Blockchain, Poverty and Time Travel to 2030

By Namira Samir

We all know the story. Government made a forecast of its expenditures and revenues in every fiscal year; Government disbursed the funds, poverty rate decreased, income inequality stayed volatile. Everything was in balance until the UN announces SDGs (Sustainable Development Goals, a joint agreement to make the world in its best possible form by 2030, without a single person living in less than 1.90 US Dollar a day. Now policymakers have been craving for a solution to realise this demanding goal. Blockchain quickly intrudes into the life of many, including those sitting at the highest level of leadership. Sadly, many would think of it as a trivial revolution. Will time change our mind?

 

UN set an ambitious goal for year 2030, one of which is to completely eliminate poverty in its multidimensionality. The 193 member states concurred the agenda and adopted them since the year 2015.

Despite agreeing with this collective objective, Indonesia encounters tremendous challenges in tackling deprivation. It is, as we all aware, a home to diversity. Its population are divided into five main islands which encompasses 34 provinces with distinctive livelihood activities subjected to socio-economic conditions in that particular area.

Poverty, which happens to be the result of inability to fulfil basic necessities, is influenced by access to opportunities. Deprived households in regions with extreme distance from populous cities which have been associated with persistent growth tend to have far less opportunity for improvement.

Economics 101 would tell us that there are two main approaches on how a country can address poverty; macroeconomics and microeconomics. The former stresses on how external factors such as inflation, consumer buying power, and declined economic growth would cause turbulence that only makes the poor worse off. Meanwhile, the latter looks at poverty alleviation strategies from the internal capacity of the household. How deprived households can meet their basic needs.

Being in a constant battle with poverty, Indonesia has implemented a range of programmes and investments that derived from both macroeconomic and microeconomic approaches aiming to win the war of poverty. It invests heavily on infrastructure, with the planned budget for 2019 415 trillion rupiahs and the cumulative allocation for infrastructure, poverty and unemployment increased from Rp.1,343.1 trillion (2017) to Rp.1,454.1 trillion (2018)1.

Yet, the result of the assumed “pro-poor budget allocation” was not so favourable, with the latest data informs that poverty merely declined by 0.16 points from 9.82% (Mar 2018) to 9.66% (Sep 2018)2. With simple math, we know what this implies; Indonesia, if continuing the current ways of alleviating poverty, will be nowhere near the SDG 1 (No Poverty)3 by 2030.

Increased State Budget for poverty alleviation means nothing if there is no significant improvement on the livelihood conditions of the poor.  They have been waiting for opportunities to directly knock on their doors and said “This is the way out. We will guide you through the process and we will make sure that your family will be better off afterwards”.

The limitations of the Government State Budget suggest the need for new collaborative approach among communities to ensure that those who are poor can live in physical and spiritual prosperity, and acquire the same opportunity and benefit from growth,

The conventional way to address poverty is just like a one-man show, in which the Government happens to be the sole Actor, and its citizens are the audience. Whatever the Government says or do with its performance will determine its audience’s conditions. They might be happier, sadder, or perhaps remain unchanged with the performance.

But we must never forget to include the initial condition of the audience into our estimate. Some might come to the show with enormous happiness or extreme sadness. If the purpose of the show is to make everyone feeling satisfied, how can the Government resolve this inequity of emotional state and make everyone happy? Is it possible?

Happiness in this matter is in relation to having sufficient capabilities to make ends meet. The Government employs various instruments to make sure that its performance touches the lives of many, most importantly, the unfortunate.

The limitations of the Government State Budget suggest the need for new collaborative approach among communities to ensure that those who are poor can live in physical and spiritual prosperity, and acquire the same opportunity and benefit from growth, just like what is articulated on the Article 28H of the 1945 Constitution of the Republic of Indonesia4.

But the question is, how do we channel these resources and deliver them right away to the door of impoverished households?

It’s time to re-read the first paragraph.

Kate Raworth in her widely read book “Doughnut Economics” emphasised the need to look out for better ways of ending poverty. We must not be trapped in century years old strategies and instruments that will only make the prominence such as the SDGs merely a remark of ‘good progress’, and not an ‘incredible achievement’ in the development sphere.

