Nearly three-quarters of blockchain initiatives in the philanthropy and aid sector are used to facilitate payments and money transfers, according to the Stanford University “Blockchain for Social Impact” study.
This is of little surprise. Ensuring the effective transfer and utilization of billions of dollars of foreign aid is a major challenge for the international development community. Up to 10 percent of funds can be lost in transaction fees and fluctuating exchange rates, on top of the potential loss through intermediaries and corruption, notes the report.
One of the many groups tackling these issues is the U.N.’s World Food Programme. Last year WFP built and implemented its own blockchain system in Jordan’s Azraq refugee camp to directly pay vendors, make cash transfers easier, and inspect beneficiary spending.
WFP has since expanded its pilot project, called Building Blocks, to all 106,000 Syrian refugees living in the Azraq and Zaatari camps, so that they can now redeem their cash transfers on the blockchain-based system. This has resulted in a monthly savings of roughly $40,000 from transaction costs alone, a WFP spokesperson told Devex.
Beyond cash savings, the spokesperson said their results show that the platform is making cash transfers much more efficient, secure, and transparent — benefitting WFP, donors, and the people they serve. The organization is looking into how blockchain solutions could help in other regions.
Aside from humanitarian organizations, nonprofits, which along with foundations account for 82 percent of blockchain initiatives in the philanthropy sector, are also exploring ways to use the technology to tackle financial sustainability. The U.S.-based RootProject aims to help ease organizations’ overdependence on external funding sources with three projects: Its new crowdfunding platform, its own cryptocurrency called ROOTS, and a “pension” fund.
Through the “laborless crowdfunding” platform, anyone can initiate a social impact project and assemble a campaign to fund it. The projects will then be finished either by RootProject itself or one of its partner nonprofits, all the while drawing on paid labor from people below the poverty line.
The project’s crowdfunded proceeds are shared between token purchases, which increases currency demand, wages for those completing the project, and the rest is deposited into a pension fund-like entity. This system enables the nonprofit to raise money to finish projects, helps those less fortunate, and creates a structure to make it all financially self-sustainable.
RootProject, like 34 percent of all the blockchain projects analyzed in the Stanford University report, was started in 2017 or later, and is still in the pilot/idea stage. But the project has high ambitions. According to its business plan, the U.S.-based nonprofit aims to complete its national expansion by next year while simultaneously piloting its concept in cities internationally.
“I’ve been in this space since 2013 and in global financial services for over 25 years, and I’ve never seen a startup move this quickly — let alone a country.”
— Loretta Joseph, chair of the advisory board at ADCA