Considering digital assets for humanitarian cash-based transfers

Jill Lagos Shemin (CCAF), Damaris Njoki (CCAF), Michel Rauchs (CCAF), Zain Umer (CCAF), Simon Callaghan (CCAF), Alexi Anania (CCAF) and Bryan Zhang (CCAF).

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This initial scoping study aims to provide a foundational level of understanding of digital assets in the context of electronic humanitarian CBT. This will provide humanitarian actors and pilot designers with an increased level of fluency for humanitarian actors, enabling them to take into account the key considerations in feasibility, tangible benefits, implementation challenges and risks of using digital assets (DAs) for electronic humanitarian cash-based transfer (CBT) disbursements. The paper also presents foundational knowledge on DAs more generally, and the factors that should be considered in implementing DAs for CBTs to ensure the humanitarian sector’s decisions in deploying real-world DA applications are based on a strong and contextual understanding of DAs and not driven by reactive approaches.

Highlights from the report

  • A significant development in humanitarian aid has been the gradual shift from relying solely on in-kind assistance (food, shelter and blankets) to using innovative technology enabling CBTs or a hybrid intervention due to the need to adopt modalities that improve efficacy and traceability, foster long-term resilience and encourage multi-agency collaboration. More importantly, CBT programmes empower the recipient, giving them the means and choices to address their essential needs in local contexts. They are therefore being integrated into the policies, guidelines, standards and statements of principles of humanitarian agencies.
  • Humanitarian aid has been steadily transitioning from physical cash to electronic and mobile payment programmes that enable integrated end-to-end payments. The use of e-money and other forms of digital money for humanitarian aid has increased to the extent that it is highly institutionalised in the sector. Electronic transfers offer more speed, efficiency, transparency, and increasingly meet beneficiary preferences. With agencies and mandates continuing to focus on and bring a responsibility to resilience-building, there are robust debates in humanitarian circles/thought leadership on the link between CBTs and financial inclusion.
  • The potential of these electronic and mobile payment programmes is promising, yet their full realisable capabilities of electronic and mobile are constrained because of the related limitations that plague existing CBT modalities. For example, refugees may not be able to open e-wallets as they do not have the necessary identification, and transferring disbursement money to local banks still charges high cross-border fees. Some humanitarian situations struggle with getting money into local money systems for disbursement.
  • Recent advancements in DLT, the algorithmic technology base of which blockchain is one example, have brought another financial innovation – DAs – into more mainstream finance and payments conversations. These assets are a new digital means for recording and transferring economic value and have divided opinions on whether they have a future or even any relevance in replacing or complementing conventional CBT modalities.
  • There are both advocates that exaggerate their potential in humanitarian aid and sceptics. However, initial evidence from certain ‘proofs-of-concept’ DA pilots and real-world deployments shows that they can be beneficial, although the cases are limited and conducted in different contexts, and many use cases remain theoretical.
  • There is little analysis in the current literature of how beneficiaries experience, or even if they prefer, DAs compared to the current CBT modality. The same applies to DA cost efficiencies and cost benefits compared to current CBT modalities. However, the results of our initial pilot regarding cost efficiencies offer a compelling justification for testing DA systems in various settings to more clearly determine if economies of scale and system advancements could cut costs further. This lack of knowledge limits humanitarian agencies’ understanding of DA benefits and their ability to critically consider their value and applicability in CBT operations.
  • This paper identifies three humanitarian aid environments where DAs will most likely add significant value to CBT operations. These environments tend to be those that have little or no direct access to the global financial system, are prone to very high inflation or currency volatility, and have markets with low rates of financial inclusion, high informality and a robust digital finance infrastructure, plus a demonstrated trend in the uptake of one or several types of DAs.
  • This paper further highlights and organised issues to consider before implementing or scaling pilots into production. Practical considerations are presented in a table by main dimension, and label is the aspect is unique to DA or also required for current digital CBT modalities. Practical considerations include evaluating whether DAs benefit the target beneficiaries and aid agencies more than other CBT modalities in specific contexts; what is the existing infrastructure and system architecture, local humanitarian office capacity, and how digital literacy influences the value a DA implementation would have.