July 17, 2015
Posted by Paul Currion in News.
The humanitarian system faces a range of challenges in ensuring that people affected by crisis receive the most appropriate aid in a timely and efficient manner. Systemic problems include waste (through transaction and administration costs), corruption (both active and passive), lack of responsiveness (due to individual or institutional bottlenecks) and lack of transparency and accountability. The humanitarian sector has seen many initiatives over the past years to address these issues, and the international community has reaffirmed the need for action around them.This has led to two contradictory impulses. On the one hand, there are calls for a more centralised system that is able to make rapid disbursements at scale without losing speed and value due to the intervention of middlemen.On the other hand, there is recognition that disaster-affected communities and people need to be included in responses, which calls for shifting control over financial resources to the local level where they can be used most effectively. These two impulses are presented as being mutually exclusive – but this may not be the case.
A different approach
One key factor in this set of problems is reliance on existing financial mechanisms, which have high overheads and are vulnerable to international, regional and national instability or inadequacy. This vulnerability is due to financial mechanisms having a single point of failure, which means that the resilience of the system is threatened by accidental and purposeful interruptions. To mitigate this vulnerability, both donors and actors in the humanitarian sector currently work in a risk adverse manner and create layers of control mechanisms. This risk averseness, which is in essence due to the lack of trust in the current infrastructure, is severely hampering effective and efficient delivery of humanitarian aid. If we want to address this lack of trust, the humanitarian sector needs to look beyond its current narrow focus on the system as we currently use it, and explore solutions that might be found at a more systemic and abstract level. If it is really a structural problem that is underlying the impossibility of solving the issues that face humanitarian aid, then that means we should look for answers that address this structure.
Examples of such a structural rethink can be found in other sectors facing difficulties. Crises create critiques, and the banking crisis of 2008 caused a rethink of the systems that the global financial system is based on. This critique identified as important culprits those centralising institutions operating in a non-transparent manner – and therefore susceptible to corruption and malpractice. In search of a structure that would not allow for a repeat of such a crisis, the critique has advocated for two goals of decentralisation and transparency.
The task may not be to improve the functioning of central institutions, but rather creating more resilient structures that do not rely on these institutions to function. We suggest that only a new and different structure can really deliver the change that is needed to improve the humanitarian sector.
This structure might come with a set of assumptions different to those normally applied. It may be possible to create systems in which: no one can corrupt, control or sabotage the system; that you don’t have to trust other participants but that this trust is embedded in the system itself; that you can have access to all information that you consider relevant while still retaining anonymity at the appropriate level; and that activity in the system can be held to account through radical transparency.
This is a structure that would change the humanitarian sector for the better, and a set of financial tools which might enable it have recently appeared. The financial crisis created a window of opportunity for cryptocurrencies, and their underlying blockchain structures, which were in effect the result of the 2008 financial crisis. A parallel can be drawn here between the financial and humanitarian sectors; in both, centralised institutions not operating in a transparent manner are widely recognised as hindering efficiency and effectiveness.
In addition the structure of blockchains is much more suitable for decentralised networks and organisations. The Start Network is built on the premise that constant adaptation to a rapidly changing world cannot be driven from the centre. The Start Network strategy therefore sets out a shift towards enabling decentralised initiatives with appropriate governance mechanisms, which requires a constantly evolving organisational form.
These two developments have been followed by another financial tool, the smart contract, all of which fall under the new category of Financial Technology (FinTech) The humanitarian community should explore these in order to address some of these structural problems.
- Block chain
Block chains are distributed databases that operate as digital ledgers, in which all transactions are verified by peers in the network. It is resilient, secure and transparent, since information is publicly accessible for everyone who has downloaded the software. While they have not yet been tested at scale, block chains are being investigated by banks (a recent Santander report estimated that it could save bank infrastructure costs by as much as $20bn pa) and governments (including the UK government). Such databases could be established for a range of different humanitarian functions related to humanitarian logistics, but block chain technology also supports two specific functions.
