With over half of the world’s population now living in cities, and 90% of urban growth taking place in low-middle-income countries, there are more than 828 million people living in informal settlements.These areas are characterized by poor basic services, deficient infrastructures, high unemployment rates and scarcity of money.

An extensive informal sector of self-help groups (“chamas”), resident associations, cooperatives and micro-entrepreneurs provide critical services such as water, sanitation, energy, transportation or waste collection.These become one of the few options for a livelihood in urban informal settlements.Yet, owning few assets and with no access to established financial institutions nor markets, micro entrepreneurs in the settlements have few alternatives to free themselves from the level of extreme poverty in which they live.Their income hardly covers their livelihood costs, and their saving capacity is almost inexistent.

Grassroots financial innovations

As a response to economic and financial hardship, a variety of citizen groups are experimenting with a wealth of grassroots financial innovations. Grassroots innovations build on the idea that vulnerable people hold the key to their own solutions.These initiatives focus on mobilizing local resources, designing governance structures, and developing local investment that empower the community. Community currencies have emerged as a grassroots innovation for economic growth.

Developed bottom-up by grassroots entrepreneurs in collaboration with community and cooperative groups, community currencies are inclusive economic tools to expand local markets in informal settlements, create networks to provide critical services, and build bridges between the community and local government. In this doing, community currencies contribute to retain resources locally while incentivizing community investment. Community currencies, that is, suggest a novel monetary infrastructure for communities with lack of access to conventional money.They are, too, indicating a novel route for grassroots participation in sustainable economic growth.

• From Mombasa and Nairobi to Kisumu

  Kenyan communities in Mombasa and Nairobi have been leading the creation of grassroots monetary schemes in Africa since 2011. Since the fall of 2018, these communities are moving from paper-based to crypto-based community currencies, thus offering significant historical experiences from which to conduct research on this field.The research project will learn from the experiences of the currencies in Mombasa and Nairobi and, adopting a participatory action research approach, translate those lessons to the introduction of three community currencies in the informal settlements of Kisumu. In this doing, we will develop theory on institutional arrangements and practices related to the effective governance and management of grassroots innovations for inclusive economic growth in general and community currencies in particular.

  For More Information: grassrootfinancialinnovation.org