Since collaborative finance platforms such as Local Loop Lancaster & Morecambe depend upon trust between peers, they are always local, and always require some degree of community self-awareness.
The purpose of the Lancaster and Morecambe club is for members to clear invoices against each other in loops, with the benefits – reduced debt, improved payment timeliness, and freeing up of working capital – immediately boosting participants' viability and complementing existing community wealth building strategies.
These same benefits also create direct incentives to find local trading partners that close further loops. Completion of loops – even by non-profits – provides benefits to all participants, but ‘strategic gaps’ in the network that could close loops often remain unfilled due to lack of awareness, excessive risk, or absence of appropriate financing.
Since transaction data from our platforms gives a rich map of economic activity, it becomes possible to identify and characterise these gaps. This can be used to inform capacity-building via new businesses, social enterprises, or community groups. An increased density of loops corresponds to greater local trading volume and variety, and independence from the financial sector.
At the systemic level, evidence from Slovenia shows that multilateral obligation set-off can have a strong counter-cyclical effect on the whole economy, insulating businesses from wider downturns that often originate in the financial sector. Finally, closing financial loops also provides a bottom-up driver for the circular material economy, as goods and services travel in the opposite direction to increasingly circular payment flows.
MCS works with the anchor institutions (such as local authorities and universities) that are a key part of local economic resilience to make the best use of our platforms' trading data in support of evidence-based decision-making. We also support the development of participatory governance processes, complementing other community wealth building frameworks and initiatives. In short, we couple local liquidity to available economic capacity and trust.
There is therefore a clear alignment between the way that our collaborative finance platforms mediate economic relations and the aims behind community wealth building – strengthening of local trading relationships, local value-producing capacity, and local economic resilience. Increased community wealth brings empowerment, and thus the ability to build social and environmental capital – the will is never lacking, only the means.