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.

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