The CAF World Giving Index 20185 lists Indonesia as the most generous in the world. This achievement must be seen as an opportunity to use our inner good deed to help others. The problem is that there was no scheme that allows us to help with our abilities, until blockchain enters.

With the blockchain technology, transfer of wealth and the ability to help each other becomes ‘borderless.’ You can be in one of the northernmost countries while still creating an impact on the deprived people in further South.

Blockchain technology started to actually gaining fame in 2016 with its offering of simplifying the way to perform transactions, while at the same time making everything traceable. When the idea was first presented, the first word that came to the minds of millions was “nonsense”. But here it is three years later and evidence of its positive impact on human lives could not be more affirming.

Blockchain as part of the Internet 2.0, is unlike the internet that we know. It is a new revolution which enables mass collaboration among the society.

A report by Stanford University in 20196 reveals that 55% of the blockchain-oriented initiatives are projected to contribute positive changes to individuals’ health, education and financial conditions.

So many lives are at stake due to changes which are happening in their area. Be it declined business activities, decreased consumer buying power, or economic uncertainty, among others, that risks the livelihood of not merely the poor, but also those who live slightly above poverty line.

Blockchain with its promise of better problem-solving, enables us to create solutions which were previously not being thought about.

Take for instance HalalChain, the first public blockchain that focuses on facilitating traceability and distribution of social funds such as zakat and cash waqf, as well as other Islamic financial products, all aiming to improve financial inclusion and alleviate poverty7

In response to high poverty rate in Muslim countries and among Muslim communities, HalalChain is working on creating a decentralised solution based on blockchain and Internet of Things (IoT) which enables the Government to execute its programmes specifically addressed to a targeted population.

HalalChain is one vivid example of a blockchain service provider that goes beyond “facilitating payments and verify records.” It seizes the opportunity of distributing wealth more equally through technology. 

As we all know, the real problem of realising the global goals is not the lack of fund, it is purely the absence of a reliable means of collecting them from various sources, including charitable giving and donations as well as alternative finance instruments.

With the blockchain technology, transfer of wealth and the ability to help each other becomes ‘borderless’. You can be in one of the northernmost countries of the world while still creating an impact on the deprived people in further South.

The advantage of using blockchain for poverty alleviation does not stop there. The Service Provider and the donors can also trace the usage of the funds provided to the chosen household and evaluate the impact individually and collectively.

It is time for this country to take the leap. It is only the right momentum to design a decentralised future to tackle poverty. Blockchain has a lot to offer but a dream will just be a dream, an action plan will just be an action plan if there are no concrete steps taken.

Surely, there are some critical challenges about using blockchain for poverty alleviation. For instance, for blockchain to be adopted nationally, it has to earn the public acceptance. This is a serious issue considering many still think of blockchain as cryptocurrencies.

Furthermore, we need to educate the public about the utilisation of technology in daily lives. Although Indonesia is among the world’s highest users of technology, its penetration rate is lower than many countries in Asia Pacific, with 60% of the population do not have internet access, a data by The International Monetary Fund (IMF, 2019) revealed.

We are only a decade away from our target to end poverty in all its forms. Regret will always arrive when the time that we have has gone and sorrow is everything that we will experience had we decided to make no changes in our current strategies on tackling poverty.

Adam Smith once said “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable”.

Indonesia was built with high hopes and believe to make its citizens free from suffering. It is time for this country to take the leap. It is only the right momentum to design a decentralised future to tackle poverty. Blockchain has a lot to offer but a dream will just be a dream, an action plan will just be an action plan if there are no concrete steps taken.

What an interesting reminder time travel has given to this country, that one small change can lead to a very different outcome.

Are we ready for a revolution?

About the Author

Namira Samir is a development economist based in Indonesia with main interests in multidimensional poverty, regional inequality and Islamic social finance. She holds a master’s degree in Islamic Finance and Management from Durham University, UK. She can be reached at [email protected]

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.