Blockchain could help to solve some of the challenges of the humanitarian aid sector by increasing transparency and enhancing trust. Switzerland’s Foreign Minister explains.
Switzerland has a longstanding tradition of sending and supporting humanitarian aid efforts around the world. Part of it comes in the form of financial technology, which can play a key role in humanitarian aid, in particular in regions that lack financial infrastructure.
In the 1990s, for example, the Swiss Humanitarian Aid organization pioneered the use of cash transfers within crisis zones. This initiative gave victims access to funding necessary to pay for their personal needs in the aftermath of a disaster.
During his speech at the Crypto Finance Conference in St Moritz last January 17, Swiss Foreign Minister Ignazio Cassis highlighted how an individual’s connection to financial services is just as important as their connection to clean water, sanitation, and shelter.
In line with his speech, Cassis notes how recent developments have brought blockchain to the aid sector – and he acknowledged the positive results.
“Today, millions of people in need receive humanitarian assistance through financial service providers, via ATM cards, mobile money, electronic vouchers or through blockchain solutions…around 16% of total global humanitarian aid today is channeled through cash and voucher assistance. It is often more efficient than traditional humanitarian aid,” said Cassis.
Lack of transparency and efficiency are challenges in humanitarian organizations
The humanitarian aid industry is plagued with concerns on transparency and proper allocation of resources.
Firstly, it is challenging to track where the money goes after it has been sent to a government agency. A portion of the funds may disappear in administration channels, without any indication of where it went and for what purpose it was used. This makes programs less effective and dilutes people’s trust in humanitarian organizations.
Secondly, the red tape and bureaucracy involved in getting aid from one point to another slow down the process.
Thirdly, uneven distribution of aid on the ground at the very end of the journey is a challenge that aid programs have yet to resolve for increased effectiveness, efficiency, and reliability.
Blockchain in Humanitarian Aid: How it works
Blockchain could help in resolving all three issues. As the database technology allows for real-time track-and-trace systems, in which data cannot be altered or manipulated, aid providers can at each step of the process follow their cashflow. They can receive a reliable record of where their funds go and how they were distributed, which builds trust and creates accountability.
Through the use of smart contracts, much of the donation management and distribution process can get automated, reducing the need for bureaucracy, increasing efficiency, and ultimately speeding up the aid process.
Cassis said he supports blockchain development initiatives within the humanitarian sector and believes that the financial dimension of humanitarian aid will play a more prominent role in the future – in particular, mobile payment solutions. He pointed out that some 90% of adults in sub-Saharan Africa have access to mobile phone connections, connecting them to financial services even if there are no local banking branches.