Next Article in Journal
Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations
Next Article in Special Issue
Inconsistent Definitions of Money and Currency in Financial Legislation as a Threat to Innovation and Sustainability
Previous Article in Journal
Ten Most Highly Cited Papers in Journal of Risk and Financial Management (JRFM), 2018–2020
Previous Article in Special Issue
Economic Advantages of Community Currencies
Open AccessArticle

Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis

1
Be Solutions d.o.o., Bleiweisova cesta 30, 1000 Ljubljana, Slovenia
2
Department of Media and Communications, London School of Economics and Political Science, London WC2A 2AE, UK
3
Sardex S.p.A., Viale Sant’Ignazio 16, 09038 Serramanna, Italy
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2020, 13(12), 295; https://doi.org/10.3390/jrfm13120295
Received: 2 November 2020 / Revised: 24 November 2020 / Accepted: 26 November 2020 / Published: 27 November 2020
(This article belongs to the Special Issue Monetary Plurality and Crisis)
During financial crises, liquidity tends to become scarce, a problem that disproportionately affects small companies. This paper shows that obligation-clearing is a very effective liquidity-saving method for providing relief in the trade credit market and, therefore, on the supply-side or productive part of the economy. The paper also demonstrates that when used in conjunction with a complementary currency system such as mutual credit as a liquidity source the effectiveness of obligation-clearing can be doubled. Real data from the Sardex mutual credit system show a reduction of net internal debt of the obligation network of approximately 25% when obligation-clearing is used by itself and of 50% when it is used together with mutual credit. These instruments are also relevant from the point of view of risk mitigation for lenders, based in part on the information on individual companies that the mutual credit circuit manager can provide to banks (upon the circuit member’s request) and in part on the relief that liquidity-saving provides especially to NPL companies. The paper concludes by outlining recommendations for how even greater savings could be achieved by including the tax authority as another node in the obligation network. View Full-Text
Keywords: invoice-netting; obligation-clearing; mutual credit; trade credit market; liquidity-saving invoice-netting; obligation-clearing; mutual credit; trade credit market; liquidity-saving
Show Figures

Graphical abstract

MDPI and ACS Style

Fleischman, T.; Dini, P.; Littera, G. Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis. J. Risk Financial Manag. 2020, 13, 295. https://doi.org/10.3390/jrfm13120295

AMA Style

Fleischman T, Dini P, Littera G. Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis. Journal of Risk and Financial Management. 2020; 13(12):295. https://doi.org/10.3390/jrfm13120295

Chicago/Turabian Style

Fleischman, Tomaž; Dini, Paolo; Littera, Giuseppe. 2020. "Liquidity-Saving through Obligation-Clearing and Mutual Credit: An Effective Monetary Innovation for SMEs in Times of Crisis" J. Risk Financial Manag. 13, no. 12: 295. https://doi.org/10.3390/jrfm13120295

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Search more from Scilit
 
Search
Back to TopTop