Regenerative Bonds: Formal Debt, Mutual-Aid, and Local Settlement Capacity

This paper develops regenerative bonds as formal debt instruments whose disclosed use-of-proceeds and governance rules allocate proceeds to locally governed settlement systems designed to strengthen settlement capacity across locally specified productive, ecological, care, mutual-aid, and repair commitments without converting those commitments into investor collateral. It separates bondholder claims from local redeemable commitments and models commitment pools that curate, value, limit, exchange, route, and repair those commitments. Sarafu Network, based in Kenya, provides component evidence on commitment circulation, stable-value interaction, liquidity, topology, and report-linked activity. A Monte Carlo engine calibrated to privacy-safe empirical moments asks whether bond liquidity can act as reusable catalytic funding while preserving issuer responsibility for debt service. Under the reported assumptions, the frontier identifies a modeled guardrail-pass region in which scheduled service is preserved, mutual-aid circulation is maintained or amplified, and bond issuer headroom remains available in lower-stress cells; edge diagnostics show that higher debt-service pressure and capital intensity narrow this region. The contribution is a settlement-architecture framework for evaluating when formal debt can strengthen local capacity to fulfill and repair commitments without becoming hidden household collateral.