The mobilization of financial aid and cash donation to the underprivileged, disaster struck areas and ethnic minority communities remain a challenge for Non-Government Organizations (NGOs) that are working diligently. The process is full of stoppage in terms of financial verification, accounting, release and distribution of funds across finance channels. However, the process stands as a necessity in order to make sure that the funding raised from pledges and donations get to the beneficiaries.
The problem is the invisible costs absorbed within the process of disbursing financial aid to the beneficiaries as time, resources spent and actor dependencies are needed to fulfil obligations to the intended beneficiaries. With technology, international organizations such as UNICEF, the World Health Organization and the World Food Programme are utilizing Blockchain to power modern non-profit work and humanitarian aid. This sets a blueprint on how non-profit organizations will operate in the future with seamless efficiency based on a lean model of operations.
Money Remittances under Blockchain
When it comes to the local money remittance challenges faced by local NGOs, the solution is based on the concept of Digital Wallets over the Blockchain that allows donor-to-beneficiary or direct remittances from NGO to a beneficiary. Traditionally, money remittances whether commercial or humanitarian are subject for clearance and verification from a remittance platform coming from banks or payment gateways.
With Blockchain, the remittance model is disrupted and is being transformed into a real-time platform for money remittance and making third party payment processing parties non-essential. This means that traditional processing charges can be waived with Blockchain and the money remittance is credited instantaneously. By waiving charges over remittances, NGOs are spared from paying costly remittance charges and for the beneficiaries, the money donation being remitted remains intact. This is essential in disaster-struck areas.
True Peer to Peer
In order to enable the direct and peer-to-peer Blockchain remittance system, this is where the concept of digital wallets emerged. Digital wallets are tied in with a user identity from registration. A person’s registered digital wallet can be used to intake credit, remit payment, send donations and allow the purchase of goods without cash (similar to a debit card).
Unlike a debit or credit cards, digital wallets often waive the charges from processing payments. Digital wallets also enable security and enforce privacy of personal information through layers of cryptography where information pieces are encrypted and decrypted across the distributed ledger of records. For NGOs and donors, they are able to send and track the money pledged, while remaining anonymous.
Remittance systems and digital wallets powered by Blockchain allow for an admin-less process of disbursing money transfers. With an immutable and irreversible transaction ledger, donors are assured that the NGOs have remitted the money that has been pledged. In the spirit of humanitarian aid, Blockchain fosters transparency and trust.
A Blockchain powered digital wallet and prototype remittance stream can transform how financial aid is done for local NGOs based on the following solutions:
- Transparency – With a public record that is based on distributed ledgers, transactions are irreversible and cannot be manipulated to go against its nature, therefore eliminating potential abuse and anomalies.
- Trust – While transactions can be made public, donors and recipients can maintain their privacy while being able to track their public transactions.
- Peer-to-Peer Transfers – Once the digital wallet is enrolled in an NGO program, donors that remit money can directly send financial aid to beneficiaries without the need to contact the NGO to make a donation.
- Real-Time Transfers – In making third party payment processors and clerical verification non-existent, money transfer of cash donations are done in real-time.
- Bridging the Unbanked with Mobile – According to Union Bank, over 70 million of Filipinos remain unbanked. When a person is unbanked and has no credit information, it makes cash transfers via wire almost impossible. When a beneficiary is unbanked, tracking donations becomes paper-based and very difficult. With digital wallets, economic smartphones can access a digital wallet and it ties in with a financial institution and an NGO.
Blockchain is a nascent technology but is now being utilized by large-scale non-profits such as UNICEF and World Food Bank to streamline their operations by cutting down on middle-tier processes that hamper the mobility of processes. The United Nations has an ambitious project of granting identity to the displaced: refugees, the stateless and the indigenous groups across remote areas. The UN, with the ID2020 Alliance, will utilize numerous Blockchain pilots as a convergence point in mapping the undocumented people cluster amongst refugees, stateless, the impoverished and the indigenous population. With a secured Blockchain framework, mobilization of programs such as grants and allocation of charitable values across distribution channels.
The goal of Blockchain in working with non-profit is to lower the cost of charity while enabling better value and building transparency to foster the trust around the virtue that is charity.