Baker banks on the Bristol pound to make his dough

Baker Alex Poulter is a Bristol pound enthusiast. He uses the city's independent currency to buy ingredients from his main supplier and encourages his customers at the East Bristol Bakery to purchase their sourdough loaves and butternut squash muffins with the pretty notes or text payment system.

He uses the currency to pay business rates and at the end of a hard day's baking, he buys his groceries down at the Bristol Sweet Mart and may pop into the Thali Cafe, paying, of course, with Bristol pounds.

"I think it's a great scheme," says Poulter. "It's a good way of making sure people do business and shop locally. It's become part of many people's routine."

As the Bristol pound approaches its first birthday (pleasingly for Poulter, it was launched with the purchase of a loaf of bread), the number of people and businesses using the UK's first city-wide currency has increased sharply.

More than £260,000 has been converted from sterling to Bristol pounds (£B) and more than 600 businesses in the city and beyond are accepting the currency. Around 1,200 people have Bristol pound accounts, enabling them to make virtual transactions.

Around £B70,000 has been paid in local business rates while the city's independent mayor, George Ferguson, takes his wages in the local currency and Nicola Yates, the city director (her post was formerly known as chief executive), receives £5,000 of her salary in £B.

A major transport provider is expected to start accepting fares in the currency and the community interest company that runs the scheme is in talks with an energy company about paying bills using the Bristol pound. It is also intent on persuading the city council, which has a turnover of £1bn a year, to procure services in Bristol pounds.

Chris Sunderland, director of the Bristol pound scheme, believes the currency has already changed the way business is done in the city and is confident that in another two years the equivalent of £5m will be circulating in the city's own money. That would make the scheme, currently supported by grant aid, self-sufficient thanks to fees levied on text and online payments.

"I don't think that's an unreasonable aim," he says. "We can achieve that. It would only takes council to procure some services in Bristol pounds and for a transport provider to accept it and we'll see really significant volume. By year three we think it will be playing a serious part in the Bristol economy."

There are already promising signs that the aim of keeping money local, thus boosting the city region's economy and strengthening communities, is working. Poulter is not untypical. Businesses that join have sought to trade with others in Bristol pounds.

Another scheme that has had some success is Farmlink, open to primary producers within 50 miles of the city. Stream Farm in Somerset, for example, trades in Bristol pounds with hotels and cafes. There are also plans to set up buying groups using the Bristol Pound in some of the more deprived areas of the city, putting residents directly in touch with farmers and other producers.

Starting with a few volunteers four years ago, the scheme now has four part-time staff who manage trader and community relations, run the office and do the PR. The latter is a busy job. The scheme has attracted attention around Britain and further afield. Exeter, Edinburgh, Brighton and Oxford are among the cities who have looked at it to see if it might work there.

For every Bristol pound printed, a sterling pound is deposited in a trust account so that if the local currency folded, holders would be protected. Its partner, the Bristol Credit Union, which manages Bristol pound accounts and the virtual arm of the system, is regulated by the Financial Conduct Authority.

Nobody has tried to forge the notes, which have seven security features. "I'd argue they are harder to forge than sterling," says Sunderland.

There are some yet to be convinced. John O'Brien, owner of BBS Plumbing, was keen to join the scheme, but is yet to have a customer who wants to buy in Bristol pounds.

Others such as Pete Snowman of the Bristol Cider Shop is enthusiastic, but admits he hasn't got round to doing much about using the currency. "Other priorities get in the way," he says.

But opposite Snowman's premises, Brett Atkinson, co-owner of the vintage clothing and furniture store "Shop" is as keen as Alex Poulter. "It accounts for only a tiny percentage of our turnover, but we have regulars who always use it. That makes us feel more part of a special community. It's a nice feeling."