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Blockchain Makes Cash-Based Humanitarian Aid Safe, Fast and Transparent
GAZA CITY, GAZA STRIP – Palestinian women wait to receive aid money. The aid money is a … [+] trend. Blockchain can make it safer for recipients, more transparent for donors, and more secure for everyone involved. (Photo by Abid Katib/Getty Images)
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As the international community faces a wide range of crises linked to natural disasters, pandemics and conflicts such as those in Ukraine and Gaza, the need for rapid, safe and reliable ways to deliver humanitarian aid is growing dramatically. Nearly 300 million people in 72 countries will require humanitarian assistance and protection in 2024, according to the latest United Nations figures.
On June 24th and 25th, an extraordinarily event eclectic group of organizations – from stablecoin giant Circle, to the United Nations Development Programme, to global payments company WorldPay – have come together from around the world to discuss new ways to get money to people in war-torn, financially and institutionally challenged parts of the world. In places like Afghanistan, Yemen, Syria, Libya, Sudan and Somalia, the United Nations, international NGOs and local civil society actors are working to improve the delivery of money to some of the most marginalized people on the planet.
Over the past decade, the United Nations and NGOs have begun to offer more cash assistance, rather than in-kind assistance or services. According to CALP NetworkA thought leader in cash and voucher humanitarian assistance, this form of assistance now comprises 21% of all international humanitarian aid, reaching $10 billion in 2022 and for some agencies that percentage could be much higher. Humanitarian organizations are working to deliver cash aid as quickly and cheaply as possible, while navigating increasingly complex financial regulations.
With the growth of direct financial assistance comes some serious challengesFor example, when agencies such as the United Nations World Food Programme distribute cash aid at events, security risks arise, including theft and robbery, along with the potential for violence, corruption through the diversion of funds, and enormous logistical challenges.
At the same time, the benefits can be transformative. According to UNHCRWhen families receive cash, children are less likely to engage in forced labor, families are more likely to live at peace with their neighbors, and the direct benefits to the local economy can be profound. These benefits, weighed against the risks, prompted this group of organizations to discuss ways to transform the way cash aid is delivered using blockchain technology.
An impetus to the growing interest in cash aid is a randomized clinical trial conducted in 2023 by the London School of Economics, which followed 2500 women as they received digital money over the course of HesabPay Platformpowered by the Algorand Blockchain.(INFORMATION: I work for the Algorand Foundation)
The results were surprising.
I study found high usage and adoption with nearly all women (99.75%) in the trial (or study?) group using their digital payments to purchase goods. It showed significant improvements in nutritional outcomes. Beneficiaries skipped fewer meals, had more nutritionally diverse diets, and increased their ability to purchase medicine when needed. In particular, families and children skipped fewer meals per week.
Digital money transfers have also helped promote financial inclusion among women who previously did not have a bank account. The study found that most women preferred digital help to cash, which indicates trust and comfort with the digital system. An added benefit of using digital currency was the ability to make purchases at multiple merchants, not just the initial ones they were introduced to during onboarding.
These results are reinforced by the unique features of the underlying blockchain technology that is the foundation of the payment platform. In addition to the benefits to recipients, the immutable and transparent nature of data on blockchain also benefits donors, who receive a secure record of transactions. Blockchain ensures that data cannot be altered or deleted, reducing the risk of tampering. The inherent transparency of blockchain technology reduces corruption, giving donors greater confidence that their funds are going to their intended beneficiaries.
These features of blockchain technology are just the tip of the iceberg of the most transformative ways Web3 can dramatically improve circumstances for the most marginalized among us. From access to financial goods and services that many of us take for granted to ownership of a decentralized identity that can be used for everything from school to healthcare to active participation in larger markets, the decentralized nature of Web3 opens up a world to the many that has traditionally been owned by the few.
Humanitarian aid is an interesting thing, simultaneously stuck in a stasis averse to change, yet eager and in need of the dynamic innovation that comes from technology. Giant multilateral institutions have been stuck in the same rut for years, while the world of technology advances at the speed of light. But things are changing in ways that the participants at the Humanitarian Payments Summit understood very well. Emerging technologies will make it possible for even the poorest people on the planet to become active participants in a more equitable and inclusive world, through their own participation.