The Sardine and the Whale

Aug 10, 2020 by

What happens when a group of innovative Italians find their communities short of nothing but cash after the financial crash in 2008? Well, in the case of Giuseppe Littera and his community in Sardinia, it leads to the introduction of a mutual credit system – the Sardex. Sizewise, it may compare to the overall amount of money like a fish smaller than a sardine compared to a whale. But its impact on the local economy is huge, nonetheless.

Giuseppe Littera graduated with honors in English, German, and Spanish (languages) in 2007 at the University of Leeds. In 2008, during the financial crisis, Giuseppe and some friends were inspired by the WIR’s story and decided to replicate it, creating the first and largest business-to-business trade exchange network in Sardinia. The company, based in Serramanna (VS), was founded with local capital in mid-2009 by the current management team and started operations in January 2010. Today, Sardex is one of the most successful attempts of complementary currency systems in the world. In recent years, it helped its 4000+ members conduct over 40 million euros worth of transactions in 2017, and 43 million in 2018.

But what exactly is a mutual credit system? – Mutual credit systems, or multilateral credit clearing systems, are mutual collaborative credit systems (CCSs) in which members decide to exchange goods and services without using a fiat currency, e.g. using hours as a means of payment. In fact, they just record any transaction by assigning credit lines to the seller and debt lines to the buyer. In this way, the sum of credits and debts is constant over time. The governance of debt limits and defaults differs widely among mutual CCSs. Indeed, mutual credit systems have been adopted among quite different organizations, both by groups of private citizens (e.g. Timebanking Systems and Local Exchange Trading Systems) or by groups of firms (e.g. WIR bank, Sardex), and this fact is expressed in significant differences in governance models.

Sardex and the COVID crisis – Easily said, as long as the businesses trust that Sardex exists, it exists. And the trust in the Sardex even increased during the current Corona Crises. From March until now, they had transactions worth on average 6 million euros per month, the highest result ever. It is hard to say how the Sardex affects the Sardinian economy as a whole, but a lot of firms use Sardex to adapt to this new situation brought about by Corona. Debt lines per company are a maximum of 1000 euros. What Sardex can observe is really narrow with respect to the entire economy.

How does it work? – There is no convertibility, but the use-value is 1:1 with euros. When you join, you are committing your productive capacity. If your are account goes negative, you have an obligation to pay back (sell in Sardex) within 12 months. The peer-to-peer trust in the network is necessary.

Sardex follows a “prevention-of-failures” strategy. The responsibility of the network managers is to sort out such debts, selling goods, and services. The loss is mutualized / spread in the network – a piece for everybody. When there is a malicious attack, then Sardex uses all legal means available to pursue the collection of the debt.

What are the criteria for firms to enter the network? – Proper risk management and a favorable environment for community currency systems are not easy. Sardex has competitors, and they need to maintain a balance in the whole businesses’ network.

Scaling-up? – Looking at our lively discussion, it was clear that many questions circled around the topics of scaling and safety. When we discussed how it is decided who may join the network (on a case-to-case-basis) and how big Sardex could become, Littera mentioned that the potential market could stretch out to one-out-of-four companies in Europe. However, spreading the Sardex much further is not their intention, as the local connection and the relationships add a lot of value to the Sardex.

Sardex can really change the systemic rules of the game, especially regarding the credit market.

Further remarks – Weapons, tobacco firms and dealers are not allowed to join the Sardex network. This is the only exclusion criteria. Industrialized farms usually are not well-performing in the Sardex network, so they prefer not to join. Complementary currency systems can help the regenerative economy to re-localise. When discussing future development trajectories, some students got very excited about the idea to only allow ecologically responsible, climate friendly businesses to join. Right now, there are no such criteria.


Written by: Teodoro and Magdalena

Based on the session with Guiseppe Littera during the AEMS 2020.