The phenomenon of alternative currencies is spreading, and not only with the (current) worldwide success of the bitcoin, which is growing more popular in the Netherlands.

Around the world, alternative local currencies are becoming more common, with the Brixton pound in use in London, the torekes in Ghent, the sardex in Sardinia, the Wir in Switzerland and Ithaca Hours in New York.

In the Netherlands, Amsterdam has the makkie, which started up in 2013, joining the older noppes currency from the nineties. In the last three years, plans have been made to get the gulden in Groningen, gelre in Gelder, achthoeker in Achterhoeke, zonnemunt in Leiden, bataaf in Nijmegen and schokker in the Noordoostpolder off the ground, with varying amounts of success.

Now people in Rotterdam have developed two different local currencies to the euro.

Alternative currencies in Rotterdam

The first is the zuiderling (southerner), developed in September 2013 for use in South Rotterdam, a disadvantaged area of 200.000 people and 150 nationalities. The other is the dam, debuting one month earlier in August, which is Rotterdam-wide.

Both currencies are used in addition to the euro and their circulation is predominantly virtual, using account apps on mobile phones, although the zuiderling has a limited number of printed notes.

› Zuiderling

The units of the currencies are not precisely like the euro: one zuiderling equals half an hour of work, whether it be from a lawyer, a decorator or a child-minder. Both virtual and paper zuiderlings are in circulation, through clubs, community centres and private parties.

The transactions are handled by an open-source SMS payment system, and there is a demand and supply website, a desk and a legally recognised privacy statement.

While the founders of the zuiderling were very ambitious in the beginning, aiming for 300.000 participants with 400.000 zuiderling in circulation in the first year, they currently have between 500 and 1.000 participants and are aiming to have 10.000 by the end of 2014.

› Dam

The dam is wholly virtual, a private, mutual credit system with no central distribution point. Rather, dams are created when two people start to trade together. It currently has 170 participants, 85 per cent of which are entrepreneurs.

The dam is not paid in time like the zuiderling: people ask amounts varying between 50 and 200 dams for services such as nutrition advice, printing, meeting spaces or IT support.

Wine importer and seller Jurgen Hanekom makes about 10 per cent of his monthly sales in dams, which correlates to between 800 to 1.000 euros.

"And you belong to a useful network," he explained. "So I pay my accountant and the developer of my new website partly in dams."

Purpose of alternative currencies

Both these currencies, along with others developed in the last few years, have come out of changed conditions due to the financial crisis.

Entrepreneurs, people on lower incomes and the unemployed have less money but more time. With zuiderlings they can exchange expertise for expertise, or find additional customers with dams.

Both currencies create an additional market, one that is local and social in nature. The zuiderling’s particular aim is to promote co-operation and community in South Rotterdam, stimulating the local economy and employment.

Not legal tender

The Dutch Central Bank (DNB) does not have a problem with alternative currencies, as long as they do not claim to be legal tender and users are aware of that, and that no banking operations are conducted with the currencies, such as attracting repayable funds.

There is also tax to be paid on these currencies, depending on the amount. The Belastingdienst (Dutch tax office) requires operators to keep a record of payment and inform them of members who have an annual turnover of 3.000 units or more of the local currency.

Entrepreneurs have to inform the Belastingdienst of their total turnover, including dams. According to the founders of the dam, one dam equals one euro for tax purposes.

Positive economic effects of local currencies

In economic theory, these local currencies are seen as a complement to the official economy. They are especially useful when people find themselves outside the workforce proper and are too financially strapped to enjoy life.

In a recent article, Wolf Wagner, a professor of Economics at the University of Tilburg, wrote that research into local exchange coins between 1992 and 2011 in locations around the world showed that alternative money stimulates the local economy and community.

Associate Professor Derk Loorbach, Director at the Dutch Research Institute for Transitions at Erasmus University Rotterdam, considers local currencies part of a larger quest in society towards decentralised new forms of co-operation on issues like energy, agriculture and food.

It times of crisis, he said, official institutions choose to save money or print additional money and invest more. "That as a very limited paradigm, whereas a complementary currency can boost economic activity."

He sees the proliferation of complementary currencies worldwide as a trend towards sustainable currencies sitting alongside the standard ones.

Longevity of local currencies

Henk van Arkel from the Social Trade Organisation in Utrecht currently advises people who are introducing local currencies, having previously designed banking software for local currencies.

In his experience, local currencies come and go, running for between one and four years on average, first taking off and then slowly shrinking down to nothing. Some systems, however, are more strongly organised and last longer.

It also depends, he said, on the unemployment rate, because these systems work very well for the unemployed, allowing them to make and retain contacts and perhaps experiment with a new profession.

Sources: Financiële Dagblad, FTM