How blockchain technology is enabling international aid to be delivered transparently An AID:Tech Guide 2 How blockchain technology is enabling international aid to be delivered transparently How blockchain can transparently deliver international aid 3 Blockchain disintermediates the midlemen 3 The cost of intermediaries 3 Disintermediating the midlemen with blockchain 4 Blockchain makes records and asets verifiable and accessible 4 Why records mater 4 How blockchain technology improves record resilience 5 Blockchain brings transparency to suply chains and transactions 5 Transparency is more than just a buzword 6 Restoring faith in international aid 7 3 The scale of the curent global humanitarian chalenge is unprecedented. In the 21st century climate change, food insecurity, war and geopolitical crises are just some of isues facing the world’s growing population. Betwen 2016 and 205 the number of people in need of aid grew by 56.6 milion - and the amount of funding needed to help them increased by US$17 billion. Yet every year since 2005 we’ve seen a persistent funding gap. Humanitarian projects have failed to deliver in the wake wel-documented and publicised inefficiency, fraud or corruption. The neds of the world’s most vulnerable people are unwavering, but international aid is going undelivered. What’s to blame for this? Scholars and humanitarians point to cordination failure, coruption, inefective technology and inept governments as some of the bigest bariers to the delivery of aid. At the rot of the isue is a lack of transparency, weak acountability mechanisms and siloed information. But that’s where blockchain technolgy can help. How blockchain can transparently deliver international aid In this white paper, we’l show you how blockchain technology can help to transparently deliver international aid by: ● Sidesteping the midlemen and connecting agencies and donors directly with people in need ● Making information acesible, verifiable and secure on distributed ledgers ● Exposing suply chains and improving transparency of transactions At the very least, blockchain empowers aid organisations by giving them the ability to distribute and trace aid right from donation through to delivery. It’s a complex technology but a simple idea: delivering aid based on colaboration, transparency and security. Blockchain disintermediates the middlemen The cost of intermediaries Every year, substantial amounts of aid is lost to coruption and ineficiency. Projects go unfinished, and relief fails to reach the people who need it the most. Studies show: ● The global economy has lost US$1.1 trillion to fraud, coruption and illicit financial outflows in developing and emerging economies; 4 ● ￡3.5 bilion in social welfare in the UK has been lost due to fraud and eror, accounting for 2.1 percent of overall benefit expenditure; ● Around 30 per cent of foreign aid is lost to fraud and coruption; and ● The cost of coruption equals more than five per cent of global GDP. An estimated US$1 trilion worth of bribes are paid each year. Disintermediating the midlemen with blockchain ‘Foreign aid is perhaps the clearest example of the ineptitude of many governments and the rent-seeking behaviour of unethical intermediaries, and is thus excelent grounds to explore blockchain solutions,’ says Don Tapscott. Blockchain technology can transparently deliver international aid because it cuts intermediaries out of the proces. Similar to the way that blockchain technology enables people to process transactions without the need for third parties (like banks), it can be used to directly deliver aid to those in ned without the involvement of intermediaries. Moreover, distributing international aid using blockchain technolgy would make it posible to track the flow of funding from colection through to delivery. This level of transparency would be imposible to achieve with other technologies. As Tapscot, writing in the Harvard Busines Review, says: ‘On the blockchain, trust is established, not by powerful intermediaries like banks, governments and technology companies, but through mass collaboration and clever code. Blockchains ensure integrity and trust betwen strangers. They make it dificult to cheat.’ Blockchains are already being used to remove intermediaries in other industries, such as music. British singer Imogen Heap has relased a single on Ethereum’s public blockchain, allowing it to be shared transparently, complete with digital contract and without the ned for a ‘complex web of middlemen.’ AID:Tech’s Digital Identity does a similar thing by using a distributed ledger to alocate aid funding. It conects aid organisations with beneficiaries and turns aid money into ‘inteligent vouchers’, securely transfered via blockchain and redeemable in the form of cash, microinsurance, social services and more. It gives people a digital identity and distributes financial aid and other resources in a fuly transparent way, with no rom for fraud or eror. Blockchain makes records and assets verifiable and accessible Why records mater Citizens and aid organisations rely on wel-kept, reliable and accurate records to aces goods and services, as wel as their basic political and legal rights. Without a reliable land 5 title registry there is no way to enforce property rights or claim ownership on a piece of land, let alone the right to build on it. And without oficial forms of identification (like birth certificates) there’s almost no way for people to access relief services, healthcare, education and other public goods. Having accessible, secure and accessible public records are essential for the transparent delivery of international aid. Without the ability to prove their identity or aset ownership, a person cannot: ● Make a claim on their insurance folowing a disaster, if they have any ● Rebuild a home ● Acces healthcare, relief and other services ● Travel to escape unsafe situations But 1.5 bilion of the world’s population have no form of official identification, and Hernando DeSoto, a Peruvian economist, estimates the