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And I hate this term—because it’s often used in the financial system, “Do they have skin in the game?” And for me it just really irks me because it’s like, “Heck yeah, we do. We have our bodies. And we have our lands already taken. Like, we already have our ROI there. You know, like where’s our return on investment?

And then you look at conditions, market conditions which is really hard to do in Indian Country especially in informal economies.

Collateral, access to capital Indian Country is really hard, because you know if I lived on the rez [reservation], and I had my house, and I owned my house, I couldn’t just say, “OK, I’ll put my house or my mortgage on the line for this loan.”

A lot of banks don’t want to do business on tribal lands because of sovereignty. And character is another one—a lot of our folks as Heather [Fleming of Change Labs] mentioned before don’t have access to—I hate using this term too—financial literacy. But financial capability, which is access and education, doesn’t meet us where we’re at. There’s no cultural relevancy. There’s no space for historical and systemic oppression. It doesn’t recognize that we don’t have access to generational wealth or assets. That there’s racism in financial institutions. That our economies have been disrupted or siloed.

And another lens that we’re also bringing into the space is now like trauma-informed lens. There is financial trauma in our communities, of people living in poverty, living in survival mode, living in scarcity mode. It definitely affects a person’s well-being. So, we can’t hold space and create—you know, just go in and assume we can give people money without knowing that there’s all this nuance and complexity. So that’s why I think the five Cs is actually really problematic and doesn’t hold space for all of those things in the current financial system.

In learning all of this and seeing what our community has said is really problematic, we’re trying to design capital access tools that hold space for all of this. So, we’re looking at holistic models that incorporate not only TA [technical assistance], the money, the training, the community, the care to really hold and uplift autonomy and sovereignty for Indigenous women that we serve in our community.

So, we’re actually saying that from the design of capital tools, Indigenous women or Indigenous people need to be at the forefront of that to inform the design, inform the implementation, even as we look into investment—like that whole, I guess, continuum—even in the decision-making process.

So, we’re actually looking to design underwriting criteria that is reflective of our values and done with the lens of rematriation. So, we’re taking the five Cs of credit, because we say that they don’t work. We’re flipping that on its tail, saying, “Actually, no, we want to create something different that’s actually rooted in relationship.” So, I’m not going to determine risk of someone’s credit score. I’m actually going to think about how this relationship and trust, what the business is doing in the community, how that actually is a measurement to show that Indigenous women should be invested in, and we can be trusted, and we are trying to create change in our communities, and truly see us as the solutions the solutions drivers.

This article originally appeared in the Nonprofit Quarterly. See the original article here.

When we interview the entrepreneurs enrolled in our incubator, for example—as they’re going through the program and then at the end, we’re usually probing for questions like this, where we want to understand things like, you know, “We spent all this time on financial education. Why is it that no one has set up their accounting system, or that no one has applied for a loan?” And asking those sorts of questions kind of uncovers all sorts of nuggets of information.

So, we have, I would say, the majority of entrepreneurs will say something like they feel like they’re part of two worlds. There’s the white entrepreneurship world and then there’s their Native world. And they’re constantly trying to reconcile these two.

Even, you know, the white entrepreneurship world values money and scale. Like the point of being in business is to make money for yourself or you and your family. Whereas most of the businesses enrolled in our program, they refuse to monitor their finances, because financials are not their metric for success. Their primary way, the reason that they want to do what they’re doing, is because they’re trying to solve some sort of problem in the community. And some of them don’t even want to know if they’re making money at all. Because they don’t want to be accused of greed. They don’t want to be accused of taking wealth from the community.

So, there are so many things to unpack there about what wealth means, what success means, and how a lot of the beliefs that we have as Native people are counter to how we define success as Americans.

This article originally appeared in the Nonprofit Quarterly. See the original article here.

By his own estimation, David Duvall was a “strong advocate of diversity and inclusion.” He sat on the executive committee that supervised DEI initiatives at Novant Health, the medical nonprofit where he worked. He hired a Black woman as Director of Marketing, subsequently promoting her to Vice President. He even met with the pastor of his church to promote equality within that space. Such were the details of a lawsuit he filed against Novant Health, after being fired on July 30, 2018, on the cusp of his fifth-year anniversary at the company. Duvall sued his former employer for unlawful termination, citing racial and gender discrimination, as a white man. In late October, a federal jury of his peers in North Carolina agreed with Duvall’s perception of events and made history this October by awarding the former Senior Vice President of Marketing and Communications $10 million for his troubles. This ruling, and other similar incidents of white people claiming racial discrimination, highlight a need for the critical reassessment of who qualifies for racial protections in order to prevent the distortion of racial justice policies and programs.

