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.

RELATED TERMS
  1. Currency

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

    Accounting currency is the monetary unit used when recording ...
  3. Currency Board

    A currency board is a monetary authority that makes decisions ...
  4. Currency ETF

    Currency ETFs (exchange-traded funds) aim to replicate movements ...
  5. Currency Substitution

    Currency substitution is the use of a foreign currency in transactions ...
  6. Managed Currency

    A managed currency is one whose monetary exchange rate is affected ...
Related Articles
  1. Trading

    Drastic Currency Changes: What's The Cause?

    Currency fluctuations often defy logic. Learn the trends and factors that result in these movements.
  2. Investing

    Protect your foreign investments from currency risk

    Hedging against currency risk can add a level of safety to your offshore investments.
  3. Trading

    Top 5 Reasons To Invest In Currencies

    Here's why you should get into the forex market.
  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. Tech

    Japan Finally Recognizes Bitcoin After Long Battle

    New laws will set Bitcoin and other digital currencies as official currency in Japan.
  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. Trading

    Understanding the spread in retail currency exchange rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.
  8. Investing

    Hedge against exchange rate risk with currency ETFs

    Currency moves are unpredictable and can have an adverse effect on portfolio returns. Find out how to protect yourself.
  9. 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.
RELATED FAQS
  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. What is foreign exchange?

    Foreign exchange is the conversion of a country's currency into another. In a free economy, a country's currency is valued ... 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. Read Answer >>
  4. How can I trade in cross currency pairs if my forex account is denominated in U.S. ...

    The forex market allows individuals to trade on nearly all of the currencies in the world. However, most of the trading is ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center