I don't think it has to be viable on a bigger level. If all the system does is keep productive, engaged community members a reason to stick in the town due to the currency they've built up, I see that as a win for the currency.
Startup idea: a messenger that allows small communities to create their own currencies and provides a way to convert between them. Basically Internet, but for money.
...It'll turn into an even bigger scam than cryptocurrencies, but the idea seems interesting...
The point is to incentivize local spending, not just spending on local goods. Money that circulates within a community stimulates more local activity. Local producers are more likely to undercharge for the value of their goods and services for the sake of community vitality than large, remote businesses that want to squeeze every bit of value out of a transaction.
It's essentially a way to get more work done. It doesn't work if the network is so large that people lose that incentive.