The irony of a white man being financially compensated for court-legitimized claims of racial discrimination cannot be taken for granted. Duvall’s lawyers referenced his former employer’s robust plans to promote diversity in the workplace as part of a rebuttal to the notion that he was terminated for not meeting the company’s standards, noting that he was replaced by two women—one white and one Black. They mentioned that there were other white men laid off during his tenure, implying a pattern of white men being laid off to make room for more “diverse” staff. These assertions mirror the anxieties shared by a number of white people who feel like they are the ones being discriminated against in the contemporary social emphasis on increasing the representation of people of color across a range of spheres and industries.

Novant Health argued that as a well-remunerated high-level executive, Duvall was “expected to perform exceptionally, not just demonstrate good or adequate performance.” According to court documents, he “fulfilled what was asked of him,” but “demonstrated over time that he was not exceptional or a successor” to his superior. They claimed that Duvall delegated critical duties to subordinates, did not display enterprise leadership, and had an inability to speak in front of the Board of Directors. Nevertheless, a jury of six white people, one Latinx person, and one Black woman, ultimately determined that the white man’s termination was the result of an “avowed, even boastful, ‘strategic imperative’ to rely on racial and gender targets to reshape Novant Health’s workforce and leadership to reflect the community it served,” as alleged by the plaintiff.

Against the backdrop of a movement that has been relentlessly pointing out the scarcity of Black people and POC in high level positions, the endemic mistreatment and discrimination faced by Black employees in the workplace, the shortcomings and abject failures of white leadership in nonprofits serving marginalized communities, the racial wage gap, and the generational wealth gap, this legal decision feels like a slap in the face. Let it be a wakeup call, that the courageous conversations on race that we’ve been having are all well and good until white people start being fired, demoted, or not hired, concurrent with our progressive analyses of what racial equity looks like in practice. Once real change starts to occur, those used to being in power have no problem with co-opting the language of racism to preserve their socioeconomic interests. Here we are in the 21^st century, with the Civil Rights Act of 1964 being brazenly manipulated to simultaneously demonize an organization’s racial equity efforts and make a disgruntled white man a lot richer.

Duvall is not alone in his unmitigated audacity. Across the country, white people are invoking claims of racial discrimination to subvert plans for racial equity that threaten their sense of entitlement to power and economic advantage. This is evident in the organized resistance to Black Farmers receiving the policies and aid that is owed to them, as chronicled by Dañia Davy. In efforts to remedy the “long-standing history of exclusion and discrimination Black farmers have faced and continue to experience,” Senator Cory Booker (D-NJ) introduced the Justice for Black Farmers bill. Senator Raphael Warnock (D-GA) proposed the Emergency Relief for Farmers of Color bill, “which designated Federal funds for Socially Disadvantaged Farmers and Ranchers to compensate for numerous instances of disparate treatment by the USDA.” Both bills informed the American Rescue Plan Act (ARPA), which was officially established in March 2021. Under the ARPA, Congress made provisions for debt relief for 17,000 eligible farmers of color, among whom were 3,100 Black Farmers.

But white men can’t stand to be excluded, not after centuries of preferential treatment. As of 1964, have we all not ascertained that “racial discrimination” is morally indefensible?

Indeed, Davy writes,

Almost immediately after ARPA was passed, on April 29, 2021, lawyers representing white farmers have filed over 10 lawsuits against Secretary Tom Vilsack of the USDA alleging race-based discrimination in the implementation of Section 1005 for restricting the emergency debt relief exclusively to farmers and ranchers of color. One of these suits resulted in class certification for white farmers who are ineligible for the Section 1005 debt relief. These lawsuits have, at least for now, halted the intended debt relief. Tragically, even at a time of heightened economic peril due to a global pandemic which has disproportionately burdened communities of color both financially and in terms of mortality, meaningful relief has been put off once more.

