Sikka: The Blockchain-Based Application Putting Money in the Hands of Nepal’s Rural Communities
by Jaya Myler
Can you remember the first time you held money in your hand that you’d earned for work you did? No matter how old you were, you can probably remember the sense of achievement, independence and opportunity that came along with having your own money. Imagine only getting to experience this for the first time when you’re approaching what would be retirement age in most countries.
This was the case for 55-year-old Narmada Karki, a woman from Balefi, Phulpingkot, a remote village about five hours from Kathmandu. She received money directly for the first time in her life for work she had done reconstructing an irrigation canal that had been damaged in the 2015 Nepal earthquake, that the locals needed to support their agriculture. Narmada was thrilled to get the cash payment, previously she would have to send out her husband or sons to receive money on her behalf, and they’d have to travel a long way to the district headquarters to collect it.
The transfer of cash to Narmada for work she had done as part of World Vision (WV) Nepal’s livelihood program, was made possible by Sikka, a blockchain-based application funded by and incubated in the Nepal Innovation Lab (NLab) in Kathmandu. We recently spoke to the team from Sikka, a digital asset transfer platform designed for financially marginalised rural population, to find out more about their life-changing innovation.
The challenge: transferring cash to rural communities
In the aftermath of a disaster, governments, international NGOs and aid agencies rush to reach those affected, and support often comes in the form of cash, as well as food and other goods. But getting to those in remote and hard-to-reach areas can be difficult at the best of times, let alone when damaged roads become impossible to traverse. Teams often end up travelling for days at a time, carrying bags of cash to get to the point of distribution. And there are significant staffing needs and costs associated, as well as security risks. It’s also very difficult to report back to donors on how money has been used.
The name ‘Sikka’ means ‘coin’ in Nepali, and the Sikka team’s initial plan was to develop a full-blown finance platform that included microloans and micro-credits. But the team saw a potential to help with the cash transfer program of WV Nepal in the wake of the 2015 Nepal earthquake when WV’s team shared some of the challenges they’d encountered.
And they also realised that the app had applications beyond disaster relief. Governments, aid agencies, and partner NGOs need to be able to disperse payments as well as other goods to the communities they serve, and accountability is crucial. And around half of Nepal’s population remains unbanked, and many live in remote and hard-to-reach areas with limited access to financial services.
A complex challenge that needs an easy-to-use solution
The team knew they needed to develop a sophisticated platform to address complex challenges, but it had to have a simple user interface that was easy for both NGOs and end-users to use, and it needed to be accessible to people in remote locations.
“We involved the end-users in the design process,” said Saujanya Acharya, Project Coordinator for Sikka. “One of the first design workshops was with farmers and elderly rural semi-literate to illiterate, and we involved them in the design. The focus group, done in partnership with IFRC, gave us a solid understanding of what end-users could use, and we knew it had to be simple enough to work for both NGO program teams and the end-users.”
They designed an SMS application, because while most adults in Nepal now have a mobile phone, smartphone penetration is quite low, and most people are still using feature phones and have limited or no cellular data. Sikka has been designed so that it could be used as a simple digital voucher. The value of the voucher is pegged to commodities or cash value, so that the value would always be fixed.
How Sikka works
When they want to make a transfer, an NGO or aid agency will log onto the platform, and upload and disperse tokens. To ensure transparency and accountability of the transactions, the data is backed up on a distributed ledger technology, more commonly known as the blockchain. The Sikka tokens are not cryptocurrency but are assigned to a value determined by the NGO or aid agency’s disbursement plans in order to be used within a defined ecosystem.
Within seconds, beneficiaries will receive tokens, and they can then go to local vendors and transfer SMS tokens to them, in exchange for cash or goods. Recipients of transfers only have to accept or reject the transfer, as most end-users typically have limited literacy and numeracy, and wouldn’t be able to type out complex messages with numbers, spaces and letters. The more complex requirements are transferred to the vendors, who tend to be more literate and numerate and have a greater incentive to use the platform.
For NGOs, Sikka achieves last mile distribution of cash and goods to these communities in a way that’s fast, efficient and most importantly transparent and accountable. It significantly reduces the cost of dispersing payments (as much as 65 percent based on their pilot) and reduces risk.
For the end-users in remote areas of Nepal, Sikka creates an ease to financial access. They can receive cash for work they’ve done, or cash designated to them in their village, via their mobile phone. It saves them time and money; just travelling to and from the nearest bank can take nearly a full day, and is very costly for a lot of these people.
The team recently carried out a pilot in Phulpingkot, as part of WV’s livelihood program, where Narmada received her money. All 105 transfer recipients — 73 had phones, the rest used a shared phone, usually of a family member — got their cash, the equivalent of $100 USD, within half an hour of receiving the text.
