Local Exchange Trading Schemes

Local Exchange Trading Schemes or Systems (LETS) are local, not-for-profit, community-based networks for exchanging goods and services using a local trading system. The LETS system of exchange sits outside the mainstream use of a national currency. Instead, LETS schemes typically employ a locally negotiated system of credit or exchange for the value of goods and services found within the boundaries of the community. LETS serve as a new form of economic organization that is intended to support the sustainable development of a community.

Around the world, LETS initiatives are growing in popularity and are seen as a localized response to the rise of multinational trade, rapid globalization, and the role of institutions such as the World Trade Organization. LETS programs operate like a supplementary currency and trade system, whereby alternative value systems are introduced into the community and operate like a community banking project and, as a result, insulate the [Page 288]local system from fluctuations in the labor conditions and mainstream economic markets. As grassroots programs, LETS initiatives are all inclusive, allowing for people of all ages, skills, employment status, and aptitudes to participate, as well as nonprofits, associations, small business, local government, and others.

In its most basic format, LETS programs operate via a systemized directory of “wants” or “needs” and “offers” or “bids.” A community “bank” acts as an escrow-like entity and monitors and tallies the flow of exchanges made between wants and offers. In addition, LETS systems typically account for time at a standard rate to equalize the value of services between parties. Community currency is made when credits move from one person to another between the exchange of wants and offers made. Other LETS currency systems also use tokens or other forms of credit vouchers to account for the distribution of local capital.

In more sophisticated LETS programs, local communities, usually under the guidance of their national treasury, print their own local money, often known as scrip. With this, individuals are typically able to exchange their national currency for the local currency at community banks at a 1:1 ratio. Once exchanged, this local currency can be used the same way people use national currency, but with the exception that it is only accepted within the local municipality.

As a mutual credit system, the benefits and rationale for LETS initiatives are twofold: first, individuals, organizations, business, and local government are able to decouple themselves from traditional economic constraints, and instead allow LETS programs to offer an alternative approach to money, work, trade, and economic development. Second, LETS programs bring people together, particularly in poorer areas, by creating a community system of value and exchange that relies on mutual engagement, trust, and reliance on each other. Moreover, LETS programs offer services that may be desired but sit outside the financial reach for people engaged in a traditional system of an exchange of national currency for goods and services.

Membership in a LETS initiative allows local individuals or organizations to buy and sell goods and services without using traditional cash or credit cards. LETS initiatives operate outside the traditional money and trade economies and aim to keep local economies thriving by encouraging people to invest in their own backyards, as well as to take a fresh look at the concept of money and currency.

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