A similar situation has disrupted the implementation of Biden’s COVID-19 relief plan for restaurants. The Congress-approved Restaurant Restoration Fund prioritized white women, people of color and “socially and economically disadvantaged” people, allowing them to be considered above other applicants. This prompted café owner Phillip Greer to file a lawsuit against the Small Business Administration (SBA), with the noble assertation that white men should not have to wait in line behind other restaurateurs. In a Texan federal district court, Judge Reed O’Connor ruled in favor of Greer, deciding that the Biden administration engaged in systemic gender and race discrimination in its rollout of COVID-19 relief. The use of positive race-conscious criteria in policies and programs is under threat, even as it has gained momentum in recent years due to increased awareness of rampant systemic inequalities. The opposing argument is perhaps best summed up by Chief Justice John Roberts, who stated in 2007 that “the way to stop discriminating on the basis of race is to stop discriminating on the basis of race.”

How convenient that, after generations of white supremacist policies overtly or covertly excluding people of color from socioeconomic advantages instituted by the government, white people are so eager to label any and all remedies as “racial discrimination.” The sordid history of race in society, as we know, began in the 17^th century with the institution of slavery as a replacement for white indentured servitude. Over the years, multiple laws and policies were implemented for the benefit of whites to the detriment of BIPOC. The Social Security Act of 1935 guaranteed income after retirement, for example, but did not extend to agricultural workers or domestic servants, jobs predominantly held by BIPOC. At every institutional level, policies regarding voting rights, bank loans, mortgages, educational opportunities, land ownership, you name it, intentionally disadvantaged people of color, in some cases without even mentioning race or gender.

White people would have us believe that following the Civil Rights Act of 1964, America suddenly became a post-racial utopia. Yet they have no explanation for why the racial wealth gap is worsening, not improving, or why there is still minimal representation of black people in positions of power. The reality is that unconscious biases, conscious racism, systemic inequities, financial obstacles, police brutality, and antiblackness in the justice system, the ensemble of which are the true definition of “racial discrimination,” continue to affect the black population to this day. A colorblind approach to rectifying racial discrimination is not only illogical and ineffective, but as the white supremacists have shown, it is entirely counterproductive to achieving racial equity.

The moral outrage at what they perceive to be “reverse racism” is no different from the outrage they have exhibited at every sign of progress, from the abolition of slavery to desegregation, to the election of the first Black President. Once white economic interests appear to be jeopardized, or white privilege is challenged, there will be backlash, sometimes violent, sometimes social, and quite often legal. In fact, they are no longer considering strides for equity to be “reverse racism” or “reverse racial discrimination” but have developed the gall to simply call it racism. The point of this linguistic shift is to erase the allusion to a severely imbalanced power dynamic and contrasting experiences of white and BIPOC in society, due to the reality of historical and modern colonial oppression.

White people, even those who attend DEI meetings and those who claim to be allies, are sabotaging our best efforts to tangibly address racial inequities, twisting the very laws meant to address this against us. If the law states that people are protected from racial discrimination, does this apply to white people, even though they have been the benefactors of white supremacy? Is whiteness a protected class the same as any other? As Kimberlé Crenshaw puts it, “the mystifying role of law in naturalizing and insulating the status quo must be radically rethought.” The lack of clarity and specificity on this issue has the potential to nullify all attempts to diversify ranks, pay reparations, and even speak honestly and candidly about race. Left to the interpretation of mostly white juries and white judges, white people’s specious claims of racism will be validated.

You see, we can’t simply shift to colorblind rhetoric after decades of heavily prioritizing white people in every way possible and expect that this would produce the racial equity that Dr. King dreamed of. The generational wealth gap, for one, will not change if we only avoid creating policies that explicitly disadvantage Black people. There would need to be reparations, a thorough analysis of the existing policies, and perhaps a variety of programs specifically designed for black people’s benefit. If society eschewed those measures as racist and opted to operate as it does today, black wealth may improve very minimally, but the wealth gap itself— white families being on average 10 times richer than black families—will remain in place.

Similarly, if some white people are not replaced by people of color in leadership positions, there won’t be diverse leadership. If people of color are not hired, there won’t be diverse staff. Amending the insidious discrimination of the past to any significant degree will not be achieved through neutrality or colorblindness. It will be achieved through prioritizing and empowering those who have been disempowered and sidelined for so long. It will require a host of racially conscious measures, one of which could well be selective discrimination. After centuries of pro-white ideology being enforced through terrorism, intimidation, and the rule of law, humane and moral “pro-color” initiatives are the only practical solution.

As more instances of white people pulling the proverbial “race card” start cropping up, there needs to be greater emphasis on the inadequacy of colorblind rhetoric, and greater precision around who qualifies for racial protections. The dethroning of white supremacy is integral to racial equity. And it would be impossible to attain without an ability to address the nuances of race, without a keen ability to discern between reparative racial provisions and destructive ones.

