With a pen and notepad in hand, Elizabeth Akinyi approaches the entrance of a corrugated-metal home in Mukuru Kayaba, an informal settlement across the highway from Nairobi’s industrial area. She is wearing a cloth face mask she sewed a couple weeks prior. “Hodi,” she calls. A man answers and welcomes her inside, but she greets him from a distance. Akinyi is a community health volunteer, and this is one of the 100 households she visits once a month. The man is a shoe vendor named Matthew Ongare, whose diabetes is slowly eating away at his eyesight. She asks him how he’s holding up, checks to see if anyone in his family is ill, and, in light of Covid-19, tells him to wear a mask and wash his hands with running water. He understands. But Akinyi lives in Mukuru Kayaba too, and both of them know that the water supply there has run dry for almost two weeks now, even though frequent rains have turned the paths around them into mud.

This time, Akinyi adds something else to her usual conversation with Ongare. Demonstrating on her mobile phone, Akinyi explains that there is a new digital currency that might help him stay afloat during these economically tough times. It’s called Sarafu, and it can be used just like M-Pesa — Kenya’s mobile payment system that allows anyone with a SIM card to transfer money within the country. Sarafu is a community inclusion currency (CIC), which is intended to be used alongside government-issued money to make payments at a local level. The idea is that CICs can bolster small businesses by keeping daily spending within the community, which allows people to save their national currency for transactions with larger businesses or government bodies.

The vast majority of people in Mukuru Kayaba are not employed in the formal economy, and although they have goods and services to offer, they often don’t have money to spend. Akinyi explains to Ongare that he can use Sarafu to buy flour, water, soap, a haircut, or clothes from local vendors; he could even accept Sarafu for the shoes he sells. Akinyi registers Ongare, and he starts with a balance of 400 Sarafu, or 400 Kenyan shillings (~$4). She gets a bonus of 100 Sarafu for signing him up.

For the past nine months, Akinyi has been relying on Sarafu for her own business endeavors. Though she volunteers as a health worker, Akinyi earns a living running a cosmetics business from inside a small metal kiosk. Few people buy beauty products during a pandemic, so she started making and selling liquid soap, purchasing chemical materials in bulk and mixing them in jerricans. Yesterday, she sold two jerricans of soap to a young man who paid with Sarafu — one for his mother’s house, the other for his own. Later that day, Akinyi bought vegetables from a roadside produce stall with the digital currency. Akinyi uses Sarafu wherever she can; then, once a month, she goes to a local community group to cash some of it out for Kenyan shillings. In these uncertain times, when people might otherwise be not spending at all, she says she’s relied on it more than ever.

The Covid-19 pandemic has revealed who in every society is most vulnerable, and Kenya’s has not been an exception. After the country confirmed its first case of Covid-19 on March 12, 2020, the government promptly shut down schools and religious centers, banned international flights, and permitted only businesses deemed “essential” to remain open. For many Kenyans, however, adhering to these measures has been difficult or impossible. More than 83% of Kenya’s workforce is informally employed, and many rely on casual daily wages and have little in the way of savings; 60% of Kenyans surveyed by FinMark Trust, a nonprofit that facilitates inclusive financial markets, said they don’t have access to any emergency funds. Most won’t be able to simply “ride it out.”

Amrik Heyer, head of research at Financial Sector Deepening Kenya, says that, as the pandemic continues, “people are consuming their long-term assets” — such as school fees or savings — and likely won’t be able to rebuild them. And, with fewer customers and supply chains under threat, many businesses may collapse entirely.

Though the “coronavirus recession” is unprecedented in its scale, there have been many other severe shocks to regions and nations within the last couple of decades. How might money be kept within local economies in order to insulate them? Since the 19th century, introducing community currencies alongside national currencies has been one answer to this question. Even though individuals in a community may have goods and services to sell, money that enters local economies usually ricochets right back out of them. To minimize this exposure, community currencies often rely on closed-loop voucher systems that incentivize people to “spend local.” Take, for example, BerkShares of the Berkshire region of western Massachusetts. In that system, buyers can purchase printed Berkshares notes for 95% of the dollar value, use the currency at local businesses, and ultimately redeem them for dollars with no exchange fee.

