Blockchain for Social Good: Revolutionizing Pre-School Funding in South Africa

For the past 9 months I’ve worked with Project Amply, a startup that is building a digital identity and subsidy management system on the Ethereum blockchain for pre-schools in South Africa. During that time we’ve made amazing progress, going through an alpha launch where we registered over 2000 children on the platform, securing an investment from the UNICEF Innovation Fund and running first successful trials on a private Ethereum chain. This is a small write-up that provides an overview of Amply, why it is important and where its headed.

Happy faces at our first field test in August 2016 — taking blockchain into the wild!

Background

Pre-school services in South Africa are currently managed by paper-based information systems that provide little data, trust and efficiency in the way subsidies are managed. Amply is a first of its kind mobile platform that utilizes the Ethereum blockchain to provide unprecedented levels of accountability and transparency in the subsidy process, as well as superior information gathering and data security for children. The project is supported by the South African government, with investment from the UNICEF Innovation Fund and funding from the Innovation Edge. The data gathered with the system is expected to significantly improve impact measurement and planning. Automated and accountable subsidy payments on the blockchain provide efficiency gains by reducing friction and introducing auditability and trust.

The South African government supports a subsidy scheme for pre-school centers to ensure that children from underprivileged families receive access to quality preschool education, care and nutrition. Of the approximately 40 000 centers in the country, many are located in the country’s poorest regions and cater to those most in need. The centers are typically run by local women from the neighborhood in an informal way. While figures are hard to come by, these centers cater to around 700 000 children from the ages of 2–5.

In 2016 the subsidy system paid out around $200 million (R2.3bn) and the government intends to increase funding in future years with an additional $50 million (R800m). However, making these additional much-needed resources available is conditional on having a sense of how many children already access subsidies (and how many still need to) as well as better safeguards in place to ensure the money will not be misdirected. In addition to government subsidy schemes, corporate entities in South Africa are required to invest 1–1.5% of their revenue into community socio-economic development. In 2014, this amounted to more than $800m. ECD services are compelling beneficiaries, but have yet to benefit from systematic investments.

Large inputs of money with overburdened and inefficient administration in poor communities with little infrastructure have made it difficult to know how effectively the current system is performing, to identify service gaps and prevent systemic fraud. This provides a compelling need to leverage technology in ways that can improve the efficiency, accountability and effectiveness of social development and benefit programs such as this.

Amply is a South African startup that uses Ethereum to create decentralized digital registries of children, their caregivers, service providers and the service centers they attend. This will be the first large-scale implementation of self-sovereign Digital Identity open standards that are being developed through the Rebooting the Web of Trust community and the Web 3 Consortium (W3C). This could provide the basis for tracking the delivery of early learning services and has the potential for administering the government daily attendance subsidy over future years. Verifications will be performed using mobile applications as digital oracles that provide proof of service delivery, such as children’s attendance, with related meta-data that can be used to track service performance and impact.

Current frictions

The ECD subsidy program is currently operated mostly as an analog system with paper forms and cumbersome manual processing. On a monthly or quarterly basis, centers submit lengthy attendance reports to the local branches of the Department of Social Development to claim their subsidies. After administrators review the attendance records a payment is made into the centers’ bank account. This form of administration is very time consuming for both applicants and social workers.

The current information management system — boxes of paper and lengthy applications

The system manages identities poorly, is unreliable and yields little useful data for the government, NGOs or the centers themselves. Simultaneously, ECD programs are trying to scale and become more electronically enabled, current systems are characterized by lack of verification, transparency and therefore trust.

The Amply App — Our front end that gathers daily attendance data and ledgers it to a child’s identity on the blockchain

In summary, friction points in the current ECD management system include the high labour cost of a paper-based administration process and the directly associated lack of transparency, accuracy and trust. These elements have caused situations where: (i) intended beneficiaries cannot access the subsidy; (ii) processing of the subsidies are delayed; (iii) and fraudulent claims are difficult to identify. Finally, there is a significant opportunity to generate high quality data and analytics to improve the system for all stakeholders.

The Most Optimal Solution: an Open Source Blockchain System

The nature of public blockchain networks provides unprecedented levels of accountability through an immutable, trusted ledger, as well as smart contracts that automate service transactions without the need for intermediaries.

All transactions in the system are tokenized and recorded, which reduces financial friction through disintermediation and generates richer transactional data with privacy assurance. The tokenization of subsidies and payment automation will make it easier to process and access the subsidy, solving points (i) and (ii). Through the collection and verification of all data fraudulent claims (iii) become impossible. Additionally, the data can be used for results tracking and impact measurement, planning, field research and personal records by various stakeholders with access rights.

The Amply System: Tokenized subsidy payments go to the child’s identity account and are transferred to the center’s account once the service is completed

The implementation of a blockchain-based system could significantly increase the accountability of government and corporate funding in ECD services. Moreover, Amply has the potential to scale beyond ECD services in South Africa into areas such as healthcare or nutrition.

Finally, there is also an argument for the superiority of blockchain networks as open-source systems. An open-source system is fundamentally necessary for security, trust and innovation and creates more flexibility, freedom and development in how applications on-top of the platform are adapted and used. The overall value of the platform increases as the tools and technical expertise for social innovators, governments and entrepreneurs beyond South Africa are readily available. This also enables Amply to scale beyond the national context, as many of the frictions described above are prevalent in many developing countries.

First Results and Next Steps

Initial development and field testing for Amply began in March 2016 with support and funding from Innovation Edge. Both the front-end mobile application used in the center, as well as the back-end protocol that gathers the transactional data, went into a public alpha testing in November 2016. A further major milestone was reached when we secured investment from the UNICEF Innovation Fund. And as of today, over 2000 children have been registered using the platform.

Me and Lyndsey installing the Amply app with at one of our alpha centers in Kyalitsha township in Cape Town

Next steps include the completion and testing of critical blockchain components, including automated service transactions and subsidy payments through smart contracts and testing different ways for the child’s guardian to hold the cryptographic keys to their child’s future. Each of those components moves Amply closer to becoming a fully functional decentralized application. While the technology stack matures, registering over 40,000 centers and well over 1 million children in South Africa will also be a significant logistical challenge.

Long-term considerations center around the questions of system governance, identity ownership, as well as the nascent state and evolution of blockchain technology itself. Amply will move the information and identity system to full decentralisation when the core technologies stabilise and become usable for production-grade applications improving the lives of millions.

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