Here's an economic riddle: what do you do when a community has goods and services to sell, but no one has any money to buy it with? That was the situation in a little village on the outskirts of Mombasa, Kenya earlier this year.
Most people would probably call it a slum -- tumbledown shacks, dirt alleys, open sewers everywhere. People here live on a little more than a dollar a day, and that makes them all entrepreneurs. Some people grow tomatoes. Some people sell water. The mayor repairs clothes on an old sewing machine. But the community is really poor. And so while everyone is selling, very few people have cash to buy anything.
That’s what Will Ruddick is trying to change. “Imagine a silly situation with a bunch of people sitting around with goods and services to exchange with each other,” said Ruddick. “But they're not, because they don't have money. Sounds insane, right? It is insane. It's dumb.”
Ruddick’s a Santa Cruz native who now lives in Mombasa. He's only in his thirties but he's packed a lot into his life so far -- he graduated from high school early, studied physics in Boulder and at Stanford, worked at a software company and a hedge fund, and lived on a commune.
Eventually, Ruddick joined the Peace Corps, which is how he ended up in Kenya. When his term of service finished, he stayed, and founded an NGO to try to solve some of the problems here, using theories of what's called econophysics. He started asking some revolutionary questions.
Emma Onyango sells vegetables at a stand on the main street. She's one of the founding members of the Bangla-Pesa exchange.
“What is this thing called money that they need so that they're not poor?” asked Ruddick. “Can we replace it with something they can use on a daily basis?”
Ruddick came up with the idea to print a kind of barter voucher that people could use as a universal IOU for their local trade. They named it Bangla-Pesa, after the name of the slum and the Swahili word for money.
Emma Onyango, who runs a produce stand in the town’s main market, illustrates how the Bangla-Pesa system works. Onyango sells tomatoes for ten Bangla-Pesa, then uses that ten Bangla-Pesa to buy some corn meal at a shop. The shop owner takes the same ten Bangla-Pesa and buys herself some water. The water seller brings the voucher back to Onyango's stall to buy some cabbage. And so on.
Onyango and her neighbors could have used Kenyan shillings, the national currency -- but they don't have enough. Instead, they're using Bangla-Pesa to trade what they do have -- tomatoes, water, corn meal. The economy is moving, without any cash at all.
“It has really helped us a lot,” Onyango said. When the people here started using the vouchers in May, everyone suddenly had more resources to spend. Ruddick says trade jumped 22 percent in the first week.
Courtesy Ryan Delaney
Will Ruddick and Alfred Sigo at the Mombasa offices of Koru Kenya, the NGO that administers Bangla-Pesa.
But a few weeks later, Ruddick and the barter currency fell under suspicion. It started with articles in the local paper that implied Bangla-Pesa was part of a secessionist movement with shady links to Islamic terrorists.
“Police were running around asking people whose door to knock down, who's abetting the terrorists, and that sort of thing,” said Ruddick. So he went to the police to explain how the currency works -- in true California fashion, with a presentation on his laptop.
“Halfway through my PowerPoint I could tell they weren't really listening,“ Ruddick recalled, “All of a sudden, the officer in charge of banking fraud just grabbed my laptop away from me and said ‘this is evidence.’”
Kenyan police threw Ruddick in jail, along with five community leaders, and charged them with bank fraud. They faced seven years.
Alfred Sigo and Emma Onyango speak to a crowd of Bangladesh residents, explaining that the charges against them have been dropped and Bangla-Pesa is legal again.
Out on bail, Ruddick started a PR offensive. He appeared on local TV to explain that Bangla-Pesa was meant to help businesspeople save their Kenyan shillings, not to replace them. He produced an animated explainer video, and a YouTube documentary, which showed pictures of similar vouchers used in Massachusetts and in the UK. Experiments like Bangla-Pesa have gone to court in Thailand and Brazil too, but they had always won in the end.
And indeed, in August, Kenya's public prosecutor dropped the charges.
Will Ruddick says he's not a revolutionary. But he admits that he's broken the rules -- of economics.
“You talk to a lot of economists about these types of programs and their jaw will just drop,” he said. “We have these staunch rules that you can't break -- but it turns out we just made them up.”
After six months out of commission, Bangla-Pesa started up again last month.