Financial inclusion for women and rural communities
“We found out during the pilot that before Sikka, it would be mostly men who would be travelling to district headquarters and collecting money,” said Saujanya. “Using Sikka and with the travel time reduced to 30 minutes, women could easily reach out to the point of distribution and access the money that had been assigned to them.”
The theme for this year’s International Women’s Day on 8th March was ‘#BalanceforBetter’, recognising that gender balance is essential for economies and communities to thrive, and part of that quintessential balance is enabling financial inclusion for women. When it comes to financial inclusion, we’re still a long way from gender equity.
Globally, 65 percent of women have a bank account compared with 72 percent of men. In developing economies the gender gap remains at 9 percent. And urban populations continue to benefit from far broader access to finance than rural communities.
Two-thirds of unbanked adults globally have a mobile phone. Taking a tool that many people living in poverty are already holding in their hand, the mobile phone, and turning it into a way to make and receive payments, is a powerful way of enabling financial inclusion for women and for rural and marginalised communities. It can improve their potential to earn an income and lift themselves out of poverty.
“What really struck me was the wide range of demographics of people who joined the pilot — from 18 years old to almost 60, and we had a lot of women coming,” said Suyog Chalise, Program Coordinator at NLab. “This was because the money was being distributed in their own village and they didn’t have to travel anywhere. In Nepal, most of the household work is done by women, while men are more likely to go to work in offices or district headquarters.”
Listen to everyone, build trust along the way
The team from Sikka has worked with multiple partners, and learned a lot along their journey about how to partner effectively. “Try to listen to everyone first,” said Sandesh Pandey, Sikka’s Blockchain developer. “You may have a set solution or fixed system in mind, and you’ve done a lot of research around how it works, but it’s important to try to incorporate the requests or changes of your partners.”
Sikka was developed after lengthy discussions with the WV team to develop an in-depth understanding of their challenges. The team also worked with the Red Cross (IFRC), as well as other Nepali partner NGOs (PNGOs), and had to understand how to meet their compliance requirements. They ensure that any requirements program teams have for documents and compliances, are met with their app, producing the verifications and documents they need, and working with their process.
While they were developing Sikka, the Government of Nepal introduced a ban on cryptocurrencies. Sikka is not a cryptocurrency, but as a blockchain-based digital asset transfer platform it often comes up against this association. The government isn’t an official partner, but the team from NLab was engaged in talks with the Ministry of Science and Technology for another program. They had the timely opportunity to explain what Sikka was, and the Ministry facilitated talks with the central bank, and other government stakeholders.
“When working with partners, we need to understand there are different levels of understanding of everything we are doing,” noted Saujanya. “When we are working with PNGOs they might not have an in-depth understanding of how our blockchain-based system works, but they have a better understanding of the beneficiaries and end users, so it’s crucial to listen to their input.”
While most people still have a limited understanding of how blockchain technology works, in order to build trust, the team didn’t focus too much on trying to get end-users to understand how their innovation works. They just wanted to make it as simple as possible to use and ensure it had a clear benefit to NGOs and end-users.
“Even for a basic Google search, there are millions of lines of code behind it, but all we see is typing in simple phrases or sentences, we don’t need to understand how it works,” said Sandesh. “We explain to the program team what we’re doing, and after we demonstrate the advantages of Sikka, we share how the system works and address any issues to do with misconceptions of blockchain.”
Since Sikka is built on blockchain technology, the app ensures accountability, transparency, and trust within and among organisations. The transactions between beneficiaries, vendors and cooperatives can be tracked in real-time as they happen, and are essentially tamper-proof. Sikka improves trust and accountability, while allowing efficiency and reduced costs.
Asia P3 Hub will be working with the NLab to convene transformational partnerships that benefit families and communities, and support the lab to pilot, adapt and scale its innovations. We’ll continue to bring you a series of stories in the coming months on how some of their innovations are already changing lives, as well as opportunities to collaborate.
Read our post on our recent visit to NLab here.
This article was written by Jaya Myler, Asia P3 Hub Communications and Marketing Consultant.
Jaya Myler is a non-profit manager with more than 12 years of experience working with international NGOs, corporate and consumer brands, in both developed and developing country settings. She has a strong background in managing projects and programs, and advocacy and communications, and experience working in environmental, education, and WASH NGOs. She is passionate about water and sanitation, education and poverty alleviation. She has experience working on multi-sector partnerships with NGOs, corporates, academia and governments, and is a big believer in the power of cross-sector collaboration to drive innovation and achieve impact. She holds a Master of Media Practice. She is currently Asia P3 Hub’s Communications and Marketing Consultant.
