Blockchain – Leapfrogging for the Poor?[i]

Blockchain can help leapfrog a number of challenges faced by the poor. Imagine a world where the poor have their own identity on the Blockchain, which they can use to access essential services or finance. Imagine a world where the two billion unbanked poor, can access the global financial system through a simple mobile phone and crypto currencies.[ii] Imagine a world where poor people who live on customary land, have it titled on a Blockchain and can use that title to access finance. Imagine a world where poor women and children are able to live longer lives, and improve and grow their communities. Imagine a world where foreign aid goes directly to the poor under a smart contract. All this is possible with the advent of Blockchain technology. If we seize the moment, Blockchain can make a transformative contribution to the poor. Blockchain applications and use cases are developing fast and we believe that Blockchain has tremendous potential to provide scalable solutions to address issues of poverty which impact on health. 

Creating Immutable Identity

Legal identity is a fundamental human right and is a prerequisite for financial inclusion, access to services, movement of people and a multitude of things we take for granted. Still, many millions of people worldwide do not have a legal identity.  The potential to confer a permanent, immutable record of identity in the Blockchain owned by individuals could be game changing. Without identity, poor women and children may be denied access to government services, finance and fundamental human rights.  Blockchain can be used to ensure women and children’s access to these services and enable health rights. The identity data is held immutably on a Blockchain, a web of trust “hardens” the data over time, the identity data remains in the ownership of the individual and individuals give permissions on who can see what data for what purpose and for how long. It’s a transformative concept. Blockchain records can be used to establish an identity where no state identity exists or can be used. There is a distinction to be made between identity and credentials – governments issue credentials. The distinction is one that becomes ever more important in the complex issues around a better identity system, ranging from the need for more secure single-use personae to the need for self-sovereign identity.[iii] This technology has potential to be used in humanitarian emergencies, in remote poorly serviced populations, and can ensure that cash transfers and donor funds reach the intended beneficiaries.    IDBox[iv] is developing a simple, low cost solution which can be used with basic analogue phones and does not require electricity or the internet. 

Better Targetting of Donor Funds Through Smart Contracts

Smart contracts provide a viable method of issuing and tracking ownership of unique digital representations of value, which we call money. Smart contracts are computer programs that act as agreements where the terms of the agreement can be pre-programmed with the ability to self-execute and self-enforce. The main goal of a smart contract is to enable two anonymous parties to trade and do business with each other, usually over the internet, without the need for a middleman.[v] 

Using smart contracts, Blockchain can be used to ensure that donor funds reach intended recipients in a transparent way without middlemen and leakage along the way. Aid delivery can be tracked with transparently recorded “way-stations” showing location in supply chain and ultimate delivery. A smart contract could unlock a delivery payment when a service is delivered to intended recipient (using a Blockchain enabled identity). A Blockchain record can support donor funds by providing a specific record of care achieved through the funding. 

Applications are being tested to improve the flow and targeting of donor funds. Disberse is a fund management platform for the global development sector, built on Blockchain technology. It drives the transparent, efficient and effective flow and delivery of development and humanitarian aid. It enables donors, governments and NGO’s to transfer and trace funds through the whole chain, from donor to beneficiary, via intermediaries. It has potential to be used for social cash transfers to enable mobile money transfers and voucher schemes for the most vulnerable and for any development and humanitarian projects that involve the transfer of funds between two or more stakeholders.[vi] Another Blockchain application, StoneBlock, is a secure decentralised platform tying funds to agreed-upon actions to ensure mutual accountability. It provides transparent and tamper-proof ‘metering’ service of development aid flows at a range of scales: a project, programme, portfolio, and national, regional, and international.[vii] Applied to the many millions of dollars that target women’s and children’s health, these platforms will be able to significantly enhance targeting and accountability.

Faster Cheaper Remittances

The poor of the world need assistance with cross-border and internal payments, and multiple successful initiatives (e.g., mobile money) have contributed to increased financial inclusion for this population. Blockchain’s unique characteristics allow financial institutions to tailor their products and services to promote ease of use for the unbanked and underbanked. A Philippine company, Coins.ph, offers a good example of Blockchain’s potential. Situated in the country ranked third in the world for receiving remittances (totaling about USD$30 billion a year), Coins.ph provides Filipino users a mobile, Blockchain-based platform to allow them to send money at a more affordable and faster rate. Blockchain allowed Coins.ph to build an application to facilitate fund transfers without reliance on existing bank infrastructures and to be more agile in their services at a more affordable price.[viii]

Current remittance processes are slow and expensive. Digital currency remittances can move funds from remitter or donor to recipient almost instantaneously with low transaction costs. CASHAA is already operating in India and Nigeria and transmits remittances at no cost to the consumer. Recent experience from Bangladesh shows that women actually prefer to receive payments by phone, rather than cash.[ix] In order to be possible this will rely on the confirmation of the identity of the recipient, emphasising the criticality of solving the identity piece. With Blockchain enabled digital currencies and identity – financial inclusion can be provided to the two billion unbanked in the world.[x]  Blockchain would reduce the transaction costs for remittances, giving the unbanked access to financial systems and ensuring that funds intended for the poor actually reach them. 

