What Is a Sectoral Currency?

A sectoral currency is a medium of exchange that only has value in a limited marketplace in terms of geography or purpose. 

Local currencies, also known as a community currency, and local exchange trading systems (LETS) are examples of sectoral currency in use. The Fureai Kippu is a well-known example of a sectoral currency in Japan with the basic unit of account being an hour of service to an elderly person.

Key Takeaways

  • Sectoral currency is a form of complementary currency that is intended only for local or community use, or in exchange for a particular product or purpose.
  • As complementary currencies, these informal monetary systems are not considered legal tender by governments, who may even go so far as to outlaw or ban their use in some cases.
  • Successful examples of sectoral currencies include local money systems like Ithaca HOURS or service-based value tokens such as Fureai Kippu in Japan.

Understanding Sectoral Currency

Sectoral currencies are a type of complementary currency, and include regional or local currency, which only has value in specified locations within a limited geographic region. Regional currency examples include BerkShares, Ithaca HOURS, and Lewes pounds.

Most complementary and sectoral currencies do not have actual monetary value in the eyes of the government since they are not legal tender. They are instead specific to a certain area or product and meant to stimulate economic activity in a specific community or industry sector. These are essentially worthless in any other situation. Because sectoral currencies can be seen as a threat to standard currencies when the economy is struggling, governments often downplay them as experimental.

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, and are most often considered to be a form of scrip. Still, these serve as sectoral currencies with a limited product or scope of purpose.

Attitudes About Complementary Currency May Change

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.

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.

Examples of Sectoral Currency

The Fureai Kippu is a well-known type of sectoral currency scheme. These "caring relationship tickets" support a time-dollar system used in Japan to provide healthcare 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.

Another example is saber currency, 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.