A pilot project using blockchain technology to create local community currencies in Tanzania has demonstrated remarkable success in boosting economic impact and community resilience. The initiative, developed by Swiss NGO Encointer in collaboration with local organization Jukumu, shows how digital currencies can be effectively integrated with traditional cultural practices to multiply the effectiveness of development aid.
The Nyota community currency project in Dar es Salaam has achieved a significant milestone: combining cash transfers with the local digital currency multiplied the economic impact by 240%. This means every dollar of development aid generated nearly two and a half times its value in local economic activity. The project, which launched in late 2023, now involves more than 100 active participants who are co-creating innovative ways to strengthen livelihoods through this emerging local economy.
The system operates through two complementary approaches that both utilize blockchain technology for direct cash transfers. In the first method, individuals receive small cash transfers and then pool their resources using Mchezo, the region's traditional rotating savings and credit system. These pooled funds are then used to support small local businesses in sectors like tailoring, food production, and retail. This approach leverages existing cultural practices while introducing the efficiency of blockchain technology.
The second approach uses cash transfers to create a reserve that secures the issuance of the local digital currency. This reserve ensures the community currency can be exchanged for national currency when needed, building trust in the system while keeping the digital currency circulating within the local economy. The external cash transfers thus enable sustained local economic activities without draining resources from the community.
The tangible benefits are already visible in the community. Alinagwe Mwaselela, a participant in the program, observed that "the use of Nyota currency has increased savings and reduced the cost of getting good products and services." Local business owners like Aisha, who runs MoZa Cosmetics, have seen their customer base expand from approximately 15 to over 40 clients per month through participation in the community currency system.
Documentation of the project's impact is available through https://encointer.org and video materials that illustrate how the community uses the system to grow small businesses and strengthen social ties. The success has prompted Encointer to scale the model, with expansion already underway in Nigeria where new communities are adopting the system based on the same principles.
The organization is conducting deeper impact assessments through community surveys and transaction analysis while integrating savings groups and community-backed microloan mechanisms directly into their smartphone application. This development aims to make the tools pioneered in the Nyota pilot accessible to new communities worldwide. Malik El Bay from Encointer emphasized that "the Nyota pilot shows how local trust, innovation, and collective action can create real economic resilience."
This approach represents a significant shift in development economics, demonstrating how technology can be adapted to local contexts rather than imposing external solutions. By combining blockchain efficiency with community-based decision-making and traditional financial practices, the model offers a sustainable alternative to conventional aid programs that often fail to create lasting economic change.
