Reuters

The "CDD" is helping residents open banks and encouraging them to shop local.

In Cidade de Deus, a slum in Rio de Janeiro and the basis of the 2002 film "City of God," residents can shop using a local currency called the "CDD," a nickname for the Brazilian favela. It is one of dozens of alternative currencies that are catching on in Brazil.

In the past, "alt currencies" emerged during times of economic and political instability (the Notgeld, literally “emergency money” used in Germany in the 1920s or the scrip (paywall) in the U.S. during the Great Depression). But in Brazil, Latin America’s largest economy, the new currencies signal development rather than uncertainty. Over half of the 12 million Brazilians living in slums like Cidade de Deus could be classified as middle class in 2011 compared to 29 percent in 2001, a study by Instituto Data Popular found.

Today, the countries most likely to host local money systems are those with monetary stability, a developing financial sector and economic growth, according to a 2012 report (pdf) by Damjan Pfajfar, Giovanni Sgro, and Wolf Wagner for the International Journal of Community Currency Research. “[Alternative currencies] seem to fulfill a role very different from the ones they have fulfilled in history,” the researchers write. The number of organizations that issue these alternative tenders across the world rose from 20 in 1992 to 224 in 2011 (p. 46), according to the Complementary Currency Resource Center.

So what are the benefits? In Brazil, community currency encourages residents to buy goods from local businesses instead of in other wealthier towns where many go for work. The CDD, along with the "capivari" in Silva Jardim and the "bem" in Vitoria are pegged to be stronger than the Brazilian real so shoppers get a discount. Residents can more easily open accounts at the community banks that issue the currencies, and in the case of Vitoria can get loans from Banco Bem based on their neighbors’ approval. It’s not a bad deal for tourists either; in CDD, they can change Brazilian reals into local money.

This post originally appeared on Quartz, an Atlantic partner site.

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