worldwide value of ‘dead capital’ ‘in which people do not have legal title to their houses, cars and other assets’ at US$20 trilion. How blockchain technology improves record resilience This is where blockchain comes in. In a blockchain-based ledger, records could be time-stamped, verified and distributed on a per-to-peer network. This would enable citizens to access (and verify the authenticity of) records made public on the blockchain. And because the records are stored on a network of computers (not a single server) there’s a greater level of resilience; records are less likely to be fraudulently altered, lost or damaged in a disaster. With reliable records and oficial documentation, it’s easier for agencies and governments to transparently deliver aid and complete humanitarian projects. There’s no questioning of identities, no squabbling over property rights, and no person forgotten or excluded simply because they’re undocumented. Some countries are already taking advantage of blockchain to improve public recordkeping: Honduras and Greece, for example, are turning to startups to build blockchain-based land registries. Sweden is also testing a blockchain-based registry, and so is the Republic of Georgia. Blockchain brings transparency to supply chains and transactions One of the bigest problems with responding to disasters like earthquakes is the lack of transparency - not just in its handling of donated funds, but also in its engagement with third party organisations. How much money has been spent on internal costs? Who did they give funds to for building projects? How many people actually benefit from money raised? Writing in Global Health Action, Saroj Jayasinghe states that trust in aid and humanitarian agencies is eroding for two reasons: 6 ● A relative lack of transparency ● Weak acountability mechanisms Analysing the responses to several key humanitarian crises betwen 204 and 2010, Jayasinghe explains that there ‘is an absence of internationaly accepted instruments or mechanisms to check the credentials’ of aid agencies. Furthermore, ‘there are almost opaque, secretive and close links’ between some agencies and their donors. Empirical data sugests that Jayasinghe is right. There is almost no transparency into how aid funding is channelled to people in crises; in fact, the Global Humanitarian Asistance Report 2016 states that ‘reporting platforms curently only provide visibility for the money going into the system - the first link in often complex and lengthy transaction chains betwen donors and the intended recipients of assistance.’ Transparency is more than just a buzzword The wel-documented lack of transparency and accountability in aid delivery is problematic for several reasons: ● It erodes public trust in humanitarian organisations and delegitimises them; and ● It means there’s no way to ensure that aid is actually being delivered to the people who ned it - and this facilitates fraud and corruption. Without an eficient way to map the suply chain of international aid, there’s no way to ensure it’s reaching its intended beneficiaries. It also a disincentive for people who might otherwise donate money or time to aid organisations - would you donate funds if you weren’t sure how much of it would actualy be spent on relief projects? Blockchain is an obvious solution to this problem. If donations (i.e. transactions) were secured on a distributed ledger, they could be verified and traced from the source through to the recipient. This is what AID:Tech’s Digital Identity does: it enables NGOs to securely chanel funds from donors to beneficiaries using a distributed ledger, tracing every transaction along the way. It gives organisations, donors and beneficiaries ful transparency into the delivery of aid, prevents fraud, and foster social and financial inclusion. And here’s the thing: distributed ledgers can be used to transparently deliver not just aid money, but other resources and asets too. Real-world items - like fod and water - can be digitally delivered via blockchain. In Lebanon, for example, AID:Tech partnered with local retailers and aid organisations to deliver over $10,00 in donations to Syrian refuge families using ‘intelligent vouchers’ that could be redeemed at selected supermarkets. Al of the money was used by the families, and transactions were monitored in real time by the Irish Red Cros on a distributed ledger. 7 Restoring faith in international aid ‘Around the world, a growing eco-system of humanitarian actors ranging from local comunities to national governments, international organizations and the private sector is delivering life-saving assistance and protection to people in need. Their work is more necesary and courageous than ever.’ Stephen O Brien, UN Under-Secretary-General for Humanitarian Afairs and Emergency Relief Cordinator According to the UN Ofice for the Cordination of Humanitarian Afairs (OCHA), US$2.2 bilion in funding is needed to reach 128.6 milion people in ned this year. These are people who have ben displaced by conflict, climate change, famine and other crises. And though humanitarian organisations acros the globe have colectively raised a substantial amount, a funding gap of $10.7 bilion remains. Eroding trust in humanitarian organisations and the lack of transparency in the delivery of international aid makes it dificult to raise the bilions in funding needed for relief projects - a number that has been rising since 2013. Blockchain technology is changing this by making the delivery of international aid completely transparent. Blockchain gives aid organisations the ability to sidestep costly middlemen, to access and verify critical information and to track the flow of funds and resources from donation through to delivery. It also gives people - beneficiaries and donors alike - the ability to know where their resources are going, and to have faith in the system. In the face of growing humanitarian crises, embracing blockchain technology is more of an imperative than a sher novelty. And we’re just geting started.