Sarafu was created by Grassroots Economics (GE), a Kenyan nonprofit that builds CICs. The organization, which was founded by the American physicist and development economist Will Ruddick, is the only one working on CICs in Kenya. Since 2010, it has introduced CICs to 45 communities in Kenya. Over the years, GE found that CICs worked at a scale of 100 to 200 businesses, but given design constraints, had trouble expanding beyond that. CICs constantly racked up printing costs and couldn’t be exchanged for other local currencies. But when GE switched from paper to digital in 2018, these barriers were suddenly removed. The technology that made this possible was blockchain.

Cryptocurrency’s revolutionary potential, its proponents say, lies in its ability to provide an alternative to traditional banking. For the many Kenyans for whom credit is not easily accessible — or when it is, offered under predatory conditions — CICs are a way for people to access and issue credit while avoiding banks altogether.

Credit, debt, and money are abstract concepts as is, without adding blockchain to the mix. But breaking this down from the perspective of an individual user can help. Let’s say there is a mama mboga who sells vegetables at a roadside stall and is part of a chama, a local savings group, called “Power Women Chama.” Each of these chamas keeps a reserve of money in xDAI, a cryptocurrency pegged to the U.S. dollar. That way, if a member business collapses, or crops fail, the CIC is backed by that reserve. The vegetable seller can, using her feature phone, store Kenyan shillings in this chama-owned reserve on a public blockchain. What she has just done is added to that reserve and thus minted shares in Power Women tokens — a hyperlocal CIC owned by Power Women Chama. Since all the reserves of the various chamas are also pegged to a shared reserve currency, an exchange value can be calculated, and all of them can be used interchangeably.  

“One of the most significant strengths of these blockchain-based currencies is that they can be adapted to ‘value’ essential workers who often go unseen, at least in economic terms,” Ruddick argues. By looking at anonymized data on transaction volumes and type, economists and aid organizations can identify key “nodes” in supply chains — like small-scale food and produce vendors as well as those who perform crucial but uncompensated community services — and send them financial assistance during emergencies. In other words, a CIC might not only keep money flowing during dire times, it can support the people who actually keep the community running.

GE was in the process of building a decentralized ecosystem of hyperlocal currencies when Covid-19 hit. Then, due to the pandemic and the resulting economic crisis, it merged all local digital currencies into the Sarafu Network, which is, for now, acting as an aid currency. Funds from the International Federation of Red Cross and Red Crescent Societies, Innovation Norway, Gitcoin, and Triodos Bank are being used to seed CIC reserves, which users have been able to cash out into Kenyan shillings every month. (According to the most recent data from GE, every dollar in donor aid has led to $18 worth of trade.)

In April, Kenya Red Cross and GE partnered to deploy community response teams to spread information about Covid-19 and sign up users for Sarafu. For the time being, they’re scaling slowly: of the approximately 7,000 new users who have been registered since April, almost all are in Mukuru Kayaba.

Every month, Akinyi meets with other members of her chama at a local community hall, a spare concrete room that they fill with a circle of plastic chairs, spaced at least a meter apart. The group is made up of health volunteers, and they begin by talking shop. By now, they were supposed to have completed a survey that would document health status and needs in over 6,700 households. But they received only one notepad from the Kenyan Ministry of Health for the whole project, so the mapping didn’t happen.

Then, they get into money. The group has a fund made up of contributions from all the members, and, each meeting, one or two people borrow from it. For two months, this has all been done in Sarafu, not Kenyan shillings. Akinyi received 5,000 Sarafu that meeting, which she used to buy materials for her liquid soap. Usually, she’d return the loan with interest the following month, and, over time, the group’s savings would grow. At the moment though, the chama has decided to waive interest since “no one has money right now,” according to Akinyi.

