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Humanitarian Aid on the move # 17, special issue: The World Humanitarian Summit

Disintermediation - the future of Aid in a Digital world?
Ian Gray



The digitisation of money in humanitarian response is well documented and has some momentum behind it, with the results of the recent High-level Panel on Humanitarian Cash Transfers’ work calling for an increase in the use of this mechanism. However, this approach is not yet disrupting the sector, in fact only 6% of all humanitarian financing is delivered to affected communities through cash transfers [17]. This is despite the growing evidence of the powerful impact of unconditional cash transfers for vulnerable and disaster-affected communities. A number of agencies are taking cash transfers and their disruptive capability seriously. The World Food Programme is increasingly turning its programming to cash and vouchers, as they understand that the advent of large-scale unconditional cash transfers seriously threatens their current business model.

The proliferation of mobile phones and mobile money means that in the future, the vast majority of these types of transfers will happen digitally [18] Not only is it the best methodology in the right conditions, but it is also the methodology that is most scalable. The disintermediating implications of large-scale digital cash transfers are clear. It creates the potential for mass public and institutional giving directly to disaster-affected populations, via of platforms like Give Directly [19]. The role of traditional humanitarian actors in this situation will need to be re-purposed, to focus on critical areas such as inclusion, targeting and verification, market analysis and accountability mechanisms. The full implication of large-scale, unconditional cash transfers means that the humanitarian aid industry, in whatever guise it will continue to exist, will need to turn from a supply-driven system, that is responding to ‘need,’ to a demand-driven system, that is responding to people being able to ‘choose’ what goods and services they are willing to pay for. Humanitarian disasters are complex, and large-scale, digital cash transfers will not always be the most appropriate solution. However, they will become the default rather than the exception.

Digital cash transfers are not the end of the road for how digital disruptive disintermediation could affect the humanitarian sector. Cryptocurrencies, such as the Bitcoin digital currency, have shown that there is the opportunity to create value that people can exchange for goods and services. The simplest way to explain cryptocurrencies is that the only reason money works is that there is trust in the Central Bank of the country to guarantee its value. This guarantee means that you can exchange this money for goods and services, knowing that the person you are buying them from also trusts the ‘value’ of the money you are giving them. The key term is trust. If everyone involved in a transaction trusts a cryptocurrency, then it has value that you can trade for goods and services. The potential for cryptocurrencies in the humanitarian sector is already being investigated. Paul Currion wrote about this last year, outlining how he feels that ‘AidCoin’ could be used, and it’s potential benefits for accountability, efficiency and incentives [20].

Cryptocurrencies bypass the traditional ‘pipes’ through which money is currently transferred around the world. These pipes are the bank accounts and transfer mechanisms that are controlled by established financial institutions who have a strong influence over the regulatory framework for these financial flows, but are also subject to foreign policy restrictions in areas such as anti-terror financing regulations. Those agencies who are currently working on the Syria crisis will understand the implications of these controls on transferring money to their humanitarian responses and partners in that country. In effect, being able to transfer funds using a cryptocurrency means that agencies would be able to bypass the current restrictive, risk-averse, costly and overly bureaucratic ‘financial pipes,’ particularly if there is transparency built into the currencies that allows financial tracking, similarly to what Currion outlines in his article. Therefore, in the coming decades, agencies faced with a similar set of circumstances as they currently face in Syria with money transfers, will not just be exploring Hawala systems as an alternative, but also cryptocurrencies.

[17] See ‘Doing Cash Differently: How Cash Transfers can Transform Humanitarian Aid, Report of the High Level Panel on Humanitarian Cash Transfers, Overseas Development Institute, London September, 2015

[18] ibid. pp.13 & 6.

[19] https://www.givedirectly.org accessed 14th March 2016

[20] See https://medium.com/@paulcurrion/introduction-513f86ed92df#.c7a1hhvvd accessed 14th March 2016