Evolving the future of Cash Transfer Programming with cryptocurrency and blockchain technology
“70% of Syrian refugees have sold the aid they were given, in order to buy what they actually need.” — UNHCR 2014 Kurdistan Region Of Iraq Assessment Report
In 2010, the world was rocked by the devastating earthquake that crippled Haiti. Over 220,000 people lost their lives and another 1.5 million were left homeless. The world responded with the biggest donation drive in history, with a total of $3.5 billion USD raised for relief efforts. However much of this funding was misappropriated. The Red Cross alone spent nearly $125 million USD on its own internal expenses — a quarter of the donations the organization received. Such inefficiencies are common during relief efforts; charities on average spend 36.9% of donations on overheads, with many charities spending even more as there is no standard self-reporting practice for charities, and accounting practices differ wildly.
Overheads are only one aspect of the quality of a humanitarian response — at the end of the day, what is most important is the extent to which people who are affected by a crisis have their livelihoods improved. NGOs regularly fall short on this aspect as well.
People live or die after a crisis based on the aid that they receive in the first 72 hours. It is during this time that people are most vulnerable, where acute injuries take their toll and otherwise manageable issues such as access to clean drinking water, shelter and sanitation blow out to become huge problems. Current aid practices make it nearly impossible to properly respond to a crisis within two weeks. The time it takes to provide the proper support to people on the ground, determine an affected community’s needs, and spool up international supply chains to sustain donor support means that it often takes several months for NGOs to actually deliver relief. By this point, it is often tragically too late. When aid finally does get delivered to those affected, it is often the wrong type of aid. One study found that 70% of Syrian Refugees sold the aid they were given to buy what they actually needed.
What is Cash Transfer Programming?
At the core of these problems sits a system that’s just too complex; there’s too much that has to happen between an NGO coordinating the support and needs of a major crisis, and aid actually getting to the people who need it. High nonprofit overhead, high misalignment of community needs, and slow response times have all contributed to ineffective, albeit hopeful, approaches toward transformative aid disbursement.
Cash transfer programming (CTP) refers to all programs where cash (or vouchers for goods or services) is directly provided to program participants. It is an approach that builds upon linkages, capacities, incentives and relationships to encourage effective market recovery. CTP is a mechanism for delivering assistance; it is not a sector or program on its own. When done right, CTPs are orders of magnitude more effective than aid provided by traditional response, given that the international supply chain demands are exponentially less than coordinating the shipping of donated goods across the globe through dozens of intermediary organizations. Providing cash directly to under resourced community members also stimulates the affected area’s local economy and avoids unnecessary intermediary expenses, that, ultimately go back to companies established in westernized societies. Most importantly though, cash is empowering — giving affected people money and telling them that they are able to spend it in a way that works best for them sends a powerful message.
Cash aid has only recently become a viable way of delivering aid for the global community due to a few critical junctures:
- The nature of humanitarian crises has changed. It is now rarely the case that people affected by a crisis find themselves stuck in a location where local infrastructure is completely devastated, or in refugee camps where no infrastructure existed in the first place. It is more often the case that destruction is localized, or that people are displaced from their home communities into other existing communities — a process known as urban displacement.
- While financial inclusion globally is still low, technical penetration of basic telecommunications infrastructure is at a critical point, where most families will have access to a Mobile phone (though not a smartphone). This continues to be the case even after a crisis.
- The weight of evidence is finally demonstrating the efficacy of cash programming, overturning decades of previous perceived wisdom.
While cash programming currently comprises only 10.3% of the 30 Billion USD that is spent on humanitarian response each year, it is projected to become the norm as large governmental donors demand the maximum effectiveness from social sector funds disbursed.
What is the Bifröst Initiative?
