Blockchain application and foreign aid

by Lumai Mubanga

Foreign aid disbursements have been a challenge for donor countries for some time. The aid is normally sent to developing countries in war-torn countries, refugee camps and underdeveloped countries especially in Africa, South America and middle east. some of the challenges have been lack of accountability, absence of records and the aid not reaching the intended recipients. Blockchain, however, seems to have been the solution already. This article will discuss how that could be possible and how it is being done.

Blockchain has proved that it can improve the efficiency and transparency of how foreign aid is administered. The main challenges in aid distribution have been the many intermediaries along the value chain. Many intermediaries are not transparent and usually misuse the funds. This has been worsened by the fact that many endpoints(recipients) do not have the necessary infrastructure to ensure they get the aid.

This is where blockchain comes in. Much of the foreign aid is distributed as either non-cash or cash aid. For example, the united nations world food program distributes aid as non-food aid in the middle east. There are many variants to this application. In one example, the agency uses crypto-vouchers, equivalent to a gift card which the recipients use to exchange for food and other necessities. In another example, the agency combines the power of blockchain and biometric technology. Each refugees identity is digitized and kept on a blockchain. The refugee simply has to look into a retinal scanner that confirms their identity, queries the world food program account and pays the bill at designated points of sale. This technology achieves two things. It ensures the intermediaries are eliminated while at the same time ensuring that the intended recipients are assisted.

Others like the Consensys social impact program Bifrost has completely wiped out all intermediaries in the aid disbursement. It transfers aid to recipients using stablecoins that are collected and exchanged for local currencies in the respective countries. The project setup kiosks in the recipient countries were the stablecoins are exchanged. This arrangement like the non-cash system ensures that the transfer fees are drastically reduced while ensuring that the aid reaches the intended recipients.

Other projects demand that the various intermediaries are kept in the loop except that there is a strict requirement for all transactions to be logged onto the blockchain. The transferred currency, however, is exchanged at local banks.

In all these examples discussed, it appears that aid disbursements are heading more toward the cash system since it’s easy to monitor and distribute. The immutable nature of blockchain is ensuring that each transaction is traced from the sender to the actual recipient.