In Serramanna, the Sailors meet with Lorenzo Pinna of the international relations department. He explains that the founders started Sardex with a clear goal: to give Sardinian companies access to a local currency so they can fulfil their potential. But how? Lorenzo answers with an example. “Imagine a photographer and a painter. The photographer wants to have his studio painted, but does not have enough euros. The painter doesn’t have enough work. If they both become members of Sardex, the photographer can pay the painter in Sardex. In order to do so, the photographer can use a credit in Sardex. If he pays the painter 100 Sardex, the balance of his Sardex account goes to -100, while the painter gets +100. Now the painter can spend this amount to buy peaches from a local farmer, for example. And the farmer can, in turn, use Sardex to hire the photographer.”
As trust in the local community is important for success, the region where the Sardex can be used is limited to Sardinia. Since the Sardex only exists digitally, it is possible for participants to have a negative amount on their Sardex account. And because companies can only use the Sardex to pay other participating companies, spending in Sardex increases regional trade and employment.
The idea behind Sardex is simple, yet triggers many questions. Does the government allow it? Lorenzo: “Yes. Sardex is legally permitted as a means of digital payment under Italian law. VAT is also paid on the transactions, in euros." All transactions are recorded digitally, so VAT cannot be avoided. It explains why the tax authorities are also happy. They, too, benefit from the increased Sardinian productivity. To keep things simple, the Sardex is worth as much as the euro, but cannot be bought or exchanged for euros.
The Sailors also want to know who is in control of the amount of Sardex in the system. Lorenzo continues: "Here at Sardex HQ we set limits on the positive and negative balance that a participating company can have. Those limits depend on the size of the company. The sum of all the accounts of all participants is always zero.” So participants cannot abuse the system by only drawing credit, we wonder? "No, we keep an eye on that. And we help companies with negative balances to get extra customers. We link these to other Sardex participants, for example those with a large positive balance.”
The Sailors join Lorenzo behind a computer screen and get a live demonstration with a dummy Sardex account. We see different debit and credit transactions, and a total balance of the account is visible. It looks just like regular internet banking, except that it is in Sardex. What is missing is an interest rate. “That's right, because we neither pay nor charge interest.”
No interest? Lorenzo continues: "Sardex is just a medium of exchange that stimulates transactions in the local economy. It is not intended to store value or to obtain interest-driven capital growth." As a result, there is no need for more and more Sardex to meet interest obligations. That is a difference with the "ordinary" money system, where exponential growth of the total amount of money in circulation is necessary for that reason. In order to cover its costs, Sardex HQ charges participating companies a registration fee and an annual fee.
Still, the Sardex has proven to be successful. More than 4,000 companies now participate, and since its inception, some €140 million in turnover has been made in Sardex. As a privately-owned company, Sardex now employs around 60 people. Following Sardex’s success, similar money systems have been set up in other Italian regions such as Rome and Piedmont. And the Sardex will also become available to private individuals that live on the island.
Back at the anchorage, the Sailors reflect on the sustainable aspects of Sardex. It increases local services and production activities. As a result, less transport is required and employment on the island is stimulated. Those are clear and quantifiable benefits. By encouraging transactions within the community, Sardex also strengthens cooperation and trust. Although the effects thereof cannot be measured easily, they should not be neglected.
The Sardex makes the local economy more resilient against shocks of future financial crises. After all, the business community is no longer dependent on the availability of euros. And because it is not possible to speculate with the Sardex, the local currency is immune to debt-crises. Finally, the absence of interest has an important advantage: growth to meet interest payment obligations is not a necessity. For these reasons, a currency like the Sardex seems to fit better within a circular economy than the "ordinary" money system.
Sailors for Sustainability is formed by Dutch sailors Ivar Smits and Floris van Hees who chronicle their sailing trip around the world in search of sustainable solutions and examples of circular economy thinking. The goal is to inspire their followers with positive cases while raising awareness of the urgency of sustainable change. Using renewable energy sources such as wind and solar energy, they travel sustainably. Finch & Beak is involved as a partner of the project to share the insights gained by Sailors for Sustainability to inspire sustainable business transformation. More information about the sailors and their project can be found on the Sailors for Sustainability website.
Image source: Sardex, Twitter