This article originally appeared in the Nonprofit Quarterly. See the original article here.

This article is the fifth in our series—Community Development: National Leaders’ Visions—that NPQ, in partnership with the CEO Circle, an informal network of BIPOC community economic development leaders, is publishing in the coming weeks. The series focuses on identifying what is required to address key transformational challenges and to help the field of community economic development better accomplish its twin missions of racial and economic justice.

As of May 2021, the median US home price, as reported by the National Association of Realtors, stood at $350,300. Even with low interest rates, that’s a high barrier for many people. Nationally, the gap in homeownership rates for Black households compared to white households is large and growing. At present, 44.6 percent of Black Americans live in homes they own, compared to 74.2 percent for white Americans. That’s a stunning gap of nearly 30 percentage points.

And when Black households do own, their equity is lower; the median housing equity for white families is $118,000, compared to $60,000 for Black families. On top of this, families of color are more likely to live to inadequate housing, 5.8 percent of Black homeowners compared to 3.1 percent of white homeowners.

This lower rate of Black homeownership is a direct result of limited access to the financial market. Only five percent of conventional market were loans to Black borrowers, compared to 15 percent of the federally subsidized Federal Housing Administration and Veterans Affairs loans. In 2019, a group of 10 lenders were responsible for originating 24 percent of mortgage loans to Black borrowers; of those 10, only three were traditional depository banks. Black applicants are more than twice as likely to have their loan applications rejected.

Barriers to BIPOC Homeownership in Low-Cost Cities

While national home prices have reached record highs, homes are not expensive everywhere. In Detroit, Michigan, for instance, the median home costs about $70,000. Yet even here families of color struggle to buy homes. Why?

Well, banks often refuse to lend to potential homeowners in these lower valued homes for many reasons. Two critical ones: the cost of servicing the loan is the same whether the loan is for $50,000 or $500,000—the larger loans are more profitable; the low-cost loans are money-losers. Also, the lower price means that people who need a mortgage compete with people paying cash, and, as the saying goes, “cash is king” (or queen). This flawed system perpetuates and exacerbates racial inequalities with a vast percentage of Black households hitting said roadblocks when attempting to obtain financing for affordable housing.

What can be done? The nonprofit I direct, the Center for Community Progress (CCP), seeks to align mission-driven and flexible lenders, with public funding and philanthropic dollars, to mitigate the challenges that exist with small principal mortgages and incentivizing their widespread adoption. This means working not just with banks, but also community development financial institutions (CDFI), credit unions, and others. Recognizing the varied characteristics of each institution, and how they can aid in helping to address the gap between financing tools and lower valued inventory is important to properly address the problem. Part of the solution is partnering with a fund for land banks to rehabilitate properties to increase the quality of available inventory. This, in conjunction with generating affordable first residential mortgages that are less than $100,000, can make a real difference in helping millions of BIPOC families become homeowners.

A Small Principal Loan Program Solution 

CCP, in its work, focuses on developing community-based strategies to revive vacant, abandoned, and deteriorated properties. In the course of our work in this field for over a decade, a network of public, private, non-profit, and philanthropic leaders has developed. By leveraging this network, we believe it is possible to address this unsung, but widespread, weak market homeownership problem.

An Urban Institute report found that in 2019, an estimated 26.7 percent of home sales nationwide were for homes priced below $100,000. Since about 5.5 million homes were sold that year, that means that in 2019 nearly a million-and-a-half homes were sold for under $100,000. Of these homes, only 23.2 percent were purchased with mortgages. The same Urban Institute report noted that 53 percent of all renters stated that qualifying for a mortgage was a major barrier to homeownership. The gap to fill, in short, is large, leaving millions of families in weak markets unable to purchase their own homes.

Across the country, there are over 200 communities that have a history of vacant, abandoned, and deteriorated properties that negatively impact the market. These communities could benefit from a platform that provides five-digit mortgage loans to turn a number of these properties into productive use. Existing scans of the field show early promise in several places; however, the broader challenge still exists. As the community development field works to identify steps to address this issue on a larger scale, early solutions are beginning to emerge. Important action steps include:

• Build on lessons learned from existing pilot sites to develop appropriate financial tools to ease the transfer of more land into the hands of potential homeowners.
• Invest in existing sites where small-scale mortgage products exist and help expand availability to a larger portion of the country.
• Engage national partners to offer these new tools along with traditional financing options.

