How Blockchain Can Help Solve The NGO Crisis of Confidence
Non-governmental organizations (NGOs) play a vital role in global affairs, from aiding refugees to protecting wildlife, to providing medical support in war-torn regions. Widespread internet access has facilitated the proliferation of NGOs and provided them a platform to gain donors and supporters worldwide, but has also fostered the rise of sham NGOs raising funds for false causes. Even legitimate organizations have been found to misappropriate funds, causing them to severely reduce the effectiveness of aid and to lose credibility and public confidence.
These organizations are facing ever-stricter financial scrutiny and are being held more accountable for ensuring that their sources of income are legitimate and that donors do not hold undue sway over how money is spent. Both governmental and private donors are demanding to know more about the income and expenditures of the NGOs they support, and it has never been more important to show openness and transparency.
Blockchain technology has immense potential to not only reduce transfer costs but also to help ensure transactional security and financial transparency for NGOs, enabling easier monitoring of how resources are allocated.
Managing the complexities of NGO funding
NGO funds come from a variety of sources, such as direct donations from individuals and businesses, crowdfunding, and official development assistance (ODA). This can make funding flows difficult to track and report accurately. The Development Cooperation Report from the OECD points out that “funds flow in several directions among foundations, non-governmental and civil society organizations, multilateral organizations and governments. This can result in both double counting of resources and inflows that are never captured in accounting systems.”
NGOs are beginning to use self-regulatory mechanisms by voluntarily joining organizations designed to hold them accountable for their activities, but there is still much work to be done.
Blockchain can help solve the transparency dilemma
Transparency is arguably the most important factor for both donors and investors when choosing where to put their money, and organizations need to show exactly how money is used in their operations.
GuideStar, a U.S.-based organization that rates and provides information profiles on non-profits, helps would-be donors evaluate organizations. The rating system is based on a number of criteria such as overhead, programs, progress, and results. Most importantly, non-profits receive a bronze, silver, gold or platinum seal of transparency based on quantitative program results data. This ranking has been found to correlate directly with donations: the higher the ranking, the more private donations an organization receives.
Blockchain, the distributed ledger technology first made famous as the technology underpinning Bitcoin, has a broad range of applications, from tracking funds to creating digital ID’s. Within NGOs, it can be used to reduce distribution costs, ensure execution of contracts and to track funding flows, allowing organizations to more easily demonstrate where money is coming from and how it is being spent.
Rebuilding trust in NGOs with Blockchain
Some organizations are using technology to help rebuild global confidence in them and their initiatives, which is no easy task.
For example, the UN Innovation Network is currently exploring how to incorporate blockchain and other technologies within their systems to track project progress and to distribute resources more efficiently.
One group, the NGO Xchange, has created a blockchain-based transfer system to help manage compliance issues of fund trackability, security, and fraud. They have introduced a coin, called the NGO, which is pegged 1:1 with the US dollar and is designed to facilitate the transfer of funds between organizations and their field offices, increasing compliance and saving on funds transfers and transaction fees.
Secure digital payments are an extremely effective way to track funding flows. Uulala’s versatile payment platform, with its Mass Payout feature, is designed to securely distribute funds to multiple recipients, regardless of location, and all transactions are logged on a blockchain via Uulala’s utility token, the UULA. Through this platform, agencies are able to send digital funds directly to NGO field offices or to final recipients, reducing transfer inefficiencies and costs while keeping a permanent, distributed record of all transactions that can be then used to generate reports and demonstrate exactly how money is moving through the organization. Funds can then be spent through a linked debit card, or withdrawn in local currency.
The Center for Global Development considers transparency and maximizing efficiency to be two of the key indicators that determine the quality and effectiveness of aid. The application of blockchain and digital payments to development organizations could help improve both the efficiency of aid allocation and the security and accessibility of transactions, fostering trust in the donor community and building confidence amongst recipients.
Learn more about Mass Payout options at uulala.io
