¿Does all welfare money get to its beneficiaries? Some global organizations as the Inter-American Development Bank (IDB) and governments of several countries have built economic bridges to reach the most disadvantaged, without being completely certain that the money dedicated to basic necessities reaches its destination. The IDB alone allocated 505 million dollars to social investment in 2017.
In the case of Argentina, a recent article published in La Nación newspaper denounces the illegal commissions required by the “punteros“ (commission agents) to the recipients of social plans offered by the authorities to people in need. The fear of losing such a necessary aid maintains corruption and has fostered patronage. The problem takes other forms in other countries, and not only under the requirement of commissions to maintain the social plan in force. Some of the aid for milk or bread ends up on a bar’s counter, and that’s just one example.
The IDB itself has a form on its website to report fraud and corruption from its social programs. It’s not enough.
“IDB has expressed its desire to change the situation, adding transparency to the funds they allocate to social welfare. Representatives of the administrations have also spoken to us in the same way. Considering the problem carefully, we realized that Blockchain technology can be a good ally to solve it”, explains Enrique Olivera, CEO of Finweg.
Blockchain technology, which adds trust and improve efficiency to processes, can become the champion in the fight against corruption as well as it can improve efficiency in the implementation of social aid. Finweg has developed a platform to move payment methods on paper to digital media, with Blockchain technology.
“Beyond the obvious advantages of eliminating paper by incorporating a 100% electronic payment method on our platform, we can verify that the money reaches the promised destination” – adds Enrique Olivera.
Blockchain technology has its own tools to give traceability to money or goods. One of them is the Smart Contract, an automatic program of conditional orders that can be designed to, for example, release the funds destined to buy food on stores previously authorized as part of the approved network. The details in Smart Contracts can even include the brand of each food or medicine, to ensure the desired quality, or avoid the black market. NGOs around the world are beginning to use this technology to ensure the correct destination of their help.
Banks are the traditional channel for social welfare funds, but they are not the only one. Finweg’s first idea to develop its payment’s platform with blockchain technology was to support the operative of any electronic bank payment method, and of any country.
“We can incorporate other actors to the platform that have specific elements in the Smart Contract, intended for the settlement of social assistance plans. These actors can even be supermarkets whose checkouts act as bank tellers”– explains Enrique Olivera.
By integrating the supermarkets to Blockchain “the specifications are set so that the beneficiary can withdraw the money directly, or so that only a certain quantity of authorized items can be withdrawn. A mixture of both”, adds Enrique Olivera. It’s an example of the advantages of blockchain technology to make social welfare processes transparent.
The platform can adapt to any type of operative, as it differs among countries. Some opt for direct aid in the form of cheques, other choose to do so by means of prepaid cards or deposits in bank accounts linked to mobile applications. There are certain mechanisms of control, certain audit simulations. They are imperfect. For example, ilegal commission agents denounced by La Nación may appear along the way. How can we verify that the recipient has allocated the money correctly?
Finweg wants to translate the advantages demonstrated by Blockchain technology for bringing paper-based payment methods to digital support into social welfare.
”Blockchain technology simplifies operations, reduces clearing and settlement periods, helps to eliminate fraud, improves capital management and liquidity over other technological solutions”.- explains Enrique Olivera. The same platform would connect all the banks holding the social welfare or the donors of the aid, and would manage payments with Smart Contracts designed in each case. It’s the great solution.