Where to Start? The Importance of Site Selection

Communities with a history of inequitable housing practices are prime targets for interventions, but these places also bear much of the weight of the history of exclusion described above. To change this narrative, it is important to show early wins in communities that can accomplish the program goals of making mortgages available for African Americans and communities of color who have been disenfranchised from financial systems and institutions. To overcome past barriers, a small mortgage program must garner the commitment of public actors and partner with nonprofit institutions.

Building the Small-Dollar Mortgage Pool

The heart of solving the small-dollar mortgage challenge lies in gaining access to flexible capital. Obtaining a pool large enough to put in a dent in helping millions of Americans currently shut out of the traditional mortgage market will require a large and diverse group of funders to bring this program to life. The likely early sources include philanthropy, public agencies, and banks or credit unions that are willing to provide low-cost loans. This type of pool could both fund the mortgage loans themselves, as well as providing critical construction financing, all while being diverse enough to absorb the risk and positioned to survive expected fluctuations in interest rates.

It’s necessary to be flexible when seeking resources to bridge this gap, while recognizing that working with patient capital (low cost, long-term) is ideal. The four key components of a mortgage are principal, interest, term, and amortization. On top of that, when calculating affordability to potential homebuyers, it is important to account for taxes, insurance, and association dues. Multiple strategies are needed to employ a flexible and successful capital program that supports families who have the greatest need for small-dollar mortgages. Potential partners include mortgage brokers, mortgage bankers, and bank foundations.

Outreach

Research shows that there are millions of Americans currently renting who if given the opportunity would become homeowners and could save in their monthly expenses. Each community that is selected will need local partners that can both identify potential homebuyers, as well as provide necessary counseling and assistance to ensure long-term success. National partners can help to pinpoint the local conditions necessary for a site, and then identify on-the-ground partners to help implement the program. Once connected, the process will be designed to be inclusive and will focus heavily on educational components.

Land Bank Inventory

National conversations around small principal mortgage programs have recognized challenges with keeping interest rates down, identifying funding for rehabilitation, and connecting existing inventory to new mortgage tools. Properties at the low end of the market tend to be old and in need of repair or up-front costs.

Founded in 2010, CCP got its beginning working with land banks. When CCP was founded, there were public only land banks in fewer than a dozen US cities. Now these entities exist in over 250 communities. These public institutions, CCP believes, can be vital partners in this work.

Many of the communities that formed land banks in the past decade have a history of disenfranchising Black residents and people of color. These land banks now have control of property in their existing inventory, sometimes thousands of parcels, but more importantly they have access to a pipeline of properties that they could acquire if there were a reliable pool of resources to aid in the land’s return to productive use.

The Cost of Doing Nothing

Properties with lower values are unable to attract conventional financing for mortgages, ultimately leading to being sold at cash sale. This in turn reduce the odds of attracting first-time homebuyers and increases the likelihood of speculative ownership. Even worse, with properties in cities with slow market turnaround, there is less incentive to invest in said properties. This lack of investment, in turn, leads to vacant, abandoned, and deteriorated conditions. And as vacant, abandoned, and deteriorated properties continue to negatively impact the market, tax foreclosures increase and land banks by default often become the largest property owners. It’s a vicious cycle that blocks homeownership in communities of color—and an entirely unnecessary one.

The time for action is now. We must create vital solutions. Creditworthy renters in weak markets desire affordable homeownership opportunities, and land banks operating in these same markets can acquire properties before they deteriorate beyond repair. The available inventory can be rehabilitated to move-in-ready conditions, if backed with blended sources of debt, patient capital, and philanthropic support. These catalytic investments would enable small mortgage tools to be successfully introduced and for communities to thrive.

Many renters of color in weak market cities have the income to qualify as homeowners. But they lack the financing tools to make homeownership possible. Small-dollar mortgages are an ideal financial vehicle to facilitate this transition—benefiting both countless BIPOC families and their home communities. Such mortgage products could play an important role in closing the nation’s racial homeownership gap, especially in low-cost cities where homeownership is both near, and yet—because of the lack of mortgage products—so far away.

This article originally appeared in the Nonprofit Quarterly. See the original article here.

