ROME (Thomson Reuters Foundation) - Thousands of Syrian refugees in Jordan’s Azraq camp don’t pay for their food with cash but by a scan of their eyes.
Purchases are then recorded on a computing platform based on blockchain - the technology behind bitcoin.
Iris recognition devices at the checkouts of the camp’s supermarket authenticate customers’ identities and deduct what they spend from sums they receive as aid from the World Food Program (WFP).
The U.N. agency launched the futuristic system in May as a one-month pilot involving 10,000 of Azraq’s more than 50,000 inhabitants in a bid to explore blockchain’s potential to cut costs and bottlenecks.
It is now looking to scale up the project to reach more than 100,000 refugees in several camps across Jordan by the end of the year.
“We feel this is a starting point,” said WFP’s director of innovation, Robert Opp. “There are a number of potential uses of blockchain that could dramatically change the way we reach people in terms of our efficiency, effectiveness and security.”
Blockchain, which first emerged as the system underpinning the virtual currency bitcoin, is a digital shared record of transactions maintained by a network of computers on the internet, without the need of a centralized authority.
It has become a key technology in both the public and private sectors, given its ability to record and keep track of assets or transactions with no need for middlemen.
Such features have drawn investments from big business and banks around the world, as well as the attention of a number of humanitarian agencies, including WFP.
FEES AND FRAUDS
In recent years, WFP has increasingly shifted its aid giving towards cash-based assistance, which now accounts for about 25 percent of all aid it delivers.
Handing out money rather than food allows recipients to choose what they buy and eat, while helping to keep afloat local markets and economies in crisis-hit areas, it says.
In 2016 WFP’s cash transfers amounted to a total of $880 million.
To move the money across the about 80 countries in which it operates, the agency relies on the services of a large number of banks and financial intermediaries that traditionally apply transaction fees of up to 3.5 percent, said Opp.
Blockchain promises to cut those costs, an alluring feature for an agency facing a chronic shortfall in funding.
And there are also other benefits.
As blockchain automatically records transactions on a secure ledger, WFP accountants can easily follow the flow of money without spending time and energy triangulating reports from stores and banks, said WFP finance officer Houman Haddad.
There is no need for advance payments, financial risk is lower and so is the possibility of fraud - such as a bank and a store colluding to inflate bills, he added.
“Before WFP had to exclusively rely on external sources of data,” he said. “Now we have our own immutable record of everything that happens”.
MINING FOR IDEAS
Misappropriation of funds is an issue across the whole humanitarian sector, so it’s little wonder that other agencies are also studying blockchain, said Yoshiyuki Yamamoto, special adviser for blockchain at the U.N. Office for Project Services (UNOPS).
In 2012, former Secretary General Ban Ki-moon said 30 percent of all U.N. development assistance was lost to corruption.
“If we don’t know where 30 percent of the money is, that’s a big concern for everyone,” said Yamamoto.
In January, innovation units at UNOPS, the U.N. Development Program and U.N. Women started an informal grouping to exchange information about their blockchain work, he said.
The club has since grown to about 10 members, including the U.N. children’s agency UNICEF and its refugee agency, UNHCR.
“It’s a waste of time and resources if 16-plus U.N. organizations are doing the same thing separately in a silo,” said Yamamoto.
In April the group asked private companies for ideas for possible applications of blockchain to the U.N. system. The response was overwhelming, underscoring the growing hype around the nascent technology, said Yamamoto.
“In a word, it’s crazy!” he said, adding they received more than 70 responses, while other requests usually draw only a handful.
Finance is just one use of blockchain, and many more are yet to be explored, said Opp.
For example it could help track deliveries of food aid or securely register land titles in developing countries, he said.
That would help small farmers - who now struggle to prove ownership of their plots in the absence of paper documentation - to secure loans and increase food production.
“Another potential is to help build identity for refugees,” added Caroline Rusten, head of U.N. Women’s humanitarian unit.
Blockchain could be used to create a secure, paperless record of skills and education that refugees can carry with them, to which information can be added as they are on the move, she said.
“(This would allow) people to be appreciated for who they are and the qualifications they have and not just seen as refugees,” said Rusten.
A blockchain database with information on refugees’ identity and the type of support they receive would also help avoid duplications of work between different U.N. agencies.
Creating a centralized United Nations out of a “gigantic bureaucratic system” is still some way off, said Yamamoto.
“It can’t be done overnight,” he said. “We are at a very early stage”.