Noelle Acheson is a 10-year veteran of company analysis and the author of CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to CoinDesk subscribers.
One of the more disheartening aspects of aid – and there are many – is the knowledge that a large portion of the donations don’t get to where they should.
Apart from the layers of bureaucracy and transfer costs, there’s the price of corruption, leading to leakage all along the chain. According to former UN General Secretary Ban Ki-moon, as much as 30% of all development aid does not reach its destination.
In response, charitable organizations around the world are turning to blockchain technology. This shift will affect not only the delivery of the aid, it is also likely to have a significant impact on the beginning of the chain – the donations themselves.
This past week, a UK-based network of national and international aid agencies announced a trial with Disberse, a blockchain startup that aims to improve the transfer and traceability of donated funds.
Similar projects around the world are also under way. For instance, the World Food Programme recently trialled a blockchain-based method of distributing aid to refugees in Jordan, and earlier this year, the United Nations put out a call for blockchain startups to help it improve systems and develop new processes.
Several startups are working on ways to, among other things, expedite aid transfers and improve efficiency.
While the cost savings afforded by more efficient payment rails is a valuable advantage when it comes to donations, increasing attention is being paid to the transparency aspect of the technology. With the opacity of many distribution networks obfuscating the destination and quantities of contributed funds, a clearer vision of flows and impact would enable errors to be corrected and would hold participants more accountable.
With greater transparency comes greater trust that funds reach their intended recipients intact, which could encourage donors to give more.
This may not affect national budgets as much as individual pockets, but the impact at the government level could also be significant.
Mandated aid is increasingly coming under criticism as budgets are squeezed and as political sentiment turns inward. Greater accountability would enhance confidence that the funds are, for instance, alleviating world poverty, supporting stability and encouraging economic growth, which makes the concept easier to sell to constituents.
What’s more, a shift to blockchain-based aid management would help the relevant organizations comply with the growing demands from politicians for greater transparency.
Given that such a move would be unlikely to require significant structural changes (unlike blockchain applications in finance, for example), it is possible that we will start to see the benefits in the short term.
Not only are trials likely to pick up as the aid use case becomes even more pressing, but legislators are likely to support the shift, as the risk scenario is relatively low compared to the regulatory benefits that increased transparency can bring.
So, the application of blockchain technology to charitable donations at both the individual and government level will not only make the flows more efficient, it will make them more reliable. It could also encourage more giving, or at least sidestep criticisms aimed at reducing budgets. And it can do so in the short term, without waiting for changes in legislation or financial structures.
Now that’s making a difference.
African children via Shutterstock