Anarchists tend to support most forms of co-operation, including those associated with credit and money. This co-operative credit/banking takes many forms, such as credit unions, LETS schemes and so on. In this section we discuss two main forms of co-operative credit, mutualism and LETS.

Mutualism is the name for the ideas associated with Proudhon and his Bank of the People. Essentially, it is a confederation of credit unions in which working class people pool their funds and savings. This allows credit to be arranged at cost, so increasing the options available to working people as well as abolishing interest on loans by making increasing amount of cheap credit available to working people. LETS stands for Local Exchange Trading Schemes and is a similar idea in many ways (and apparently discovered independently) — see Bringing the Economy Home from the Market by V.G. Dobson for a detailed discussion on LETS.

Both schemes revolve around creating an alternative form of currency and credit within capitalism in order to allow working class people to work outwith the capitalist money system by creating "labour notes" as a new circulating medium. In this way, it is hoped, workers would be able to improve their living and working conditions by having a source of community-based (very low interest) credit and so be less dependent on capitalists and the capitalist banking system. Some supporters of mutualism considered it as the ideal way of reforming capitalism away. By making credit available to the ordinary worker at very cheap rates, the end of wage slavery would soon occur as workers would work for themselves by either purchasing the necessary tools required for their work or, by their increased bargaining power within the economy, gain industrial democracy from the capitalists by buying them out.

Such ideas have had a long history within the socialist movement, originating in the British socialist movement in the early 19th century. Robert Owen and other Socialists active at the time considered the idea of labour notes and exchanges as a means of improving working class conditions within capitalism and as the means of reforming capitalism into a society of confederated, self-governing communities. Indeed, "Equitable Labour Exchanges" were "founded at London and Birmingham in 1832" with "Labour notes and the exchange of small products" [E.P. Thompson, The Making of the English Working Class, p. 870] Apparently independently of these early attempts in England at what would later be called mutualism, P-J Proudhon arrived at the same ideas decades later in France. In his words, "The People's Bank quite simply embodies the financial and economic aspects of the principle of modern democracy, that is, the sovereignty of the People, and of the republican motto, 'Liberty, Equality, Fraternity.'" [Selected Writings of P-J Proudhon, p. 75] Similarly, in the USA (partly as a result of Joshua Warren's activities, who got the idea from Robert Owen) there was extensive discussion on labour notes, exchanges and free credit as a means of protecting workers from the evils of capitalism and ensuring their independence and freedom from wage slavery. When Proudhon's works appeared in North America, the basic arguments were well known.

Therefore the idea that mutual banking using labour money as a means to improve working class living conditions, even, perhaps, to achieve industrial democracy, self-management and the end of capitalism has a long history in Socialist thought. Unfortunately this aspect of socialism became less important with the rise of Marxism (which called these early socialists "utopian") attempts at such credit unions and alternative exchange schemes were generally replaced with attempts to build working class political parties. With the rise of Marxian social democracy, constructive socialistic experiments and collective working class self-help was replaced by working within the capitalist state. Fortunately, history has had the last laugh on Marxism with working class people yet again creating anew the ideas of Mutualism (as can be seen by the growth of LETS and other schemes of community money).