There’s a wave of business-building going on around the developed world, and it doesn’t require a government program to make it happen.
It just requires the businesses in a community to get together and agree on one thing: to jointly sponsor a community gift card, a local currency, or both.
The community gift card is the easiest to institute. Any financial institution can run it for the community. Alternatively, the community can turn to a payment processing company which can implement it as a smart phone application.
A business improvement area association could, of course, build its own but the services to track balances and securely recognize transactions already exists. Why not use it, and put the money to develop a local system into something else?
Unlike a stored value card or gift card for a single store, the community gift cards are good with all participating merchants. Making them reloadable - with some benefit associated with their use (perhaps a program like “we’ll add 5¢ for every $1.00 you put on the card”), gets people shopping locally with the participants.
For the merchants, these look like cash-type transactions - certainly no worse than accepting debit cards. Merchant fees from a card processor will reflect the cash balances on the cards.
What a local gift card program does is make it worthwhile to shop in the neighbourhood. This strengthens every business that takes part, because it makes shopping in the neighbourhood worthwhile. It also makes new business ventures in the neighbourhood pick up an immediate audience, simply by being part of the program from the day they open their doors.
Chattanooga, Tennessee, has used this to revitalize its downtown, which had seen most businesses close due to competition from the highway strips on the outskirts of that city. Dane County, Wisconsin (whose main centre is the state capital, Madison) has a county-wide program open to local businesses - those that are owned and operated by locals - and a “Buy Dane” card system. Both have the same idea: money that flows into the till of a locally-owned business stays in the community and is used to build other businesses (through purchases) locally rather than flowing into the till of a major retail chain that ends up leaving the community.
But it’s not just gift cards or pre-loaded debit card technology, or smart phone applications, that are delivering results – which can be dramatic.
Brixton has been a poverty-stricken, down-at-the-heels borough of London, England for years. Few Londoners chose to go to Brixton if they could avoid it. Many of Brixton’s more successful citizens - who included former British Prime Minister Sir John Major (1990-97) - made their fortunes elsewhere, as opposed to within the community.
Brixton decided a few years ago to fight back, and created a local currency, called the Brixton pound.
Today, people who work in Brixton often get their choice of being paid in Brixton pounds or Bank of England pounds. (A majority now choose Brixton pounds.) The two can be exchanged at banks in Brixton. Most businesses in Brixton accept both kinds of currency.
Savings in Brixton pounds are being used to make loans to build and expand enterprises located in Brixton. This has formed a vital pool of capital for start-ups in a poor area. As with gift cards, businesses accepting Brixton pounds tend to find suppliers for their needs which are also in Brixton - and are unabashed about letting the Brixton council know what their needs are (“find me a printer in Brixton!”).