Working for a global NGO, I was always wondering what drives donors’ trust to share their financial materials with us. Some of the answers consisted in being accountable, quickly respond to their questions and needs as well as making the whole donation process more reliable. But a more critical question that I asked myself was what makes donors lose trust in us or any other NGO around the world? I came up with one essential factor transparency.
Despite the significant efforts of all NGOs or non-for-profit organizations to increase transparency by showing their accountability and responsiveness to all stakeholders, these efforts seem to fail. One reason for this attribution is the actual system.
The actual donation system is made through a third trusted party. For instance, if you want to donate 10 Euros to a community or person, you need to go through a third party, which charges you a small type of fee (transaction fee, project management fee, wages, etc.). Once the third party identifies the person or community that you want to donate your money, your capital will not arrive 100% in their pockets. Instead, part of your donation will be used for internal operations. For instance, the logistic costs cumulate up to 80% of money donated to United Nations for a certain project (Illac Diaz, 2014).
What actually donors need, is a platform where they can efficiently track all their money or contributions without high current fees or considerable efforts.
One great solution coming to offer these advantages is Blockchain.
What Blockchain really does is to immediately transfer the money, with a considerably lower fee, being an immutable, unhackable distributed database. The synchronized distributed open ledger offers the stakeholders’ reliance for their transactions making everything clear for parties, donors and recipients. In a nutshell, this is a platform for truth and it’s a platform for trust (Tapscott D., 2016).
One real-life commercial Blockchain example that is coming to solve transparency to NGOs is AID: Tech. This start-up works with governments and NGOs to provide digital Identity for 2.4 billion undocumented people around the world as well as to make the process of receiving donations more transparent (Abisdris L., 2017). The main idea of the organization is based on the distribution of plastic cards to people offering them a digital identity operating as an account where they can receive donations. They do this through Red Cross: 1 of 17 million volunteers takes a picture of the undocumented individuals (Abisdris L., 2017). This allows Ngo’s donors to transfer their capital for a certain commodity to recipients, easily tracking the money. Moreover, AID: tech went further with the idea. They collaborate with local merchants in order to allow recipients to buy the products they want to with the help of blockchain (Abisdris L., 2017).
For instance, when a refugee receives the AID: Tech card is digitally identified with the help of Red Cross. The donor gives him 10 Euros for the rice. The refugee can order one kilogram of rice online with the money received. Afterwards, the person can go to the shop where his card gets scanned and the shopkeeper can easily identify the person by the photograph in the system and what the refugee is entitled to, offering him the ordered product. What makes this idea more exciting is that the donor receives a text message where he can see how his money got spend, by whom and when.
This idea cannot only reduce fraud but can establish the trust that NGO’s are looking for so badly.
All in all, BlockChain creates new products, changing the nature of relationships between stakeholders. The AID: Tech product not only improves the relationship between the donor and recipients but is changing the NGO’s industry structure. If an efficient implementation of this platform will be made do we still need NGO’s to make the world a better place?
Reference
Don Tapscott, 2016. How Blockchain can change the world.
Lanie Abisdris, 2017. Blockchain startup AID:Tech brings more transparency to NGOs and wins $25,000 investment from Jason Calacanis
Illac Diaz, 2014. Lighting Up the World a Liter at a Time
link here – https://www.youtube.com/watch?v=z02ngSto-sk&t=441s
