Sikka: Working at the intersection of blockchain and humanitarian innovation

User feedback from Sikka’s recent pilot in Sindhupalchowk: “I’m very happy to access cash at home through my mobile instead of going to the bank.” Photo: Saujanya Acharya.

Sikka: Working at the intersection of blockchain and humanitarian innovation

Sikka is an application funded by and built in-house at World Vision’s Nepal Innovation Lab in Kathmandu, Nepal. The name “Sikka” means “coin” in Nepali, which hints at its use of an Ethereum token contract to manage the creation, distribution, and validation of all transactions within humanitarian aid programming. The system was devised to allow users to send and receive tokens by interacting with the Ethereum main network via SMS, where the user’s wallet is associated to their mobile number. We describe Sikka as a digital asset transfer network, because the tokens can be created to represent access rights to a variety of aid goods, including cash-based transfers.

In this post, I want to share our vision and discuss where we’re at on that journey. I welcome all discussion and information sharing that might allow Sikka to grow and improve, and I hope this discussion can positively contribute to the discourse surrounding innovation with blockchain technology in humanitarian aid programming.

The problems we’re trying to solve

Our team has adopted an explicitly user-centered and agile development approach from the outset. Our challenge was to stay simple and effective by setting reasonable goals that demonstrably add value to problems we have identified. (See this article for a great discussion on more of the above within the nonprofit sector). At this point, then, Sikka is directed at two basic issues: 1) lack of access to banking and financial services and 2) a significant lack of network infrastructure and technical experience among end-users.

We observed certain difficulties involved with last-mile distribution of cash transfer programs and then studied various efforts implemented to overcome the lack of access to financial services within target communities. Of course, identifying lack of access to services is itself not anything new, but our team quickly realized that the many solutions to the first problem often ignore a second significant problem: The lack of network infrastructure often renders certain technologies ineffective in the field and the delayed adoption of certain technologies by program stakeholders often presents a very steep learning curve for end-users.

Problem 1: In Nepal, the World Bank found in 2006 that only 26% of households surveyed had a bank account and research from the International Labour Organization in 2016 shows that the percentage of Nepal’s unbanked population still remains at more than 50%. Even outside Nepal, the problem of access to financial services is well-established and widely-recognized by both researchers and practitioners. Given that financial inclusion is becoming a larger focus for many actors within the humanitarian sector, our objective in addressing lack of access is focused on providing a relevant solution to either restricted or unrestricted cash transfer programming, as well as a program modality that can accommodate the distribution of material goods through livelihoods and disaster response programs.

Problem 2: Internet access has increased in Nepal from 6.5% to 43% between 2000 to 2015 and is recently reported to have reached 61% of the country’s population. While the majority of those accessing Internet in Nepal are using 3G broadband networks on mobile devices, estimates place smartphone penetration to be at only 30% as of 2017. However, mobile phone subscriptions in Nepal exceed the country’s population and, even adjusting estimates for those with two SIM cards, mobile phones are in the hands of nearly 100% of Nepal’s adult population. What’s important to remember is that many of these users only possess a feature phone and may have limited or no access to mobile data networks. In addition, through our research and field experience we’ve found that a significant number are unable to confidently send SMS or make phone calls without assistance.

Concerning technical barriers to implementation, we contend that you can’t solve lack of access to financial services under the assumption that a mobile application is adequate — and the same goes for many of the tools and technologies that those reading this from a more affluent locale might easily take for granted.

A brief side-note on identity

Discussions of Sikka often quickly turn to the problem of identity management and beneficiary registration. This issue is obviously very closely associated with this first problem of access to services, because the lack of acceptable legal documents to establish one’s identity can hinder financial inclusion even when services are available. For instance, it’s estimated that more than 20% of Nepalis lack citizenship certificates. However, while it is important to work on resolving problems surrounding identity to ensure the security of legal status for those entitled to it, there still remain a number of important questions to consider when attempting to implement a digital identity solution. For the sake of controlling our project scope and allowing more time to research the identity issue, this first iteration of Sikka has not implemented a solution native to the application. We will likely work with an existing solution in the future — one that might include a blockchain-based identity verification process. In the meantime, we currently rely on our partner NGOs to register and enroll their beneficiaries through existing processes.

How Sikka adds value within the context of humanitarian innovation

At this point in its development, Sikka intends to add value to cash transfer programming by addressing the problems of lack of access to financial services and reduced technological and infrastructural capacity. We do this through a human-centred design approach that relies on our end-users’ existing knowledge base, using technology with which they are already familiar.

