Loan Backed Currency, or LBC, is a methodology developed for microcredit institutions in which credit is issued partly in a local exchange unit that circulates within a community. Generally speaking, local exchange units used are vouchers. In this way, the microcredit institution can broaden its credit portfolio without the need to collect external funds. Vouchers are issued as microcredit and backed up by the commercial capacity of whoever receives them. These cannot be exchanged for money but they can be used to pay local credits. Since this method is combined with credit issued in money, credit in money can be paid with vouchers, creating an indirect relationship between national money and the local exchange unit.

Some of the activities of the LBC system are:

• Administration of microcredit, both in money and in local exchange units such as vouchers.
• Trainings
• Implementation of local development “sub-projects” (construction of schools, drinkable water systems, etc.) integrated into the local exchange unit system.

This system has an impact in the local economy because it stimulates local companies to look for local suppliers. Moreover, it can result in a reduction in defaults because sales of businesses that participate in this network tend to increase.

Combining the activities of this method with other local development efforts (productive projects, trainings, etc.), the intention is to generate a wide strategy of local socio-economic development.