The Bifröst Initiative, originally named Project Bifröst and co-founded by ConsenSys Social Impact, MakerDAO, and Dether, is a collaborative effort between member organizations to affect positive change in the evolution of cash transfer programming by using cryptocurrency and blockchain technology. The initiative seeks to
- Create partnerships and add contributing organizations to the initiative
- Develop research publications on how different blockchain ecosystems can contribute toward the betterment of CTP solutions
- Make policy recommendations to address anti-money laundering and anti-terrorism finance laws on how to properly and legally leverage cryptocurrency transfers without crippling the social sector’s ability to leverage the technology for good
- Support blockchain-based social enterprises affecting positive change within the CTP vertical
- Develop sandbox experiments, leveraging the technology and teams of the Initiative’s member organizations and or selected social enterprises
The initiative, founded in the Spring of 2018, seeks to develop an inclusive ecosystem in which social sector organizations and technology companies work together to develop scalable, effective, and legal CTP solutions that can be leveraged on an international scale.
Projects & Partnerships So Far
Since its founding in Spring 2018, the Bifröst Initiative has accomplished the following:
- MakerDAO and Dether partnered to bring stablecoin DAI to mobile ATMs
- The Initiative inducted Sempo as its first CTP social enterprise. Sempo has gone on to (1) conduct its first pilot Lebanon in an effort to get cash to Syrian Refugees, and (2) establish its first major partnership with Coinbase’s GiveCrypto organization to support 15 Yazidi families in Kurdistan and 5 Syrian families in Beirut
- Developed the first cryptocurrency donation campaign for natural disasters using DAI through NeedsList to help affected families in need rebuild from Hurricane Florence
- Created the first University Blockchain incubator. The Blockchain for Social Impact Incubator was developed in collaboration with the University of Michigan’s optiMize program
Overall, with as little as 3 member organizations and 1 social enterprise member, the initiative has had a strong start at developing actionable steps to support an evolved CTP ecosystem.
A Call to Action to Evolve CTP
Moving forward into 2019, we hope to overcome additional obstacles that separate the work of technologists in the blockchain community from the subject matter expertise hosted by social sector organizations. Our core objectives are to:
- Invite additional members to the Bifröst Initiative from the social sector
- Release our first research publication on the evolution of CTP due to the influence of cryptocurrency and blockchain technology
- Release a collaboratively determined list of policy recommendations for regulators to consider when creating laws affecting money transfer
- Develop a grant program to further support strong social enterprises that develop CTP solutions using blockchain technology
- Select additional social enterprises to support via the initiative
- Host additional sandbox experiments to enable more people around the world to transact the value they need
- Have member representation from North America, South America, Europe, Africa and Asia
Initiative partners meet in tri-weekly sprints, during which we discuss strategies to achieve the aforementioned goals, and pursue other collaborative opportunities as well. Effort expenses, revenue, and press-release announcements are shared across initiative partners, depending on which partners are directly contributing to the effort in question.
How to Become an Initiative Partner
We invite any organizations interested in joining our cause. The core responsibilities of partner organizations are to:
- Contribute at least $2K to Initiative projects/efforts annually (per FY)
- Participate in at least 75% of tri-weekly meetings (via attendance) annually
- Propose and our contribute toward at least 2 Initiative projects annually
As you can see, we expect Initiative partners to contribute and collaborate as leaders at the cross-section of social impact and technology. If interested, please reach out directly here.
How to Earn Initiative Support as a Social Enterprise
If you are part of a social enterprise (startup, mid-sized company, or even developed company), we’d love to support your endeavors and create sandbox opportunities to demonstrate your technology. Such experiments are crucial to the mainstream adoption of solutions that leverage cryptocurrency and blockchain technology, and, through our partners, we hope to provide:
- Social sector partners to co-implement your solution in the context of an experiment
- Grant support to attend to product development and experiment implementation expenses
Note that teams with technical co-founders/members are preferred, as it is crucial for teams to be able to bootstrap their solutions as much as possible to extend their respective runways. If interested, please reach out directly here.
Extended gratitude and appreciate for the work of Mercy Corps, Cash Learning, 3IE Impact, Grey Matter Research, and the Research Source Center for their contributions in CTP research, which aided the development of this breif.