Economic Empowerment

Lifting people out of poverty will be critical to the sustainability of efforts to improve their health. The World Bank reports that formal SMEs contribute up to 45 percent of total employment and up to 33 percent of national income (GDP) in emerging economies. According to Bank estimates, 600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in Asia and Sub-Saharan Africa. In emerging markets, most formal jobs are with SMEs, which also create 4 out of 5 new positions. However, access to finance is a key constraint to SME growth; without it, many SMEs languish and stagnate.[xi] Policy dialogue with Governments on improving financial inclusion and SME financing is an essential element in addressing poverty.

Financing Poverty Reduction

Traditional poverty alleviation efforts will not work in countries where aid is already becoming irrelevant as domestic resources grow. Mobilisation of domestic financing and private financial flows will be critically important. Traditional development assistance will not be core to solving global development problems in the future. The private sector is a critical source of employment, influence and ideas and presents opportunities for partnerships in women’s leadership, financial services for the poor, health services, prevention of violence against women and building entrepreneurship. 

Blockchain enables new forms of finance to address global poverty problems, including crowd funding, more dynamic funding mechanisms from private finance markets, with tax mechanisms and incentives to encourage private sector to invest e.g. tax credit schemes – credit flows back to investor. Another example is mobilizing global efforts to tap into pension funds, and advocating with  governments to give tax relief to pension funds that pursue social investment, transparently recorded on the Blockchain. To mobilise private money will also necessitate efforts to create better measurement of social return. Blockchain enables that transparency. More funding is needed in venture capital to support the development and testing of new technologies with socio-economic investment with longer time horizons and lower financial returns and higher social returns for global problems. Partnerships’ with technology companies offer opportunities to test whether some digital successes models from can be replicated. We need to proactively identify private sector partnerships and develop an innovative portfolio of partnerships leverage the ideas, capabilities and reach of the private sector for the poor. 

Conclusion

Blockchain’s potential for social impact is yet to be realised, with few use cases in developing countries. The focus of the global community needs to move from the underlying technology to exploring use cases – and looking for solutions that can scale. There are many practical questions to be answered in settings with little internet access and electricity. We need to reach out even more to connect innovative ideas, with the local private sector, and social finance organisations to encourage innovation, entrepreneurship and action for pressing development challenges. We urgently need to unite the ecosystem which connects the Blockchain systems in advanced economies with those that work with the intractable problems of poverty and inequality. 

This post has been developed Dr. Jane Thomason, CEO, Abt Associates Australia and Loretta Joseph, Chair, Australian Digital Commerce and Crypto-currency Association who believe that Blockchain can transform the world - if we let it.

[i] This Post is excepted from a more detailed paper to be published in the inaugural issue of the Global Health Journal,  People’s Medical Publishing House Co., Ltd, July 2017. Thomason, Jane, (forthcoming) Blockchain: An Accelerator for Women and Children’s Health?

[ii] Asli Kunt et al, “The Global Findex Database 2014: Measuring Financial Inclusion around the World,” The World Bank, 2014.

[iii] David Shrier, “Hub Culture Davos 2017,.” https://www.youtube.com/watch?v=kK-rQ3Y3uiQ. 

[iv] IDBox, developed by Julien Bouteloupe, London Blockchain Week Hackathon winner, 2017. 

[v] Smart Contracts Explained The Ultimate Guide to Understanding Blockchain Smart Contracts https://www.blockchaintechnologies.com/blockchain-smart-contracts

[vi] Thomas Mloduchowski, “Disberse- Distributing Aid through Distributed Ledgers,” Zerado, Nov. 21, 2016. 

[vii] Diana Ngo, “Governments, NGOs, Consider Neocapita’s Blockchain Pilots for E-Governance,” Bitcoin Magazine, Mar. 31, 2017. 

[viii]“Blockchain and Financial Inclusion: The Role Blockchain technology can play in accelerating financial inclusion,” Georgetown University, March 2017. 

[ix]  Leora Klapper, “Why Women Workers and Manager Prefer Electronic Wage Payments in Bangladesh,” World Bank Development Research Group, March 8, 2017. 

[x] Asli Kunt et al, “The Global Findex Database 2014: Measuring Financial Inclusion around the World”. 

[xi] World Bank Policy Brief, Small and Medium Enterprises (SMEs) Finance, September 1, 2015.          

 https://www.worldbank.org/en/topic/financialsector/brief/smes-finance