Blockchain-based community currencies are new to most people in the community, and, broadly, Sarafu is being used as if it were a form of digital cash. While Akinyi describes her own accounting with the fluency of a business owner, she mostly regards the digital currency as being the same as M-Pesa. Sarafu has been in Mukuru Kayaba since the beginning of this year, but it does not seem to have fundamentally disrupted the ways in which money changes hands.

Sarafu is the newest in a long line of financial innovations that have been introduced into poor communities by foreign institutions, multilateral organizations, and nonprofits — efforts that have often had negative downstream consequences. Microfinance schemes of the 1980s were widely hailed as game changers for the world’s poorest, yet they tended to outsource the responsibility of ensuring high-interest loan repayments to other members of the community, thus pitting debtors against each other. This completely altered the nature of lending and borrowing, as neighbors came to rely on extracting profit from one another. As a result of this recent history, organizations are expected to establish that they will “do no harm.” Parijat Chakrabarti, a Ph.D. candidate in sociology at Princeton University who studies the effects of digital loans in Kenya, notes that the promise and danger of experimenting with financial technology on the poor are two sides of the same coin: the same people who stand to benefit can become even more vulnerable. “In the process of bringing economic power to the community,” he says, one must ask, “What other kinds of dependencies are created, and what are the implications?”

What sets CICs apart, according to GE, is that they require strong community ties simply to function. In a recent blog post, Ruth Njau and Antony Ngoka, two field officers at GE, highlight the experience of a self-employed metalworker called Victor who makes doors, furniture, and ovens. While Victor’s business stagnated at the onset of the economic crisis, things turned around once he began accepting Sarafu. In the last month, according to the post, Victor has had 54 clients and sold $1,246 worth of goods using Sarafu. All these transactions, as with cash, run on various forms of trust. Safia Verjee, the innovation manager at Kenya Red Cross, says she thought community currencies offered a potential improvement on the usual donation model. The idea she was initially drawn to, she says, was that of “building resilient communities.”

The rise of community currencies can also be seen as a small reflection of larger changes within humanitarian strategic thinking. “In the sector, there has been a shift from food and in-kind aid to cash,” says Mark Laichena, Africa operations director of the direct cash-transfer organization GiveDirectly. “Having cash means you have more freedom of choice, and you’re not constrained by what the donor thinks you might need.” Purchasing and donating food in bulk can distort local markets, he explains, while programs that give people food vouchers that can be redeemed at local businesses for cash are often saddled with a complex array of design and logistical choices. “The main thing is you have a trade-off between speed and inclusion,” he says. It might not take long to set up a voucher program that partners with a single large retail chain, for example, but that could come at the cost of access for residents who might be geographically or economically out of reach.

Whether or not Sarafu will be able to transition from a donor-backed aid currency to the network of self-sustaining micro-economies Ruddick envisions may depend on factors that will only manifest at scale. For one, there is the challenge of explaining CIC to potential participants — not only how to use it but also why they should trust it. GE, as with all organizations that use blockchain-based products, will need to address the ethical question of how digitally and financially literate users must be in order to make an informed choice.

The matter of state approval looms as well. There is a historical pattern of the government stamping out thriving local currencies. Perhaps because Ruddick was arrested in 2013 when Kenyan authorities mistakenly associated one of his early CICs with a coastal separatist movement, GE is particularly sensitive about adhering to regulation. The blockchain is one way to offer greater transparency. Another is by linking the CIC to the national currency. Sarafu is not only backed by the Kenyan shilling, it also uses Safaricom’s familiar M-Pesa system, which is heavily backed by the government.

Yet the open-ended questions about whether or not currencies like Sarafu will strengthen local economies don’t ultimately come down to the technology itself. Rather, they hinge on whether or not people trust and use them. And this is what GE is betting on: myriad cryptocurrencies can be minted using blockchain, but few have built up an infrastructure that anchors them to national currencies, community groups, and the experiences of everyday people. Ultimately, people do not borrow or trade simply out of lack. They do so to continue circulating the other forms of value that cannot be reduced to goods and services: such as care, support, and respect. Akinyi has been volunteering for over nine years and will continue to go door-to-door-to-door every week during the pandemic. If anyone understands this much, it’s she.