To accomplish the above, we have designed Sikka to provide three basic value propositions, as noted in our whitepaper:

  • Accessibility: Sikka makes use of cellular networks to provide its service which can be accessed through the use of a simple feature phone. Since this is based on a SMS service, there is no restriction to the kind of phone that can be used to access Sikka’s services.
  • Network Resilience: SMS service is one of the most resilient services provided by any mobile network operator, making Sikka’s services more readily available and with reduced downtime. After a disaster like an earthquake, SMS is the first service to be made available by the network operator which makes it easier and more reliable for the organizations to disburse aid to affected beneficiaries with reduced connectivity.
  • Accountability: Sikka, being built on blockchain technology, ensures accountability, transparency, and trust within and among organizations. Each transaction happening between beneficiaries, vendors and cooperatives within a given program can be tracked in real time as it happens. Since the transaction logs existing in a blockchain are essentially tamper-proof, organizations can rely on the system in a virtually trustless manner.

Sikka is unique in its approach to solving the problems facing cash-based transfer and livelihoods programs in the following ways:

  • It is a very simple and agile application that can easily integrate into existing programs to deliver maximum value to our partners;
  • the system’s user interface was devised based on realistic expectations of technology available in the field and in consultation with potential end-users;
  • the token contract is one of only a handful worldwide that have been deployed to a major public blockchain for the purposes of facilitating humanitarian objectives; and
  • the team is managed and the code developed and maintained by Nepali nationals working in Nepal.

It is also important to clarify certain points here to break through the sensationalism that often accompanies anything associated with the word “blockchain”. The prevalence of scams and other illegal activity surrounding this technology often make it difficult to have serious conversations about what value blockchain can provide to humanitarian work and it also undermines efforts to honestly evaluate field pilots devised to solve real-world problems. Most importantly, all the hype can prove detrimental to the needs of recipients of humanitarian aid, because clumsy technical requirements devised to cover all the requisite buzzwords (such that “decentralized” is becoming an article of faith more than an actual feature), or even the advancement of a certain utopian ideology, are often given precedence over more pragmatic technical solutions.

One of the greatest marketing and branding difficulties we’ve had to confront when describing what Sikka is and what we want to do with it often stems from several misconceptions and assumptions associated with our use of a blockchain token. Let me address some of those here:

  • Sikka is not electronic money. Sikka is a limited-use e-voucher that can be deployed to distribute goods, including cash, to places where financial services are limited and telecommunications networks are less than reliable.
  • Sikka is not a cryptocurrency. Our token is an ERC20 contract deployed to the Ethereum main network for the purpose of tokenizing and then tracking assets of value within humanitarian aid programs. In other words, Sikka is an e-voucher that takes advantage of benefits inherent to distributed ledger technology.
  • Sikka is not just one token. Each aid program will have its own token contracts that allow program administrators to create and distribute aid goods to beneficiaries, in which each token will represent one unit of value per good distributed. The cycle of creation-distribution-redemption results in the token being destroyed. Ultimately, the supply of tokens within each contract represents the number of goods not yet claimed by eligible beneficiaries.
  • Sikka is not a distributed application. Dapps are great. We look forward to seeing what sort of innovation might arise in the future from them, but Sikka does not aspire to be a Dapp because we see no immediate value derived from implementing such a system in the context of our current problem statement.
  • Sikka will not run an ICO. Never.

What we want Sikka to become, then, is an appropriate solution to the problems observed above that adequately addresses the needs of governments, aid agencies, partner NGOs, and their program beneficiaries. I often point out when discussing blockchain’s utility for Sikka that we could have built Sikka without using any blockchain technology at all. In the short-term, it would have been easier and possibly cheaper without deploying a contract to the Ethereum main network; however, in the long-run, the use of an asset token is a core element of providing our third value proposition of accountability. In short, Sikka’s innovation isn’t an attempt to apply a predefined “solution” to a problem; and, even more importantly, Sikka isn’t simply “blockchain technology.” Rather, Sikka is an application that integrates with existing systems while also leveraging the benefits of blockchain where appropriate.

From ideation to implementation

The first six months of our development process largely consisted of research on and refinement of our initial concept. By July 2017, we were conducting focus group discussions with the Nepal Red Cross Society to better understand how the above problems and our proposed solution might help our end-users. A prototype of the application was tested in-house at the Nepal Innovation Lab in October and November, but various scheduling conflicts delayed our first field test of the system until April 2018.

I’m happy to report that we recently had a modest but very successful field trial with no technical complications and only minor programmatic challenges. We distributed 583,000 Nepali Rupees (approximately $5,500 USD) to 73 beneficiaries; and the costs for Ether and SMS amounted to less than $0.50 USD per beneficiary. Please read World Vision’s news article on our pilot here. Also, my colleagues, Saujanya Acharya and Sandesh Pandey, will be writing a more technical analysis of lessons learned from this pilot in the coming days. Like us on Facebook to stay up to date on our press releases and other publications.

Finally, Sikka is actively seeking partners to continue learning and innovating in Nepal and elsewhere around the world. I’d invite you to read our whitepaper and then contact Sikka with any inquiries; but please post your commentary in this forum, where practical, in order to facilitate public discussion.

Note: Much thanks to Justin Henceroth (UNOPS) and Saujanya Acharya (World Vision International Nepal) for their assistance in making this rambling series of words intelligible to the humans who might read it.