Director,
T.E.(Terry)
Manning,
Schoener 50,
1771 ED Wieringerwerf,
The Netherlands.
Tel:
0031-227-604128
Homepage:
http://www.flowman.nl
E-mail: (nameatendofline)@xs4all.nl : bakensverzet
Incorporating
innovative social, financial, economic, local administrative and productive
structures, numerous renewable energy applications, with an important role for
women in poverty alleviation in rural and poor urban environments.
"Money is not
the key that opens the gates of the market but the bolt that bars them"
Gesell, Silvio The
Natural Economic Order
Revised English
edition, Peter Owen, London 1958, page 228
Edition 11: 02
October 2006
Purchases in formal money of capital goods for production purposes will
normally need to be imported into the country where the project area is
situated.
The first series of such purchases is usually
made with the original loan funds. Since the original loan funds are made
available in Euro or other leading international currency, and converted into
the local currency for the purposes of the project, their re-conversion where
necessary from the local currency into the international currency should not
pose a problem.
The amount of capital goods needed for local
productivity increase under recycled micro-loans could, however, amount to
several times (5 or 6 times or more) the amount of the original interest-free
loan expressed in foreign currency.
A condition for the granting of an
interest-free loan under the Model is, normally, that the beneficiary be able
initially to sell some of the goods or services in question outside the project
area for formal money to enable him to repay the loan. The beneficiary
therefore exports the goods or services outside the project area for formal
local currency, but not necessarily outside the national borders. Since capital
goods may often need to be imported into the country where the project area is
situated, a situation of financial leakage of formal national currency occurs
for the purpose of buying the foreign currency necessary for the purchase of
new capital goods for production purposes. This financial leakage is not
desirable but it may in part be offset by the increase of local production
tending towards a reduction in the need for imported goods. The leakage can
only be completely avoided where the project area succeeds with time to export
directly outside national boundaries enough of its production to earn enough
foreign currency to cover the costs of the imported goods. It is unlikely this
be possible at least in the early phases of a project application. The local
government must therefore when it approves a project application under the
Model accept that this (temporary) financial leakage is going to take place
during the initial stages of the project. Its Finance Ministry must ensure
flexibility in granting leave to convert local formal money into the foreign
currency necessary for the purchase of the capital goods. Failure of the
Ministry to do so would in practice lead to serious delays in project
execution. The more often the project funds are recycled the more rapidly the
project area will develop. The Project Coordinator, on the other hand, is bound
to endeavour to reduce the financial leakage of formal currency in question by
purchasing capital equipment, where available, which has already been imported
and is available on the local market.
The following schedule will produce a zero national
import/export balance for the project during its execution and a long-term
ongoing credit balance:
First two (executive) years : zero franchise
Third year, at least 35% of imported value exported
Fourth year, at least 50% of imported value exported
Fifth year, at least 75% of imported value exported
Sixth year, at least 100% of imported value exported
Seventh year, at least 125% of imported value exported
Eight and following years, at least 150% of imported value exported
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