The Commercial Credit Circuit (C3) is a business-to-business system that is an improvement on the WIR, in the sense that the currency is convertible on demand into national currency. It is a powerful way to create employment because it injects working capital in networks of small and medium sized enterprises (SME), thereby creating employment (because SMEs tend to be the sector that provides 90% of all private employment. This system is currently operational in Brazil and in Uruguay with several other Latin American countries interested in implementing it. For an executive summary of this system, please read below:
What is C3 in Uruguay?
C3 (Circuit of Trade Credit) is a tool for the Micro, Small and Medium-sized enterprises (Msmes) access to credit and to make electronic payments to public and private companies that are part of the network of commercial transactions.
It operates through 3 channels:
Internet, cell phone and a magnetic card.
What is a network of business transactions?
Connects supply and demand, creditors and debtors.
Transferred rights electronically, without the use of money physical.
As a means of payment are used transferable rights, in uruguayan pesos or us dollars.
The transactions are “payments and collections”, the “debits and credits” among the participants of the Network.
100% transparency: systematic recording and automatic movements.
Commercial Credit Circuit (C3)A Financial Innovation to Structurally Address Unemployment
C3 Step by Step:
- Participating businesses start by securing an invoice insurance up to a predetermined amount, based on the specific creditworthiness of their own business and of the claims they obtain on third parties.
- The business that has obtained such an insurance (hereafter referred to as business A)opens a checking account in the clearing-network, electronically exchanges the insured invoice for clearing funds, and pays its supplier (business B) immediately and fully with those clearing funds via the clearing network.
- To receive its payment, business B only needs to open its own checking account in the network. Business B has now two options: either cashing it in for conventional national money (at the cost of paying the interest for the outstanding period, e.g. 90 days; plus banking fees); or pay its own suppliers with the corresponding clearing funds (at no cost).
- Whatever the timing of the payment is to business A, business B is in a position to use the positive balance on its account in the network, for instance to pay its supplier business C.
- Business C only needs to open an account in the network. It has then the same two options as business B: cash it in for national money, or spend it in the network. And so on…
- 6. At maturity of the invoice, the network gets paid the amount of the invoice in national money, either by business A or by the insurance company (in case of default of business A). Whoever owns at that point the proceeds of the insured invoice can cash them in for national money without incurring any interest costs.
Benefits For businesses:
Links and Tweets:
for some reason Mr Lietaer seems to have become quiet quiet on Twitter and his website…