Charity network looks to blockchain
Start Network partners with social enterprise to push forward the use of blockchain in the delivery of humanitarian finance
Start Network, which includes 42 leading aid agencies such as Oxfam, Care International and Save the Children, has partnered with a start-up social enterprise to push forward the use of blockchain in the delivery of humanitarian finance.
It has begun working with Disberse, a recently-launched distribution platform for foreign aid, to harness the revolutionary potential of the same digital technology that enabled the Bitcoin.
The project, Start Network says, aims to speed up the distribution of aid funding and trace exactly how it is spent, ultimately enabling every pound to be traced from original donor to each individual assisted. It should enable more money within the international aid system to reach the people it is intended to help, with the flow of funding monitored at every stage, and less lost through the process of currency exchange.
Ensuring the effectiveness of donor funds remains a challenge for governments and international charities. Funds can take weeks to arrive and up to 10% may be lost if banking fees, poor exchange rates and currency fluctuations are particularly adverse.
These inefficiencies are accompanied by a lack of transparency within the sector, heightening the risk of misuse of funds and making it more difficult for communities affected by crisis to hold the aid system to account. In 2012, former United Nations Secretary General Ban Ki-moon said 30% of all UN development assistance was lost to corruption.
Blockchain, which first emerged as the system underpinning the virtual currency bitcoin, is a digital shared record of transactions maintained by a network of computers on the internet, without the need of a centralised authority.
It has become a key technology in both the public and private sectors, given its ability to record and keep track of assets or transactions without the need for middlemen.
The Disberse platform limits the losses of aid finance and has already been successfully piloted in a development project. In that test, the platform enabled the donor – the UK-based charity Positive Women – to reduce its transfer fees and trace the flow of funds down the chain to a project in Swaziland, resulting in zero losses at the points of delivery. Funds were sent from the UK to four Swazi schools, via a local NGO, and the saving enabled Positive Women to fund an additional three students’ fees for a year.
Now Start Network will work with the Disberse platform, with the aim of taking this first experiment to scale. The partnership will test the system on a series of small disbursements over the next six months, within Start Network’s existing programmes. The network has deployed more than £100 million of funds across the globe over the past four years, in response to crises and in its effort to develop innovative humanitarian solutions.
Sean Lowrie, Director of the Start Network said: “This exciting partnership could lead to the transformation needed in the way money flows through the humanitarian system. The Start Network is testing innovative solutions to many humanitarian challenges to enable aid agencies to be more efficient and effective. This new project could catalyse a new way of working, one that is transparent, fast and which drives accountability to taxpayers and those affected by crises.”
Ben Joakim, CEO and co-founder of Disberse added: “Disberse was born from an ambition to preserve and improve the impact of aid finance, for the communities and individuals it serves. We believe in the purpose of aid, but recognise it is constrained by inefficiencies. Using blockchain technology, we digitise and distribute donor funds through the chain to recipient beneficiaries. These transactions are transparent, and can be viewed online, ensuring funds are distributed and delivered as intended.”
Commenting on the initial Disberse pilot, Sarah Llewellyn, Director of Positive Women, said: “We normally use our bank to transfer funds, but transfers have become increasingly expensive and slow. Using Disberse, we saved 2.5 per cent [on forex fees], which covered the costs of a year’s education for an additional three girls. We could also see our funds being distributed to partners and schools, enabling us to spend less time monitoring, and more time demonstrating impact to our donors.”
The preliminary work by Start Network has been made assisted by a €50,000 donation from the government of Estonia, which is leading the world in its drive to adopt the new technology.