[Conference] Liquidity-Saving through Obligation-Clearing and Mutual Credit

Friday, 5 March 2021 – 4:00 pm to 5:30 pm GMT. Please register at the Meetup event by clicking here.

Tomaž Fleischman will present his paper, ‘Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis’, followed by questions and a general discussion.

Published late last year, this paper demonstrates the remarkable potential for liquidity saving (in straight terms, cashflow improvements) in the context of an SME trading network from two mechanisms – obligation-clearing (continuous multilateral invoice offsetting) and mutual credit (pooled trade credit).

In crude terms, each mechanism alone reduces the need for hard cash to settle invoices by around 25% for a typical participant in the network – and further, they can operate in tandem without diminishing this impact, for a typical 50% reduction in the quantity of cash needed within the network to finance internal trade.

This is not a theoretical result – Tomaž (who works for Slovenian company BE Solutions [http://www.be-solutions.si/]) and his co-authors, Paolo Dini and Giuseppe Littera used Tetris software to analyse a real dataset of over 138,000 transactions from 3199 firms, with a total value of >€31M, to produce these results.

The mechanisms analysed are not theoretical either – the Slovenian state has been operating a continuous clearing system for decades, which have helped that country weather several financial crises. And the Sardex network in Sardinia (from which the data originates) operates a Mutual Credit system that powers ~€50M per year in trade, with no bank-money involved.

We will discuss how these tools – which are well known and routinely used by banks and large corporations – can now be made available for use by SME networks and local community wealth-building initiatives.

The full paper is here: https://www.mdpi.com/1911-8074/13/12/295/htm