Accountability and transparency in aid funding
Start Network has been working to harness the power of blockchain to speed up distribution of aid funding and trace exactly how it is spent. Our ultimate aim is to enable every pound in aid to be tracked from donor to the people helped.
Why is it needed?
The lack of transparency within the sector heightens the risk of misuse of funds and makes it more difficult for communities affected by crises to hold the aid system to account. Added this, funds can take weeks to arrive and up to 10 per cent may be lost if banking fees, poor exchange rates and currency fluctuations are particularly adverse. These inefficiencies and opaqueness mean that ensuring the effectiveness of aid remains a challenge for governments, international charities and for the people we aim to serve.
What is blockchain?
Blockchains are distributed databases that operate as digital ledgers, in which all transactions are verified by peers in the network. It is resilient, secure and transparent since information is publicly accessible for everyone who has access to the block chain. Its best-known use is as the database that enables bitcoin and other cryptocurrencies. And while many have not yet been tested at scale, blockchains are being investigated by banks (a recent Santander report estimated that it could save bank infrastructure costs by as much as $20bn pa) and governments (including the UK government).
How is blockchain safe and secure?
Blockchain is an incorruptible database of information that can be programmed to track the ownership of assets, financial and non-financial, without the need for a central authority. It allows any two parties to transact directly and removes the need for third-party intermediaries such as banks. The three key benefits this system could bring to the humanitarian sector are transparency, speed and incorruptibility. This is because data is embedded within the network and is open and public to view. Altering any unit of information on the blockchain is impossible because it implements cryptography in a peer-to-peer network that validates each other’s information, in other words, self-auditing.
About our programme
In 2016, a €50,000 grant to Start Network from the government of Estonia, which is leading the world in its drive to adopt the new technology, enabled us to pilot blockchain for humanitarian financing. So, in 2017 Start Network formed a partnership with a start-up social enterprise Disberse to push forward our plan to test blockchain in the delivery of humanitarian finance.
Using the Disberse platform, we set out to test blockchain in a series of small disbursements. The pilot involved the creation of digital wallets on the blockchain that donors could use the transfer funding to NGOs, the NGO could then use its digital wallet to transfer the funding onto country teams. Through the pilot, we aimed to prove that blockchain could potentially be used to speed up the distribution of aid funding and trace exactly how it is spent.
Blockchain pilot II: Summary of lessons
The blockchain pilot completed in 2017 and in this 'Blockchain Pilot II: summary of lessons' piece the Start Network, Disberse, Trócaire Ireland, Trócaire Rwanda and Caritas Rwanda review the lessons learnt during the implementation of the pilot analyse whether blockchain helped to make the delivery of humanitarian aid more effective, transparent and accountable. Read more.