Villagers in Yasothon's Kut Chum district are jubilant that their self-created monetary unit - the Boon Kut Chum - could become legitimate.

Following years of battle, their petition to have their own currency is being favourably treated. The Council of State recently ruled that the currency could be used in the community if it receives approval from the finance minister.

Chanchai Boonritchaisri, director of the Bank of Thailand's legal department, says that though the Finance Ministry has the authority to legitimise the currency under the Currency Act, it still needs to discuss the process and controlling measures with the central bank.

"If the village currency is to be legal, we need to control the combined amount so that it would not affect the overall economy," he said.

"If the combined amount is controlled, it would automatically limit the scope of area where the currency can be used. Meanwhile, we need measures to ensure that if the currency scheme flops or is aborted, it won't cause damage to bearers."

A mechanism would also be needed to ensure forgery protection and that villagers follow rules and regulations.

The effect on the overall economy should be tiny because the village currency would be circulated in a small community.

The central bank is open to similar schemes from other villages, but the applications would be screened on a case-by-case basis, Chanchai added.

The local currency was introduced in 2000 to reduce the villagers' dependence on the baht and to promote savings. But within weeks the Bank of Thailand banned it on grounds that it could breach the Currency Act.

"Everybody is delighted by the Council of State's ruling. There are now more transactions using the Boon Kut Chum inside the village," said Pranee Srimantra, chairman of a group advocating community development for self-dependence.

Pranee believed the use of the Boon Kut Chum would finally show whether a local currency could encourage a community to become more self-reliant.

"By using the Boon Kut Chum, transactions will be conducted among local people only. To deal with other communities, everyone will have to opt for baht. If local people stick to the Boon Kut Chum, they should be able to save money in baht and their community will become more self-reliant," she explained.

One Boon Kut Chum is equivalent to one baht. In the beginning, it was known as the Bia Kut Chum but was later renamed to avoid offending financial authorities. "Bia" was a unit of ancient Thai currency used in the Ayutthaya and early Rattanakosin eras.

Pranee's group issued 30,000 Boon Kut Chum in 2000. No more of the currency has since been distributed.

To accommodate the use of the currency, a cooperative was set up and each of its members was given 100 Boon Kut Chum for free. Under the concept, chicken egg farmers can barter for bananas at the same value of their eggs. If they want more bananas, they need to spend their Boon Kut Chum. If they do not have enough Boon Kut Chum, they have to spend baht.

Members are supposed to report to their cooperative with 100 Boon Kut Chum one year after they receive the currency. This was a measure to encourage local people to do transactions within their communities.

At its peak, the currency was circulated among more than 120 people in five villages in the Kut Chum district.

Following the ban by the Bank of Thailand, local people turned their back on the Boon Kut Chum. But in 2003 the north-eastern office of the central bank said it understood the concept of a local currency. So about 20 local people in Santisuk Village resumed the use of the Boon Kut Chum.

"We believe the use of the Boon Kut Chum will not threaten the baht because it is just a local currency used among very few people," Pranee explained.

She added local currencies were used in some parts of Canada, the United States, Japan and Indonesia without causing any problem.

Chutima Muangman, who heads Rak Thammachat Club rice mills, hoped the use of the Boon Kut Chum would be widespread enough to provide proof of whether a local currency could sustain a community's self-reliance.

Chularat Saengpassa, Anoma Srisukkasem

The Nation