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## MODEL FOR SUSTAINABLE SELF-FINANCING INTEGRATED RURAL AND POOR URBAN DEVELOPMENT FOR THE WORLD'S POOR

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

(EN FRANÇAIS)

Edition 12: 01 November 2006

### HOW TO GET STARTED

Project applications under the Model for self-financing, ecological, sustainable integrated development lead to the general increase of quality of life in the project areas. They are therefore more general in nature than traditional projects, and involve women's leadership, productivity development, capacity building, and creation of social security in the local communities.

A project area will typically contain 50.000 to 70.000 inhabitants and might coincide with all or a part of a given administrative district where the future project coordinator is most active. There is nothing critical in the number, which happens to coincide with the size of the ancient Greek City States. The population must be large enough to support the various structures created under the project, yet small enough for everyone to be able to directly participate in the structures and associate with all the events there.

Within each project area, an interest-free, inflation-free cooperative financial environment is created. So what we do is create local economies where financial leakage is blocked, and the small amount of formal money available stays in the area and is re-circulated locally. Financial leakage is caused mainly by interest (up to 40% of the price of a typical industrial product is in fact accumulated interest), energy (all energy sources, including fertilisers, which are not produced in the area), and health ( medicines imported into the project area, often into the host country). There are articles on these financial aspects at website www.flowman.nl.

Each of these local economies must develop a zero trading balance:

a) Its local money systems must have a zero balance amongst each other.
b) Its local money systems must have a zero balance with local money systems outside the project area
c) Its formal money system must have a zero balance with the formal money system within the host country
d) Its foreign currency cost of items imported into the project area from outside the host country must be balanced to zero by the export of items from the project area outside the host country.

So how are the local economies set up?

A number of structures are created in the project area. The order in which this is done is critical.

1) Health clubs are set up. The health clubs are based on groups of about 40 families (200 people) based around future tank commission (they could be also be called local development committees) areas. The health clubs are important because they constitute a platform enabling women to organise themselves so that they can vote in block at meetings and participate fully in the structures. It is women who are expected to take most of the responsibility for the projects. In many countries local NGO's have already done a lot of work in this sector, and in some areas there may already be a nucleus of active women available. The initial costs of the health clubs are covered by the project funds until the local money systems are set up.

2) Once the women's groups are working, the local tank commissions (or local development committees) are set up. These are based on about 40 families (200 people) . The people can decide how many members the tank commissions will have, typically 3 or 5. The tank commission is the heart of the project. It's functions are fully described in the Model and illustrated in diagrams. The cost of organising the tank commissions is covered by the project until the local money systems are set up.

3) Once the tank commissions (or local development committees) have been formed, local money systems can be created. Poverty is often coupled with "lack of formal money". If the people haven't got any dollars or other formal money, they cannot buy goods and services. Yet the absence of formal money does not mean they do not have goods and services to transfer. The local money systems give the people the means of transferring all goods and services produced within the project area. The art then is to use technologies enabling most of the items basic to local development to be built with up to 100% local value added in the project area, so that they can be produced, installed, maintained and paid for within the local money systems, without the need for a single cent of formal money. Under the Model, the entire sanitation system can be built, installed, run and maintained without one cent of formal money! The costs of running the local money systems are covered under the local money systems themselves.

4) Once the local money systems are in place, a distinction can be made between what can be done within the local money systems and what can't. At that time the interest-free micro-credit structures are put in place. These recycle the users' monthly contributions interest-free for credits for productivity purposes, for the purpose of purchasing goods which cannot be locally produced. The systems will allow at least Euro 1500 of interest-free micro-credit per family during the first ten years of the project. Probably more, as the Euro 1500 is conservatively based on an average two-year pay back time. The costs of running the micro-credit structures are covered under the local money systems. Existing local NGO's may already have their own, or access to, local cooperative development bank structures.

5) Once the micro-credit systems and the local money systems are in place, the gypsum composite production factories can be set up. Amongst the priority items for manufacture in these factories are products necessary for the water supply project, water tanks, well linings, water containers, etc. and, later, even some or all of the water pumps themselves. When production capacity is available the production units can start making the sanitary systems and other items such as high efficiency stoves.

6) Interest-free self-terminating building society type structures can be set up at tank commission or other level to finance the purchase of interest-free solar home systems and other structures of common interest.

Apart from structures basic to an improved quality of life, such as hygiene education at home and in the schools, water supply, sanitation in the homes at schools and in clinics, solar lighting for study purposes, solar refrigeration for medicines in clinics, improved cooking stoves etc, the Model does not list all of the initiatives which could take place, as these are as varied as the minds and wishes of the people.

However, any services the local people may consider of special importance can be included in the project and itemised in the budget. Some examples are the setting up of a local radio station, setting up local milk shops for the pasteurisation and distribution of milk, the creation of cooperative storage facilities for food, the creation of a seed bank, the draining and re-structuring of market squares and bus centres, all of which may require formal money funds. Other local initiatives, for instance, creating sports clubs, theatre groups, local consultants offices, communications centres, plant nurseries, and reforestation would be carried out under the local money and interest-free micro-credit systems.

Project applications directly mobilise about 10% of the adult population and the remaining 90% indirectly. Unemployment in the project area should be eliminated within three or four years. The financial structures are fully described in the Model and in specific papers written. Of particular interest are:
a) The application of the compensation principle whereby savings in one sector of a project cover the costs in other areas and
b) The new possibilities offered under the Kyoto treaty for the sale of CER reduction certificates.

Under the compensation principle, the monthly contributions of users are covered by savings on some of their current expenditure. For instance, where families now spend a large slice of their income for wood for cooking or for drinking water or medicines, these costs will be eliminated or reduced under the project, releasing formal money for other uses. Wood will not be used. It will be replaced by mini-briquettes made under the local money systems. The supply of drinking water and the maintenance of structures are already covered under the monthly contributions. General increases in living conditions (hygiene education, clean drinking water, sanitation, elimination of smoke, better drainage, a more varied diet) should lead to less illness and less need to buy medicines.

Some applications under integrated projects under the Model reduce CO2 emissions. The main one is through the use of high efficiency stoves, others are the substitution of kerosene burning by solar home systems, and of some pumping systems by solar or advanced hand pumping technologies. They therefore qualify for the issue of CER certificates under the Tokyo treaty, which can be sold to industrialized countries. The value of these certificates could be enough to pay for the project. The catch is that the procedures under the treaty for relatively small scale carbon-saving projects are still clumsy and expensive.

What about the project structures?

An NGO (which may already be in place and well respected, with good working relations with national and international agencies and with a network of local NGO's) fronts for a given project application. It will nominate a project coordinator, who, during the project, may not be a member of the NGO. They are counterparts - the Project Coordinator is the executive (government), while the NGO is the controller (Parliament). Structures for auditing are set out in the Model.

A project application is prepared by answering the questionnaire form list of information needed, in English. This information can be supplied within a couple of hours by the future project coordinator, who should originate in the project area and therefore know the area well. The coordinator will then be able to prepare a first draft of a detailed project which can then be modified and varied as required by the people.

The project application is then adopted by the NGO and submitted by the NGO for financing under a country programme with one of the host country's aid partners, the UNDP or UNICEF. Since the projects meet all possible development priorities, financing in the form of an interest-free loan is not expected to be a major problem. Financing by way of a grant makes even more rapid local integrated development possible over the medium term.

Homepage Model.

Complete index of the Model.

List of drawings and graphs.
Typical list of maps.
List of abbreviations used.
Documents for funding applications.

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