Launching later this year, LocalLoop Merseyside will be the UK’s first Clearing Club for local businesses.
Adopting tools that are in use in the corporate and mainstream financial sector, businesses in the Liverpool-based network can clear debts with the least amount of cash.
Using data provided by members through an app that integrates with popular accounting software, Mutual Credit Services and Informal Systems periodically run an algorithm that detects ’loops’ of businesses that owe each other.
The results show where invoices can be cleared through multilateral obligation set-off, and can be directly applied to accounting records.
Data from a pilot study in Lancaster and Morecambe, with 30 businesses using a simple app, showed several existing loops with the potential for clearing. (see image)
In Slovenia, multilateral obligation set-off has been used on a national level for 30 years to clear mutual indebtedness. In its first year, it managed to clear debts worth 7.5% of GDP. It was this project in fact, that inspired Mutual Credit Services to apply the concept at a city-wide level.
Check out the LocalLoop Merseyside website, and read about the fascinating history of clearing.
Or dive into the technical details behind multilateral obligation set-off if you want to learn more about how it all works.
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