communities to issue their own means of exchange is a simple and effective tool for reducing poverty and creating market stability by providing a way of trading which can be used even during harsh economic conditions and market stagnation. We will continue monitoring the effects of this program over time to see that these benefits hold true. With more than 2 billion people project to be living in slums by 2030 and over a billion people living in dire poverty now, this affects everyone on the planet.

Who’s Using Bangla-Pesa?

Bangladesh is a community of roughly 20,000 residents. The business network using Bangla-Pesa has a total of 141 small scale businesses as members. The “typical” network member is a 35 year-old mother who identifies herself as the main provider of 2-3 children. She has never gone to secondary school, and supports her family either by selling cooked food like flatbread, pastries, fried potatoes, or through a stand selling fruits and/or vegetables. She earns around 600ksh ($7 USD) a day. Despite long days minding her shop, she also spends 2-3 hours a day on household chores like cooking, cleaning, and childcare.

The market in Bangladesh is extremely volatile, with business reporting their average daily sales varying from 200ksh (~$2 USD) during bad periods to 1200ksh (~$14 USD) during good periods, as shown in the volatility graph.

This fluctuation tells us that businesses could meet a much higher demand for goods and services (as demonstrated during good times) than they are during bad or even average periods. However, because community members often lack a means of exchange (Kenyan shillings) through which to make purchases due to persistent poverty or market stagnation, individuals cannot actualize their demand for products, and so businesses are not able to reach their full potential. We refer to those goods or services which might have been sold, given a means of exchange, as a business’s excess capacity.

Bangla-Pesa provides this otherwise absent means of exchange, enabling businesses to both increase their sales and more effectively actualize their demand for goods and services within the network.

Right now, there are 26,200 BP/= (305 dollars) in circulation. Businesses report spending an average of 62 Bangla-Pesa (72 cents) every day, while they report receiving about 84 Bangla-Pesa (98 cents USD) daily from customers. They also report an average increase in daily sales of 240ksh ($2.8 USD). These amounts together (sales in Ksh and BP) represent and average increase in sales value of around 83%. This effect is especially strong for women who are both using Bangla-Pesa more, on average, and experiencing a greater average increase in Ksh sales.

Community members chiefly use Bangla-Pesa to meet their basic needs, with the greatest percentage of members identifying the following 5 goods as purchased most frequently: Raw food: 48.2%, Cooked food: 49.7%, Shop Items (sugar, flour, cooking oil, etc): 37.6% Water: 28.4% Charcoal (for cooking): 22%. From this, we believe Bangla-Pesa gives community members a means of exchange through which to better actualize their demand for basic needs goods.

What We Didn’t Expect (But Love) About How Bangla-Pesa is Being Used

Beyond stable exchange circles, members have spontaneously started using Bangla-Pesa in their traditional rotating credit groups, called Merry-Go-Rounds. These groups collect 10 Bangla-Pesa from each member every day and distribute it all to one of the members. This is helping the network to spread and rotate sums of Bangla-Pesa around members. Local churches have also begun accepting offerings in Bangla-Pesa which they then use to buy food and other goods and services for needy members.

What Happens Next?

We keep registering businesses! We know there are more than 200 small businesses in Bangladesh which are eligible for inclusion in the network. Given the benefits these initial findings attribute to the Bangla-Pesa, we would like to register all these businesses. Further, just over half of the businesses in the network report that there is not enough Bangla-Pesa in circulation. 200BP per business member is kept in a community fund for social services. The community will begin using these funds for health, sanitation, education, or other services, spending the vouchers into the community and providing more opportunities for businesses to trade, grow, and meet their families’ needs.
I started taking not a whole pill but a quarter. After a few days I began to take half a pill and only then I took a whole pill. In general, I want to say that I was helped very much. The drug has removed nervous tension and panic attacks, calmed me down and clarified the mind. Side effects are described at ”” but I haven’t felt any.

As positive findings and reports continue to flow out of Bangladesh, we hope to one day replicate this program in other vulnerable informal settlements in the area. We also hope that other communities are inspired to take up their own complementary currency programs in Kenya and beyond.

What this means for you:

  • NGOs and International Aid Organizations. Communities don’t need aid forever! Helping communities tap into their own abundance is cost effective and sustainable, without long term dependence on aid funding.
  • Local and National Governments. Empower your people! This is a cost effective tool to increase local economies and help subsidize the need for government funding.
  • Communities You can do this yourself! Don’t wait for outside resource when you can tap into your own.

*These findings will be published in more detail in the next few months. Contact us if you would like to be informed when the data is published.
**Baseline data collection started in November and continues for new members. Data were collected by three trained surveyors using Android phones and Open Data Kit. Report compilation and data analyses was done by Morgan Richards (M.A. Sociology) and Will Ruddick (M.S. Physics).

Bangla-Pesa (BP) Summary statistics
Date circulation was officially re-initiated: 10-Dec-2013
Businesses using BP: 131
Businesses surveyed: 123
% of daily sales in BP: 7%
BP as a percentage of daily sales: 16%
% increase in total sales (ksh + bp): 83%
Avg. BP sales per business per day: 84 BP (98 cents USD)
Avg. BP used per business per day: 62 BP (72 cents USD)
Total BP in circulation: 26,200 BP (~$305 USD)
Avg. daily trade in BP: 9,600 BP (~$111 USD)
Amount of monthly trade in BP: 289,000 BP (~$3,345 USD)
% of users report spending BP the most on: Raw food: 48.2%, Cooked food: 49.7%, Shop Items (sugar, flour, cooking oil, etc): 37.6% Water: 28.4% Charcoal (for cooking): 22% (note users could select multiple categories, hence categories do not add to 100%)

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