Leading charities harness blockchain to prevent fraud
Image credit: Dreamstime
A network of leading charities from around the world has begun a project using blockchain-based technology to ensure that donations are appropriately spent on humanitarian projects, and are not wasted on inefficient exchanges, excess fees and fraud.
According to the Thomson Reuters Foundation, Disberse, a tech start-up, will be working with Britain’s Start Network to provide transparency in the sector. The network spans five continents and includes 42 leading aid agencies, including Oxfam, Save the Children and Christian Aid.
Blockchain is a tool that enables transparency across complex webs of financial exchanges. It was first established as the system supporting the virtual currency Bitcoin. Blockchain retains a decentralised database of all transactions, shared across a network of computers.
This makes it possible for consumers to track all transactions behind a product or service and identify, for instance, whether unethical labour has been employed somewhere along the supply chain to produce a garment.
Many charities have come under scrutiny for spending donations inefficiently. Charities are now under considerable pressure to minimise the amount of aid lost on banking fees, poor exchange rates and fraud, in order to prevent further disillusionment with the sector.
According to former UN Secretary General Ban Ki-moon, 30 per cent of UN development assistance funds were lost to corruption.
Applying blockchain technology to the charitable sector will allow donors and charities to track every penny of aid, potentially increasing trust in charities to deliver aid responsibly and effectively.
“This exciting partnership could lead to the transformation needed in the way money flows through the humanitarian system,” said Sean Lowrie, Start Network’s director. “It could catalyse a new way of working, one that is transparent, fast and which drives accountability to taxpayers and those affected by crises.”
A pilot Disberse project has already been run in association with Positive Women, a UK-based charity aiming to empower women and children in Swaziland. The blockchain-based platform was used to reduce the charity’s transfer fees to overseas projects, making it possible to fund school fees for additional students.
“We normally use our bank to transfer funds, but transfers have become increasingly expensive and slow,” said Sarah Llewellyn, director of the charity. “Using Disberse, we saved 2.5 per cent (on fees), which covered the cost of a year’s education for an additional three girls.”
Earlier this year, Alice, a tech start-up, launched a similar tool using blockchain technology, in association with London-based homelessness charity St Mungo’s. The tool ‘freezes’ donations until charities can prove that their money is being spent appropriately, in order that donations can be guaranteed to make an impact.