Back in 2006, the Schumacher Center for a New Economics, a nonprofit where I work, helped to established BerkShares, Inc. a local currency issuer. Then as now, the idea behind BerkShares was to galvanize residents in Pittsfield, Great Barrington, and surrounding areas to purchase more goods and services locally. The local currency could be converted into US dollars but is designed to be spent directly in the area. The theory of change involves both encouraging local economic activity—increasing the economic multiplier effect, in technical parlance—while fostering bonds of community.

A local currency seeks to encourage recirculation and reinvestment within the community. These currencies are not new—they were quite common during the period of the Great Depression—but had fallen out of fashion. When the BerkShares currency launched in 2006, it involved something of a gamble: that a moribund tradition of local currency issue could still work to bolster local economic activity in the 21^st century.

The experiment proved successful. BerkShare currency notes—printed in signature colors and sporting portraits of local historical figures—have become a point of pride among many area residents. The one BerkShare note honors the local Mohican nation; W.E.B. Du Bois is on the five BerkShare note; agricultural activist Robyn Van En on the 10, and so on. You can spot BerkShares in circulation at area farmers’ markets, Main Street storefronts, auto repair shops, and professional offices. Today, over 400 area merchants accept BerkShares for payment, revealing an enduring intention in residents’ choice of where and how to do business.

The original launch of BerkShares presaged a broader revival of interest in local currencies following the Great Recession. There are now over 200 local currencies in use worldwide, according to a database maintained by the Schumacher Center, with popularity greatest in Europe and Brazil.

Now 15 years in, BerkShares, Inc. is taking the local currency digital. With a new mobile payment app launching in December, BerkShares users will be able to transact with local merchants, exchange BerkShares for US dollars, and vice-versa from a smartphone or tablet. The addition of a digital platform to the local paper currency will make BerkShares more accessible for users while broadening access for merchants. The aim of digital BerkShares’ added convenience, ultimately, is to deepen the local currency’s impact by encouraging even more spending to stay local and fostering increased community investment.

Of course, this is an experiment, and the proof of concept remains in the execution. Given the lack of established models, there will undoubtedly be some unanticipated curves ahead. But if the digital platform works, it could generate interest far beyond western Massachusetts. While the current intent is to deepen the presence of an existing local currency, digital currency offers the potential for other local, as well as non-geographic, communities of common interest to organize systems of their own. Imagine, for example, a network of Black-owned businesses, or Indigenous-owned businesses, or worker co-ops. While initial launch is still a month away, the possibilities are exciting.

Why Go Digital?

Even before the pandemic, the popularity of digital payment methods had been steadily rising. With COVID-19, widespread health-related hesitancy to handle physical cash accelerated this pattern even further, resulting in a marked increase in cashless transactions. Today, about 60 percent of Americans report using mobile payment platforms such as Venmo for at least some transactions. This obviously could pose a barrier to BerkShares’ continued growth. At the same time, the opportunity of expansion provided by the trend proved an enticement.

The digital launch involves a partnership between BerkShares Inc., a democratically structured non-profit which issues the local currency; the Schumacher Center (which retains its affiliation with BerkShares, Inc.); and Humanity Cash, a tech venture focused on alternative digital currencies.

From the beginning, BerkShares has been about much more than just another way to pay for goods and services. Facilitating personal bonds between local producers, consumers, and suppliers can increase resiliency in periods of global supply chain disruption while cutting the carbon footprint of shipping. The bills themselves, adorned with depictions of the local heroes who embody these values, reinforce this deeper meaning of BerkShares’ use.

With this upcoming launch in December, BerkShares will uphold these same values while meeting the clear demand for digital. The user experience of the BerkShares app will resemble those of mobile payment services such as Venmo. The app will become available for free download on iOS and Android. Digital BerkShares will be backed by US dollars and will be redeemable at a 1:1 rate.

As before, it remains free to accept and reuse BerkShares, encouraging local circulation of currency. Accepting payments via the mobile app simplifies the use of BerkShares in person-to-person settings including farmers markets and other less formal services. Only when a merchant decides to withdraw funds from BerkShares circulation and cash out to dollars is a 1.5-percent fee processed to move the money. This is slightly less than Venmo’s rate and considerably less than the fees most credit cards exact from merchants on each transaction.

Beyond the direct advantage to small merchants, digital BerkShares’ competitive fee structure is meant to keep more area capital at work in the Berkshires. While we may not think of it when swiping a credit card in-store, all those processing fees add up, bolstering the profits of big financial corporations. Likewise, holding a balance on Venmo or even pre-loading gift cards from chain retailers gives those corporations capital to invest on Wall Street.

