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WIR Bank

wir_bank_hauptsitz_basel_2011 copy

Introduction

The WIR Bank, or WIR (short for Wirtschaftsring, German for ‘Economic Circle’, and ‘wir’ = German for ‘we’), is an complementary currency system in Switzerland that serves SME businesses mainly in hospitality, construction, manufacturing, retail and professional services. The WIR offers a clearance mechanism in which business can buy from one another without using Swiss Francs. However, WIR is often used in combination with Swiss Franc in dual-currency transactions.

WIR started in 1934, and now has over 60.000 users: 45.000 SMEs and 15.000 employers or owners of these businesses participate as individuals. Together they generate a 10-figure annual turnover. 1 Therefor it serves globally as the key example of a business-to-business closed loop payment system currency at scale.

 

Purpose

WIR is designed to support SME in Switzerland, providing liquidity and marketing, especially in times of economic downturn.

Community Overview

Today, the WIR has over 60.000 users (ca. 17% of total Swiss businesses) together responsible for an annual turnover of 1.5 billion Euro. Trade in WIR has a share of 1-2% of Swiss GDP. 2

Organisation and History

The Swiss WIR was founded in 1934 by a small group of Swiss entrepreneurs that saw their turnovers vaporise during the financial crisis of the interwar period. It was modeled after an exchange and clearing system in Scandinavia and the Baltic related to the JAK bank (compare Dubois 2014 3). It was initially named the ‘Wirtschaftsring-Genossenschaft’ (free economic circle cooperative) until it changed its name to ‘the WIR Bank’ in 1998. WIR is an abbreviation of ‘Wirtschaftsring’ (business circle) and also the German word for ‘we’. The direct cause for establishing the WIR was the shortage of conventional currency after the stock market crash of 1929. By joining the WIR participating small and medium-sized enterprises were enabled to make use of WIR units to complete their transactions.

The WIR Bank was a not-for-profit entity, although that status changed during the Bank’s expansion. 4 Although founders Enz and Zimmerman were inspired by Silvio Gesell, according to whom money should be free of interest, the ‘Freigeldtheorie’ was abandoned by 1952 allowing low interest-rates on loans provided by the WIR. A tiny experiment with demurrage using low-value stamp scrip notes was carried out in 1938-1948, but discontinued [Godschalk, H. (2012), pages 58-69].

In 1936 the organisation acquired a Swiss banking licence. Since 1999 the WIR Bank also offers, in addition to the WIR currency (CHW), banking services in Swiss Frankcs (CHF). Since 2000, these are also available for individuals, not only SMEs.

The WIR still operates as a cooperative, which is a definite legal form in German speaking countries. 5

To apply to become a member of the cooperative with voting rights in the general assembly, participants of the WIR payment system have to have overtly accepted WIR for two years and own 10 shares of the cooperative which will be blocked from sale for the duration of the membership. Shares are otherwise freely traded [current rate here: http://wir.ch/de/wir-kunden/stammanteile/].

Impact

Research by the economist James Stodder (1998; 2005; 2007) shows that the WIR creates a countercyclical tendency in the economy meaning that during financial crisis, when the availability of legal tender contracts, the trade in the WIR network increases and hence enables SME businesses to avoid a severe downturn in profits and annual turnover. This effect proofed statistically significant despite the small absolute vloume of CHW in comparison to the national CHF economy.

Currency Details

a. Issuance – Backing

WIR units enter circulation when being lent by the bank to an account holder. They are taking out of circulation when that loan is repaid. This can happen in two ways. The primary way, accounting for the bulk of WIR, is through loans granted through the WIR Bank’s head office in Basel.

A secondary option is through an overdraft facility with predetermined terms.

Often, WIR is presented as an example of a mutual credit systems, which, in the narrow sense, implies units being created between two user accounts independent of a central issuer. This however is not the case in WIR, where all credit is booked against the bank’s central account. Also see the article trade exchange for more details on mutual credit and b2b currencies.

b. Function and unit of account

The unit of account of the WIR-franc (CHW) is the Swiss Franc (CHF): one WIR-franc always equals the value of one Swiss-franc. But according to the WIR Bank’s statutes, WIR-Credit cannot be redeemed for Swiss Francs (Douthwaite 1999: Ch. 2). This design criterion guarantees that money remains within the cooperative circle.

In WIR, no ‘physical’ are printed or minted. WIR-credit is purely electronic. Since 1995, it is possible to make payments using a single plastic charge card rather than using cheques. In 2008 internet-banking became available.

Only in rare cases, in the absence of card readers, there still exit WIR cheques to be sent in to the banks headquarters for accounting.

c. Dual-currency transactions

Not all suppliers accept 100 percent payment in WIR currency. Combined payments are more common where goods and services are paid for part in cash and part in WIR. Members agree to accept at least 30% of the payment in WIR (of the first 3.000CHF of a purchase, above that figure acceptance is voluntary). Many members choose to accept exactly 30% payment in WIR, or perhaps 50%.
Previously a variable ‘acceptance by agreement‘ option existed, but has now been discontinued. Then, users were differentiated by “guaranteed acceptance” and “acceptance by agreement”.

Acceptance of WIR does not have to be published, which results in a number of “covert members”.

d. Funding

The WIR has installed several cost recovery mechanisms to finance its organization. First of all, a fee or levy on every transaction is charged.

In 2014 this fee was 1% for users with guaranteed acceptance and 2% for those with acceptance by agreement. These fees are paid in Swiss Francs. The current conditions are published on WIR.ch 6

A second source of income is the interest paid on loans and overdraft facilities.
A maximum interest rate of 1.75% is charged on WIR-mortgages.
On over-drafts, different interest rates apply depending on the user’s collateral. For WIR overdrafts backed by CHF accounts 1.5% is charged, 2.5% for other collateral (e.g. 2nd mortgages) and 3.5% if no collateral is offered. (Current conditions can be found on their website. 7)

The WIR bank also offers loans and accounts in Swiss Franc, which contributes to the revenue of the organisation.

How it works

In the WIR all participants can buy from one another, the banks software keeping score of everyone’s balance. All participants sign up for a membership and start with a balance of zero WIR-franc in their current account. They can start to sell goods or services to another member of the WIR network and receive WIR-Francs in return. The buyer’s bank account is debited and the seller’s bank account is simultaneously credited by the same amount. Sellers advertise on the bank’s marketplace website 8 and meet each other and potential clients at regular regional trade fairs. 9

Further reading

Ryan-Collins, J. (2010). Not so “Mickey Mouse: Lessons in the nature of modern money from complementary currency innvoations, 12 (Sept) 57-66

(from the previous spokesperson of the WIR Bank)
Dubois, Hervé (2014) Fazination WIR, Eine Wirtschaftsbewegung mit Zukunft, Fona, ISBN-13: 9783037810750

Godschalk, H. (2012) Does demurrage matter for Complementary Currencies?, International Journal of Community Currency Research 16 (2012), Section D, pages 58-69

Stodder, James P. (2007) Residual Barter Networks and Macro-Economic Stability; Switzerland’s Wirtschaftsring. Available: http://www.lietaer.com/images/Stodder_WIR_paper2009.pdf

 


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