Interview: Credit Clearing in Slovenia – A Conversation with Tomaz Fleischman, Part 2

Recorded May 2025. Interview edited for clarity and length.

In this second part of our conversation, Tom Woodroof (Local Loop Merseyside) speaks with Tomaž Fleischman, Principal Scientist and Founder of Cycles Protocol, and long‑time researcher of multilateral trade credit set‑off (often called Loop Clearing). We discuss the ways businesses can maximise their impact and benefit from participating in clearing clubs, the importance of trust, and how clearing can support local community projects.

Maximising Impact through Community Participation:

Tom: You noted that firms at the fringes (of the network) gain less. How might community‑owned systems bring more businesses into the centre?

Tomaž: The community has to create projects that enable businesses on the fringes of the network to participate in the centre of the network.

This looks like purpose‑driven projects, creating initiatives everyone is happy to supply or buy from (or even donate to). A local social enterprise for instance, can accept in‑kind obligations rather than cash. Those obligations slot into clearing cycles, letting a fringe business donate goods or services and recover an overdue debt in the same loop.

Tom: So the social project would actually issue you an invoice for £100, and that would connect you into a cycle, and that would enable you to collect a debt because it can be cleared around a loop?

Tomaž: I wouldn’t suggest issuing invoices as this has tax consequences. There could be a contact at the social project that says, okay, there is a willingness to send a flow of up to £100 in my direction, and if this happens, this will be accounted for as a donation.

This is something that happens in Slovenia too, perfectly legal, because it is covered by private law. It’s about managing financial obligations, but you need a cover contract in such an entity, or social project.

Tom: You’ve achieved something quite impressive there, because you’ve meant that the social project gets more funding, the business which is helping to fund it is also receiving a benefit and you’ve actually created more local trade, more local economic activity, without relying on external forms of financing.

Tomaž: There is also a way to achieve this where the whole community can approach impact investors and grant funders, because sometimes it’s very difficult to show the impact of funds that were granted.

What you can do is enhance the liquidity (how quickly you can get your hands on your cash) of such a system, if grants are incorporated as a liquidity source. You can report to the grant giver saying we have used, say, £1 million pounds of impact grant funding, but this one million was not used once or in one spot, it travelled through the trade network, and so you can report that there was a network multiplier - the £1 million created £2.5 or £3.5 million of debt discharge in the network.

I think this is a huge opportunity for communities, but also for local councils, to think over whether this kind of system is good for making sure the funds granted are used locally.

Tom: There’s two interesting effects there. One is the local multiplier effect, whereby a pound spent locally might discharge multiple pounds’ worth of debt and keep the money circulating in the community, but you also have the ability to quantify social impact, which is getting a lot of interest at the moment in the UK. As you say lots of people should be paying attention to this, as the potential is enormous.

Supply‑Chain Resilience and Localisation:

Tom: You mentioned before this interview that the economy is becoming more complex, supply chains are becoming longer. There is a growing interest in response to global volatility in relocalisation and onshoring. What role could tools like Loop Clearing play in actually delivering on these concepts?

Tomaž: What we have in the economy is longer and longer supply chains - the profit motive basically forces everyone to specialise more and more and to bring labour to where it is cheapest, to bring the material production to where materials are cheaper, and this is what’s stretching supply chains.

Stretched supply chains means there is less local (monetary) circulation. The way to offset this is to create monetary instruments that enable local monetary circulation.

The problem with the current money we use, pounds or euros, is that it’s not really local, you cannot capture and develop local communities using conventional monetary instruments. So this raises the question of how to do it. Since normal supply chains are stretched everywhere, creating a local supply chain that closes up in a cycle is a really huge challenge. Normally it would also involve investment. To produce something locally or deliver services locally is simply impractical.

So you have to be innovative in the way you manage money. Here I think the big opportunities lie in tapping into the concept of local trust. If a group of local firms trust each other, they know each other, they support each other, but they cannot close a cycle through a supply chain, they can instead close the cycle through a monetary instrument like mutual credit.

If you participate with this as a liquidity source inside the clearing instrument then you create a new local circulation of value.

Tom: There are so many directions this could go. But it seems really clear to me that the future of these systems is local, it’s community owned and governed, and based on trust coming bottom-up from the business community. For me that’s probably the single biggest takeaway from the discussions we’ve been having the last few years. Thank you for your research, and your time, and this interview.

Key Takeaways:

• There are ways to actively bring businesses and community projects into the centre of the trading network, and this has beneficial impacts for everyone.
• Community‑owned, trust‑based clearing networks are the future. They offer immediate cashflow relief and the long‑term rewards to collaboration that businesses need to thrive amid uncertainty.
• Local Loop Merseyside is embracing this future by building the network density, governance, and technical requirements necessary for a member-owned clearing club. Watch this space.