As many Americans now realize all too well, present-day financialized capitalism, with its huge stock buybacks and asset inflation, has fueled the nation’s widening economic inequality. A handful of America’s largest financial corporations are also leading investors in global fossil fuel extraction. With BerkShares, by contrast, reserves are held with individual community banks, which reinvest directly via lower-risk loans to start-up farmers and other small business ventures.

Beyond these benefits, running a local currency on an app opens even more potential for experimentation. Digital BerkShares will launch with a newsfeed feature, providing a community channel for local businesses, like the local food co-op, to communicate with their constituents. As a platform for such local activity, more participatory forms of engagement are already envisaged—an area “culture pass” for museums and arts institutions is one exciting example—to further stimulate local activity. Although still in ideation, digital BerkShares has even garnered philanthropic interest for the possibility to test universal basic income (UBI) distributed through local currency among low-income residents.

Local Currency as a Tool for Community Economic Development

Local currencies thrive on a spirit of communal interdependence. Often, they have appeared at moments of economic crisis. The first wave of local currency issue in the US came in the 1930s, in the wake of the Great Depression. Producers were eager to work and people always need food, but the stock market crash meant that capital for wages and investment was scarce. As with area precursors to BerkShares, many of these experiments were rooted in food production—local food security being foundational for any healthy and ecologically sustainable economy.

Given this history, it is unsurprising that interest in alternative currency was rekindled in the wake of the Great Recession. In the US, corporate finance was bailed out of its speculation-gone-awry after being deemed “too big to fail” by the Federal government. Rather than banking being decentralized after the malfeasance, the opposite ensued. As historian Gar Alperovitz noted in 2012, some 30 percent of all deposits in the US had by then already been concentrated in just five of America’s largest corporate banks (it is now over 35 percent).The unequal economic recovery which followed only deepened the widening chasm of wealth inequality the country faces.

Amid such systemic crises, local producers and communities can turn to each other for support. Local currencies are by no means a panacea for America’s deep economic injustice and poverty. The benefits they deliver to a community are, in the end, as strong as community members’ commitment to local solidarity. What such currencies can do is provide a conduit for that commitment, creating a tangible manifestation of interdependence which becomes a hallmark in everyday exchange. So, while local currencies are but one tool, they can be a powerful complement to broader efforts to build community wealth and a solidarity economy.

This framework specifically rejects the neoliberal mold by privileging local reinvestment and inclusive ownership. The implications for bottom-up theory of change were well summarized by James Dickson in 2019:

[T]here is…after decades of neoliberal hegemony…an alternative…we can reorganise our economies so that they work to make the lives of all citizens better. The task now is to…entrench a new economic common sense—that the economy need not be a remote and divisive structure facilitating the extraction of wealth…but can instead be made to work for all of us.

Berkshires residents know something about the importance of reinvesting in the local economy. In the 1990s, closures like that of the General Electric plant in Pittsfield in the 1990s had a lasting effect on the health of the local economy. Growing the available reserve of BerkShares will enable local banks to invest in new ventures to fill procurement gaps—products and services currently being imported from outside the region. This import replacement approach, a notion popularized by urbanist Jane Jacobs in the 70s and 80s, could offer greater opportunities for young adults wishing to stay or move back to small communities like the Berkshires, a tendency that has become more prevalent in the wake of COVID-19.

One final advantage of the digital currency is richer data and insight that could inform such economic development. BerkShares data could be analyzed (in an anonymized and transparent format) to identify local procurement gaps. Regular reports from BerkShares, Inc. could point residents to potential areas of investment opportunity.

Nationwide, interest in local currency has risen in response to COVID-19 and its continuing economic repercussions. Municipal governments, in particular, are exploring creative and responsible ways to encourage local economic recovery.

In 2020, we witnessed a remarkable flourishing of direct mutual aid networks in response to the COVID-19 pandemic and resulting economic shutdown. Because local currency thrives on the same spirit of communal solidarity, it has great potential to help focus and sustain such efforts into the future. Whether it be cities working to recover from decades of neoliberal divestment, climate activists seeking to catalyze publicly owned sources of renewable energy, or efforts to “Buy Black” or “Buy Native,” local currency can help harness collective power at a more human scale—empowering everyday people to shape and direct the economic futures of their own communities.

This article originally appeared in the Nonprofit Quarterly. See the original article here.