Tracking UK Aid on the Blockchain
THE QUESTION
Can distributed ledger technology (DLT) be used to track UK Aid payments through the delivery chain to enhance transparency, increase the speed at which money flows to the end recipient, and reduce intermediary costs?
LOCATION: Iraq & Palestine
SECTOR: Humanitarian Aid
TECH: Blockchain
TIMELINE: August 2019 - October 2020
PIONEER: Anthony Hermann
PARTNERS: Disberse
The Challenge
Transparency is a common issue in international development assistance. Financial flows from donors represent large sums of money, but there is a traceability problem at each level and there is not enough information known about the complete system to be able to analyse its effectiveness. Inefficiencies in the accounting practices of donor organisations and little oversight of banking procedures compound the transparency issue. These issues make the international aid delivery chains unnecessarily slow, expensive and opaque.
The Idea
This pilot tested the effectiveness of a platform that could coordinate and trace international aid transactions across delivery chains and act as a financial service to donors and implementing partners in the aid sector. The platform would be secure and frictionless by using smart contracts and distributed ledger technology, combined with a virtual money account that is linked to a registered banking provider. This solution can improve the overall speed, cost and transparency of funds across the aid delivery chain.
The Journey
What we learned
The international aid system is typically very conservative when it comes to finances, and we found that asking questions and talking about the inefficiencies of the financial sector of aid became a type of capacity building. We hope that this pilot starts conversations in organisations about the current financial system and how it can be improved.
FCDO raised concerns about their role in the development of a privately-run platform that has the goal of being used by the entire aid system. The potential monopoly power of a single platform was concerning, and user value was more associated with using Disberse as an accounting tool rather than a platform that conducted financial transactions on the blockchain.
The platform provided a far more comprehensive understanding of aid delivery chains that was not possible in the existing system. In addition, the platform provided improvements in both traceability and efficiency.
The strongest impact of the platform - at least in its initial uptake - comes not from the decentralised nature of the solution, but the centralised and coordinated ways that financial flows can be managed and optimised using the Disberse platform.
The emphasis the pilot team placed on blockchain was unhelpful because it was a distraction to stakeholders where the team would have liked to understand and better build around defined problems.
All photos on this page were taken by the pilot’s implementing partner, Disberse. Read more
Learn more about the pilot’s first sprint — Do people really need this? and What does transparency look like?
Explore learnings from sprint 2 — Digging into the Data behind “Business as Usual”
Read about the pilot’s test simulation — Simulation’s what you need!
Read the lessons learned from sprint 4 — On the right track