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How Blockchain Could Transform The Way International Aid Is Distributed

A new digital-payment platform from the United Nations’ World Food Programme is bringing efficiency and stability to refugee camps.

How Blockchain Could Transform The Way International Aid Is Distributed
[Illustration: Francesco Ciccolella]

The future of world food aid arrived, in early May, unnoticed by its first recipients: the grocery shoppers inside a supermarket at the Azraq camp in Jordan, home to 36,000 Syrian refugees. To be fair, their buying process already looked pretty high-tech, especially for a store with a dirt parking lot in the middle of the desert. Before paying, each shopper peered into a black, rectangular iris scanner mounted at eye level, which confirms users’ identities with the camp’s organizing group, the United Nations High Commissioner for Refugees, and allows them to access a food stipend from the United Nations’ World Food Programme (WFP).

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That’s a spiffy authentication process, but it had been there for months. What the shoppers didn’t see was the new back-end procedure. Instead of receiving WFP funds via a third party, such as a bank, the grocery store was reconciling each purchase directly with the aid group through a secure platform called Building Blocks, based on blockchain technology. Inside the store, Houman Haddad, a finance officer for the WFP and the founder of Building Blocks, watched as each eye scan led to a cashier’s tablet flashing a green check mark, signaling a completed transaction. “It was the moment when I knew this was technically possible,” he says.

The technology behind cryptocurrencies such as bitcoin and ethereum, blockchain is essentially a shared digital ledger system: a decentralized database that allows information to be exchanged among several parties but not altered. Transactions become blocks of data that are chained together, making everything transparent and easy to review. The concept arose in 2008 as a way to securely track and transfer bitcoins. Today, blockchain is being applied to everything from energy trading to legal contracts, and is poised to transform how we store and share personal information. But one of its most profound uses, say advocates, may be in international aid, where documentation is scarce and operating budgets are low. By eliminating intermediaries, blockchain technology creates faster, safer, and, ultimately, cheaper ways of doing business.

Organizations working in international relief can lose up to 3.5% of each aid transaction to various fees and costs. What’s more, across the industry, an estimated 30% of all development funds don’t reach their intended recipients because of third-party theft or mismanagement. In Jordan, the WFP can use Building Blocks to audit each beneficiary’s spending in near-real time. And by paying vendors directly, Building Blocks has reduced money-management costs by 98%, according to Haddad. For an aid organization spending $6 billion annually across 80 countries, that adds up to tens of millions of dollars in savings. Bernhard Kowatsch, who heads the WFP’s Innovation Accelerator, which incubated Building Blocks, sees more value: “[Building Blocks] provides even higher assurance to individual donors that if you give to the World Food Programme, that money actually reaches the people it’s intended for.”

Haddad, who has worked for the WFP for seven years, approached his employer in mid-2016 about developing a blockchain-based business through its accelerator. The WFP incubator offers intensive coaching and up to $100,000 to social entrepreneurs who share its goal of eradicating global hunger. Once in the program, Haddad joined forces with Alexandra Alden, a Silicon Valley–based mentor, refined the concept during a boot camp run through California’s Singularity University, and, in January of this year, began testing a prototype in the Sindh province of Pakistan, whose rural inhabitants are dependent on food entitlements and direct cash distributions. (This trial didn’t involve fancy iris scanners, relying instead on text-based mobile voucher codes.)

The WFP initially scheduled just a one-month trial of Haddad’s technology in Azraq, but the program was surprisingly successful. The organization has asked Building Blocks to stay—and expand to other camps later this year, reaching a total of 100,000 people. An even wider rollout to the country’s half million refugees scattered throughout different host communities will follow. Haddad expects the system to be available in other countries sometime in 2018, along with the ability for recipients to review their balances and itemized lists of purchases.

Because the design for Building Blocks is largely open sourced—its ethereum-based operating system allows for customizable applications—Haddad envisions the technology being used well beyond grocery stores. For instance, the WFP’s recipient rolls could be tethered to health data from the World Health Organization, or educational information from UNICEF. That would give aid groups a better understanding of their recipients, and refugees a better way to manage their affairs. And the technology would be easily transferable across borders. “That’s when [it] starts getting pretty interesting and powerful,” says Haddad’s mentor, Alden.

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Ben Siegel, an impact policy manager at ConsenSys, an ethereum development company that has helped form the Blockchain for Social Impact Coalition, considers Building Blocks a “superb” first step, and several U.N. organizations are exploring how to take it further. The ultimate goal, Haddad says, is to give uprooted people “as much control as possible” over their own lives.

[Illustration: Francesco Ciccolella]

Blockchain For Good

These other organizations are using secure technology to bring stability to vulnerable communities.

Alice: This London-based platform brings transparency to philanthropy by collecting and holding charitable donations—and releasing them only after an organization shares metrics demonstrating its success. Its first project is with a local homeless charity.

Banqu: Minneapolis’s BanQu uses blockchain to establish “economic identities” for people who lack access to banks. In Kenya, it’s helping refugees secure government aid and services. In Latin America, it has created shareable property registries to help female farmers prove ownership and secure loans.

Aid:Tech: Like Building Blocks, Aid:Tech eliminates transaction fees and fraud by allowing NGOs to disperse digital cash vouchers directly to recipients. The Irish Red Cross has used it to help Syrian refugees in Lebanon.

Project Amply: The Cape Town organization, which is running a pilot with South African preschoolers, creates immutable digital identities to help children in Africa receive educational services and subsidies.

About the author

Ben Paynter is a senior writer at Fast Company covering social impact, the future of philanthropy, and innovative food companies. His work has appeared in Wired, Bloomberg Businessweek, and the New York Times, among other places.

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