DEFINITION of 'Sectoral Currency'

A sectoral currency is a medium of exchange that only has value in a limited marketplace. The Fureai Kippu is a well-known type of sectoral currency in Japan.

BREAKING DOWN 'Sectoral Currency'

Sectoral currencies are a type of complementary currency. The other major type of complementary currency is a regional or local currency, which only has value in specified locations within a limited geographic region.

How Complementary and Sectoral Currencies Differ From Regular Currency

Most complementary and sectoral currencies do not have actual monetary value. They are specific to a certain area or product and are essentially worthless in any other situation. Because these types of currencies can be seen as a threat to standard currencies when the economy is struggling, governments often downplay them as experimental.

Complementary currencies can be found as early as ancient Egypt, when farmers were given pieces of pottery based on the amount of goods they harvested and put in storage. They could then trade these pieces for other goods or services they needed. In modern times, these types of currencies are still not able to be purchased, they must be earned.

Examples of Sectoral Currency

The Fureai Kippu is a well-known type of sectoral currency. These "caring relationship tickets" support a time-dollar system used in Japan to provide health care to the elderly and the disabled. Individuals earn the currency by spending their time providing care to someone in need. The hours of service they accumulate can be used to pay for their own care in the future or for the care of a family member with a present need.

Saber currency was proposed in Brazil by Bernard Lietaer as a way to make higher education more attainable. Elementary school children would earn sabers for attending extra lessons taught by older students, who would earn sabers by teaching the lessons. Upon graduation, these sabers could be redeemed to help pay for a college education. The program was never accepted by the government or put into practice.

Although purchased with standard currency either indirectly or directly, loyalty program rewards and gift cards are often considered sectoral currency because they can only be redeemed in specific stores or used to purchase certain products or services.

Regional currency examples include BerkShares, Toronto dollars and Lewes pounds.

Attitudes About Complementary Currency May Change

In the past, it has been hard for people to accept anything but standard currency as a way to purchase or get paid for things. However, the introduction of cryptocurrency, which is not based on any standard currency, may increase the acceptance of complementary and sectoral currencies in the future.

  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Fureai Kippu

    Fureai kippu is a system of currency in Japan that allows people ...
  3. Accounting Currency

    Accounting currency is the monetary unit used when recording ...
  4. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
  5. Currency Pair

    A currency pair is the quotation of one currency against the ...
  6. Currency Basket

    A currency basket is a group of currencies used to measure the ...
Related Articles
  1. Trading

    Currency fluctuations: How they effect the economy

    Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm for most major economies. Read on for what effects these changes can have.
  2. Trading

    6 top-traded currencies and why they're so popular

    Every currency has specific features that affect its underlying value and price movements in the forex market. Learn why these currencies are especially popular for trading.
  3. Trading

    Top 5 Hardest-Hit Currencies

    The value of a country's currency is dependent on many factors that will cause it to fluctuate, relative to other world currencies.
  4. Insights

    A Primer On Reserve Currencies

    For nearly a century, the U.S. dollar has served as the world's premier reserve currency, but the future is uncertain.
  5. Insights

    How Currency Works

    Currency offers key advantages over economies based on direct trade, including a broader market for sellers' goods and services and transport ease.
  6. Investing

    What Is A Currency War And How Does It Work?

    We look at what a currency war is, what factors may lead to it, the impacts of such a strategy, and whether there is a currency war currently.
  7. Investing

    Hedge Against Exchange Rate Risk with Currency ETFs

    Because of their investor-friendly features, currency ETFs are ideal hedging instruments for retail investors to manage exchange risk.
  8. Investing

    Currency Positions You Can Take Now

    The foreign currency market is the largest financial market in the world, and investors in this market have many options.
  9. Trading

    Currency exchange: Floating rate versus fixed rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers regarding the difference between floating and fixed exchange rates.
  1. Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

    All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>
  2. Is there a world currency? If so, what is it?

    There is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has ... Read Answer >>
  3. When and why did the euro make its debut as a currency?

    On January 1, 1999, the European Union introduced its new currency, the euro. Learn more about its history. Read Answer >>
  4. Can I trade a currency when its main market is closed?

    In the forex market, currencies from all over the world can be traded at all times of the day. The forex market is very liquid, ... Read Answer >>
  5. How is spread calculated when trading in the forex market?

    First, remember that in the forex markets investors trade one currency for another. Therefore, currencies are quoted in terms ... Read Answer >>
Trading Center