Fringe Projects #5: Financial Innovation... Avoiding the next global recession

Dernière mise à jour le 3 décembre 2013.

Fringe Projects #5: Financial Innovation... Avoiding the next global recession

The financial system is an integral part of our world’s economy. The Global Financial crisis of 2008 and the ongoing European Financial Crisis are both indicators that money plays a huge role in the stability of the economic system in which we live. The fragility of this system has resulted in numerous creative citizens from all over the world taking matters into their own hands and creating alternative financial instruments.

 

Many people these days have heard of Bitcoin, the most widely known alternative currency, but there are many other financial innovations that are taking place throughout the world. Here are just a few:

 

Palmas is a local currency that circulates in the Palmeira neighbourhood in Fortaleza, Brazil.

The project was started to address a larger cycle of poverty and stalled economic growth as a result of the lack of credit in poorer regions. The currency is backed 1:1 by Brazil’s official currency. Since the currency is accepted only within the local area it encourages purchases of local goods resulting in a boost to the local economy. It is also much easier to obtain credit in Palmas, relying mainly on reassurance from neighbours that the person receiving the loan is trustworthy. This increases the community aspect of the bank and empowers local citizens to take control of their local assets.

 

Using Parmesan cheese as collateral is an innovative way a bank in Milan is able to give loans to farmers who may not have the financial capital to support the loans.

Credito Emiliano began using Parmesan as collateral in 1953 and currently has two climate-controlled warehouses that hold approximately 132 million euros worth of cheese. Each wheel of Parmesan bears a serial number and can be traced if stolen. Parmesan increases in value over time making it an ideal candidate for use as collateral. The system is a perfect example of using local resources in an innovative way to make people’s lives better.

 

Ven is another form of alternative currency but unlike Palmas, Ven incorporates carbon-pricing contracts into its valuation, tying its value in part to the environment.

The value of Ven is determined by a weighted basket of currencies and it trades against other currencies at a floating exchange rate. While not accepted everywhere, members of a social network service, Hub Culture, use the currency to buy, share, and trade knowledge, goods and services.

 

 

 

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Fringe Projects is a blog series that brings to light some of the projects that are the most innovative, disruptive, creative and controversial from all over the world. If you have heard of a Fringe Project, share it in the comments below. 

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