Leveraging blockchain to enable humanitarian cash transfers: the WFP “Building Blocks” project


Vegetable market during COVID-19, in Antananarivo, Madagascar

ILO/E. Raboanaly. (CC BY-NC-ND 2.0)

The blockchain is a type of distributed digital ledger hosted across a network of multiple participants, that provides a way to share information and transfer digital assets in a faster, more transparent, and secure manner. The use of blockchain technology as an enabler of digital cash transfers holds considerable potential to mitigate or overcome several critical challenges that affect the identification and verification of cash transfer recipients. By storing data in blocks which are immutable and secure, and with multiple actors holding copies, the risk of fraud, theft or manipulation is reduced to near zero. Furthermore, its peer-to-peer nature removes the need for third party verification from costly intermediaries such as banks or other institutions. Recipients’ privacy and security is guaranteed as they are assigned encrypted code numbers as ID to ensure their anonymity, while still allowing scheme managers to monitor the delivery of the transfers in real time.

Published: 6 April 2021
READING TIME: 3 minutes
Author: Niclas Benni

The World Food Programme (WFP) has carried out extremely relevant work in recent years, as part of its “Building Blocks” project, to leverage blockchain technology within cash transfer programmes for refugees, with the objectives of facilitating transfers, expanding recipients’ choice over how and when to receive their money, and overall strengthening beneficiaries’ data protection and risk management. In 2017, it began piloting blockchain-powered cash transfers in two Syrian refugee camps in Jordan, relying on the biometric registration of more than 10 000 beneficiaries to enable them to pay for food at the camp with only a scan of their irises, instead of using cash, voucher or e-cards. Their entitlements were all registered on a private, permissioned blockchain, which kept track of their spending. To make the system work, the WFP leveraged the existing biometric identity management system established in the camps by the United Nations High Commissioner for Refugees (UNHCR).  As of 2020, more than 100 000 Syrian refugees were being assisted through the Building Blocks system.

Following the COVID-19 outbreak, in April 2020 the WFP began delivering blockchain-powered cash assistance to 400 00 Rohingya refugees in Cox Bazar, Bangladesh, providing beneficiaries with contactless cards with QR codes, linked to a digital account, which they could use at eight different outlets spread around the camp to pay for various goods, with all transactions updated in real-time on the blockchain. Interestingly, these digital accounts are able to store cash transfers provided by different agencies within the camp, not just WFP, which showcases the notable advantages that this innovation holds in terms of coordination and optimization of humanitarian response efforts, especially if a neutral blockchain collaboration platform could be established that saw the participation of all UN and non-UN entities involved in the provision of humanitarian assistance.

According to the agency, transaction fees for cash transfers are reduced by 98 percent through the Building Blocks system, which also makes it particularly attractive for donors as overhead costs are substantially reduced. There is no need for intermediary agencies to enable the cash transfer, and beneficiaries’ data is held solely by the WFP. At present, the agency is also exploring more potential applications of blockchain technology in areas that are linked to digital payments and transfers, such as digital identification and supply chain tracing.

Overall, during the pandemic and other future global disasters, blockchain technology holds considerable potential to become a key enabler for more transparent, efficient, and coordinated cash transfers directed at vulnerable segments of the population. Beyond social cash transfers, this technology shows potential to radically alter the entire digital payments space, for example by making digital cross-border payments (i.e. remittances) substantially cheaper, safer, and more transparent. Nevertheless, several barriers still curtail the widespread adoption of blockchain technology in digital payments ecosystems, such as substantial infrastructural investments required initially; high levels of regulatory uncertainty and lack of public expertise on this technology; and lack of proof-of concept on a larger scale.