Case study: Blockchain in a refugee camp

28 Nov 2018
Case Studies

Using blockchain to make food purchasing more efficient at a refugee camp

“Building Blocks seeks to make World Food Programme’s (WFP) cash transfers more secure, traceable, cheaper and collaborative using blockchain technology. The project targets refugees and their families... Through Building Blocks, WFP provides greater security and privacy for Syrian refugee families, as sensitive data is no longer shared with third parties such as banks or phone companies used for mobile money transfers.”
UN World Food Programme Innovation Accelerator Annual Report 2017

The challenge

The UN WFP expects to spend close to $1.6bn in 2018 on cash transfers to help vulnerable people around the globe meet their essential needs. This typically involves working with regional banks and other financial services providers, which usually charge fees for enabling aid recipients to buy food and other necessities.

By combining biometric security with a blockchain-based system for managing cash transfers, aid agencies could instead allow recipients to spend their funds directly at local partner merchants without the need for third-party intervention. Such systems could eventually be expanded to help refugees and other vulnerable people control their own financial and identity data, even if they lost all of their personal records due to war, natural disaster or political persecution.

The project

First tested as a proof of concept in Pakistan in early 2017, the WFP’s Building Blocks project was deployed later that year for 10,500 Syrians living in the Azraq refugee camp in Jordan.

Iris-scanning biometric technology was already being used to verify the identity of refugees buying food at the camp’s grocery stores. Building Blocks integrated that system with a permissioned, Ethereum-based blockchain to record every transaction and to link payments to each refugee’s virtual wallet.

“As of October 2018, more than 100,000 people residing in camps redeem their WFP-provided assistance through the blockchain-based system,” the WFP’s website reports. “Thanks to the technology, WFP has a full, in-house record of every transaction that occurs at that retailer, ensuring greater security and privacy for the Syrian refugees. It also allows for improved reconciliation and significant reduction of transaction fees.”

The results

Following the initial deployment of Building Blocks at the Azraq camp, the WFP reported a 98 per cent reduction in banking fees for transactions using the blockchain system. If the project could be expanded to all 500,000 Syrian refugees living in Jordanian camps, the savings could total around $150,000 per month, the organisation estimates.

“It’s a major success,” Houman Haddad, the WFP’s cash-based transfers adviser for the Middle East and North Africa, told writer Russ Juskalian in the MIT Technology Review earlier this year. “Now if we get a call that 20,000 people are coming in the night, we can have everything ready for them in the morning. The old way would have taken two weeks and required paper vouchers.”

In addition to lowering financial services fees, Building Blocks also reduces the need to share refugees’ personal data with third parties, Haddad said.

Eventually, such a system could also let the WFP change how it handles cash transfers, enabling the organisation to reimburse merchants after purchases are made rather than forwarding funds to them in advance.

“That’s a big deal, since upwards of 30 per cent of UN assistance is lost to corruption,” Juskalian noted in his article.

Key benefits

While the proof of concept tested in Pakistan used a public Ethereum blockchain, the system being used in Jordan uses a permissioned version, which helped to speed up transactions and reduce transaction fees.

For refugees themselves, the system makes purchasing supplies easier as well. Bassam, one man quoted in the MIT Technology Review article, said the system is better than the one used earlier, which required the use of a card that could sometimes wear out and could then take weeks to be replaced.

In late 2017, Haddad told the Huffington Post Australia that a system like Building Blocks could also eventually be expanded beyond use for grocery shopping to benefit refugees in other ways.

“So, what we’re doing right now is essentially we’re creating financial transaction histories for beneficiaries and just showing that your money may not be very meaningful on its own, but if you can show that you can save a bit of money, this can potentially count towards a credit score,” he said. “So let’s say if a refugee then returns to Syria, potentially they could get a small business loan based on this and get back on their own feet.”

Final thoughts

“Beyond cash-based transfers, WFP is also interested in exploring using the application of blockchain technology in areas such as supply chain operations and digital identity management,” the organisation’s website says.

The MIT Technology Review adds:

“Haddad imagines Bassam one day walking out of [the refugee camp] with a so-called digital wallet, filled with his camp transaction history, his government ID, and access to financial accounts, all linked through a blockchain-based identity system. With such a wallet, when Bassam left the camp he could much more easily enter the world economy. He would have a place for an employer to deposit his pay, for a mainstream bank to see his credit history, and for a border or immigration agent to check his identity, which would be attested to by the UN, the Jordanian government, and possibly even his neighbours.”

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