- Smart Contracts
Smart contracts are computer-based automated contract processes that implement real-world outcomes, such as payments. Such contracts can be established between multiple parties without requiring third-party involvement (such as a bank), and can deliver gains in efficiency – by lowering transaction costs – and in security – by introducing cryptographic principles. We believe that smart contracts may provide a way of decentralising decision-making processes within the humanitarian system, and are currently in discussions to develop smart contracts to manage the Start Fund as a proof of concept. Transparency will be vital to this project, both in the design and the operationalisation.
Discussions around cryptocurrency have been dominated by Bitcoin, a virtual currency introduced in 2008 that is both decentralised and transparent. However this is only the most well-known example of the new type of cryptocurrency that combines the management benefits of alternative currencies, the flexibility of digital currencies, and the security provided by computer cryptography. We are exploring the idea of an “AidCoin” cryptocurrency that could be implemented as part of cash-based programming in specific situations. This would allow for transferring humanitarian aid streams in a rapid and transparent manner, tailoring the response to the need identified by affected communities or people. This virtual currency would not disrupt local economies, would protect communities against price volatility, and would prevent some types of corruption.
The humanitarian community, while lacking resources for extensive research and development, should partner with specialised organisations to explore the possibilities in this new field of FinTech. This comes with the recognition that the technologies discussed are still in an immature phase, and that further R&D is required. We hope that the High Level Panel will consider this as part of its wider discussions about improving the humanitarian system, and embrace the potential it has for a radically new way of working for and with disaster-affected communities.
Prepared by Paul Currion (humanitarian.info) and Annemarie Poorterman (Start Network) for the Start Network, July 2015
Join the conversation
Leave a Reply
Sean Lowrie’s message to COP21 leaders
December 9, 2015
The Start Network’s Sean Lowrie tells world leaders attending the...
Join the network for change: Start Network opens applications for membership
December 1, 2015
The Start Network is taking applications for membership from registered...
Be Safe: Strengthened Ebola communications in Senegal and Guinea-Bissau
November 20, 2015
Participants of training on preparing for and preventing Ebola, have...
Leadership for Humanitarians Training in Amman – registration closing soon
November 19, 2015
Applications are open for leadership training in Jordan, in December....
Start Fund crisis update: India and Pakistan
November 18, 2015
A summary of small to medium scale crises that the...
Call for applications: Transforming Surge Capacity Pilot Fund
November 16, 2015
A pilot fund for localised and collaborative surge in the Asia...
Extra UK help for refugees arriving in Western Balkans
November 8, 2015
Tens of thousands of people who have made the dangerous...
Humanitarians receive leadership training in Nairobi
November 8, 2015
Last week, 26-30 October, 21 humanitarians were trained in Nairobi as...
Launch of the monitoring, evaluation and learning project for the Disasters and Emergency Preparedness Programme
November 8, 2015
On 29 October people from across the Start Network and...
Vacancy for Start Fund Officer
October 20, 2015
The Start Network is seeking a Start Fund Officer to...
Crisis update: Internally displaced people and ongoing conflict in Afghanistan
October 16, 2015
On Monday 12 October, the Start Fund was alerted by...
Growing monitoring, evaluation and learning within the Start Network
October 15, 2015
The Start Network is seeking two new colleagues to help...
Statement from the Start Network on the Kunduz Hospital bombings
October 12, 2015
The horrific bombing of the Médecins Sans Frontières hospital...
Start Fund crisis update
October 9, 2015
A summary of small to medium scale crises that the...
Start Network launches new funding mechanisms for humanitarian response
September 28, 2015
New York – The Start Network has committed to prototype...
Start Fund allocates £160,000 for emergency response in Nigeria
September 21, 2015
The Start Fund has allocated £161,802 to provide a rapid...
Start Fund disburses £200,000 to address oil spill crisis in Colombia
July 23, 2015
On the 21st of June 2015, a rebel group sabotaged...
Start for Change 2015: Photos from our Annual Conference
June 1, 2015
Two new senior roles with Start in evidence and digital communications
May 29, 2015
The Start Network is recruiting for two new roles to...
View full archive
View more posts in the News archive.